More than 25 percent of restaurants statewide are looking at closing their doors forever, in the face of soaring overheads and a severe labor shortage.
That’s one of the findings of the latest survey by the Colorado Restaurant Association, conducted July 8-Aug. 9.
The survey also found that more than 67 percent of restaurant owners have an average of $180,000 in pandemic-related debt, and “every single respondent — 100 percent — said that the cost of doing business has increased since March 2020,” Colorado Restaurant Association President and CEO Sonia Riggs said.
Almost 60 percent of Colorado restaurants did not receive the federal Restaurant Revitalization Fund grants they applied for, because the fund ran out of money sooner than anticipated.
“Without further federal assistance, the fall and winter are looking rather bleak,” Riggs said in an email.
The survey results did not break out restaurants in the Pikes Peak region, but many in the local community believe Colorado Springs restaurants have fared somewhat better than most.
That’s due in no small part to a local Facebook group called Culinary Distancing COS, which grew during the pandemic to more than 8,400 members and helped restaurant, catering and other food-related businesses connect with customers and each other.
The power of the page was measured recently by the Colorado Springs-based National Institute for Social Impact.
The bottom line: Culinary Distancing generated nearly $1.1 million in tangible and intangible benefits for the local food industry, according to a measurement called Social Return on Investment.
STATE OF THE INDUSTRY
The Colorado Restaurant Association asked 195 restaurant operators about the continuing impacts of the COVID-19 pandemic and how they were coping.
More than half of the restaurant owners surveyed estimated it will take three to five years to pay back their COVID-related debt. About 59 percent of restaurant owners said they owe more than $100,000; 30 percent owe more than $200,000; and 4.4 percent owe more than $500,000.
Asked about operational overhead, 80 percent of the survey respondents said labor costs have increased the most, followed by food and supplies. Almost 95 percent of the respondents said they have been forced to boost menu prices to offset their increased costs.
Addressing the labor shortage, nine out of ten respondents said they have changed their business practices or wage rates to boost hiring and retention, and one out of four are offering retention or hiring bonuses.
Restaurants report that they have increased wages by an average of 19 percent since March 2020, the report stated.
More than 31 percent have increased wages by 21-30 percent, while more than 10 percent are paying employees 31-40 percent more.
More than 23 percent of restaurants have sought to hire and retain employees by adding new benefits to their compensation packages. These include paid time off (23 percent), medical insurance (31 percent), dental insurance (22 percent) and vision insurance (18 percent).
Other new benefits include 401K plans, educational assistance, health and wellness programming, and health and wellness allowances.
Despite enhanced wages and benefits, the Colorado restaurant industry is still struggling to find and keep staff.
By the end of June 2021, restaurants throughout the state were down almost 11,000 workers (4.6 percent) from pre-pandemic levels.
More than 91 percent of restaurants reported struggling to hire enough staff, and more than 67 percent said they were having difficulty retaining current staff members.
Because of the lack of staff, “we’re seeing longer wait times at restaurants and slower service than people were used to having prior to the pandemic,” said marketing strategist Lauren Hug, owner of HugSpeak Consulting and cofounder of the Culinary Distancing Facebook group. “And because of that, we’re hearing from restaurants that are experiencing an increase in rude and angry customers, people that just don’t understand the challenges that restaurants are facing.”
The Culinary Distancing Facebook group went live on March 16, 2020. It was the brainchild of Matthew Schniper, a former restaurant industry professional and current food and drink editor for the Colorado Springs Independent (the Business Journal’s sister publication), who created the group with support from Hug.
The idea came from a discussion they had, just after restaurants and bars were shut down in March 2020.
“We were brainstorming ways to help the local industry survive the restrictions,” Hug recalled. Hug and Schniper invited restaurants, bars and industry employees to share takeout and delivery deals and menus, post recipes to inspire home cooks, let others know of their needs, and share ideas about how to further assist these businesses.
“It very quickly took off as a kind of gathering place of both business owners and customers,” Hug said.
Hug and Schniper made it clear that the group was not a place for negative reviews or complaints about mask policies, and relentlessly monitored the page to enforce those guidelines.
The group generated empathy toward restaurants through shared stories that resonated with customers.
“It created a sense of community that turned customers into partners and friends,” Hug said, “so they made — and are continuing to make — decisions on a connection basis instead of just transactions.”
The page also helped restaurants find the ingredients and supplies they needed through appeals to the group.
Hug noted that a similar group was created to connect local artists and said she thinks the concept could be adapted for a variety of other industries.
KEEPING IN TOUCH
Eric Brenner, owner and chef at Red Gravy Italian Bistro, engaged with Culinary Distancing early on.
“I thought it was a great way to cut through a lot of noise and speak to the people that you wanted to speak to — people who are open to what you’re about to say,” Brenner said.
“I think there were two parts of it. One was that they were concerned about eating out — who they could order from, who was doing the safest practices. The other side was that there were a lot of people just looking to help restaurants, and that site created a place for people to find out who needed help.”
Brenner said he knows the site did a lot of good in helping restaurants to survive. He used it to get the word out that Red Gravy had set up its own delivery service and had started delivering food, which enabled him to retain all of his employees rather than having to lay anyone off.
He also learned through the site that people wanted to find family meals they could take home, and started providing family meals that fed four to six people.
Brenner shared through the Culinary Distancing page that he was taking donations for Meals to Heal, an initiative he started to fund meals for frontline health care workers.
The response was great, he said, and the initiative spread to other restaurants and other cities, where it has helped keep restaurants in business and employees working.
“I still use [Culinary Distancing] to this day,” Brenner said, “I think it’s a really good example of how you can gather a group and make an impact.”
Hug said there are many other stories of how the Culinary Distancing page helped to support businesses, but there was no hard evidence about its influence until the Pikes Peak Workforce Center decided to fund a study of its Social ROI.
“We believe the study is important to the workforce and businesses,” said Becca Tonn, PPWFC communications manager.
Social ROI is an evaluation of data and metrics to measure the value of an organization’s efforts to alleviate a social, environmental or community issue, expressed in dollars and cents.
It was developed as a way for businesses and nonprofits to show donors the dollar-for-dollar return on their contributions, considering both tangible and intangible benefits, said Stacey Burns, cofounder of the Colorado Institute for Social Impact, now the National Institute for Social Impact.
The institute has conducted numerous SROI studies for social impact businesses and nonprofits. This one was a little different, Burns said, because Culinary Distancing was a purely volunteer effort.
“What’s included as the costs or expenses is really estimating how much time Matthew and Lauren spent on it each week and how their time would have been valued,” Burns said. “That’s definitely not the typical expense of an organization with overhead and staffing and things like that.”
The study was the first of a pandemic-related business effort.
“This is the only SROI study that we’re aware of that’s been done on COVID and its impacts,” Burns said. “So we definitely wanted to take a look at that.
“We found that, above all, when community comes together around a positive, well-intended, trustworthy effort, amazing things can happen,” she said.
The institute collected data via surveys of consumers and business owners between December 2020 and early February 2021.
Among the key findings of the survey were that the group:
- created an important space for owners to market their business and see an increase in sales;
- allowed owners to find information important to their businesses and pivot accordingly; 59 percent of owners said the site helped them financially;
- allowed business owners to give back to the community;
- built community among owners and between owners and other group members;
- provided a space for owners to give to others in need;
- opened opportunities for group members to support local restaurants; and
- helped members locate reliable information about safe food sources.
The Social ROI weighted these and other factors to determine that the group had a unique business impact of $514,960 and a community impact of $582,028.18, for a total impact of $1,096,988.18.
“In addition to just financial support that the businesses received, some of them stated that they received very clear mental health support of just having a place to go to be able to get the support from consumers that they needed — but also just be honest with how challenging that truly was for them, and still is,” Burns said.
The Culinary Distancing page doesn’t have the same level of participation now that it had during the shutdowns, but restaurants are still struggling to recover from a year of restrictions, labor shortages and supply chain issues, and facing an uncertain future, Hug said.
“They need our continued support,” she said. “The more that we can tell their stories, … talk about how great they are and what they’re going through, the more we’ll all understand how we’re still
in this together.”