Many kitchens, not enough cooks
Historically, restaurants have always operated on slim margins. According to the National Restaurant Association, full-service restaurants have a median income, before taxes, of 6.1 percent — just $6.10 on a $100 check.
Even small fluctuations in costs can send the bottom line into the red. But over the past five years, the three biggest expense categories for restaurants — ingredients, labor and rent — have all lurched up, putting many restaurants in a perilous state.
Organic, sustainable and locally sourced ingredients are generally more expensive to produce. But while diners increasingly demand these foods, they aren’t always willing to pay more for them.
“It’s discouraging. We all know what’s right, but everybody is more concerned about the dollar sign as opposed to what they’re putting in their body,” says Binkley, who in the last year has sold or handed off control of his restaurants, keeping only fine-dining Binkley’s in midtown and Cafe Bink in Carefree. He also shifted the former to prepaid seats — $160 a person — and a tipless service-charge model to survive.
“My food costs go up, but I can’t raise menu prices,” he says. “So what does that do? It puts me out of business.”
Increased demand for seafood isn’t helping, either.
“Everyone sees steak as this luxury item. It’s not. Halibut’s a luxury item,” says Josh Hebert, chef and owner of Posh Restaurant in Scottsdale. “I can get a whole prime New York strip for $13 a pound. Halibut is $32 a pound. Scallops are $30 a pound. Ahi tuna is $27.”
But food cost is only one piece of the puzzle, Hebert says. Having spent the past two years scouting locations for his ramen shop, Hot Noodles, Cold Sake, he got a thorough look at how booming commercial property values have put the squeeze on restaurants when it comes to paying the rent, especially in growing dining hubs like downtown Gilbert.
“I’ve heard some stories that the original tenants were somewhere around $13, $14, $15 a square foot,” Hebert says. “Now, people are asking upwards of $50 a square foot for those spaces. If I were to go there right now as a restaurant owner, it’s likely that the only person making any money at that space is my landlord.”
Put together, rising food and rent costs are already putting a brutal squeeze on restaurant margins before the elephant in the room — the cost of wages — is even addressed.
Chefs and restaurateurs agree that restaurant staff — particularly back-ofhouse employees, such as cooks and dishwashers — are underpaid, often vastly so. At the same time, passage of Proposition 206, which phases in minimum-wage increases over four years — including the recent jump to $10 per hour from $8.05 — has been a tough blow for an industry that operates on thin margins and is already struggling with other cost increases.
“(Back of house) is paid so little, I don’t think people even realize,” says Eliot Wexler, who shut down his critically acclaimed Phoenix restaurant, Noca, in 2014 and currently operates Nocawich in Tempe. But Wexler and others say that what the staff deserves doesn’t change the financial reality of trying to run a restaurant with rapidly increasing wages.
Wexler estimates his wage costs at Nocawich have increased by 25 percent since the implementation of Prop. 206 on Jan. 1. That’s enough to put a restaurant operating on single-digit margins in the red. Wexler’s estimate is mirrored by Amber Haddad, vice president of brand development for Fox Restaurant Concepts, the Phoenix-based restaurant group owned by James Beard Awardnominated restaurateur Sam Fox.
“We’re really challenged with this last wage increase,” says Haddad, who estimates the wage costs at the group’s Valley restaurants have risen “20-25 percent” since last year.
But some are quick to point out the increase isn’t purely statutory.
“Minimum wage isn’t even in play (for back of house) because it’s impossible to find even a dishwasher for less than $12 an hour,” Hebert notes. “We’re just talking general supply and demand.”
The employee shortage isn’t unique to Arizona. The National Restaurant Association has called recruiting a “top challenge for restaurant operators” in its 2017 Restaurant Industry Outlook report.
A growing number of restaurants, low unemployment and fewer people entering the restaurant workforce have combined to turn the old adage on its ear: too many kitchens, not enough cooks.
“There’s been mounting pressure with just not being able to find great people,” Haddad says, noting that other trades “will hire the same kind of people we hire, for more money.”
Conditions have become bad enough that it’s frustrating for even the most passionate chefs, to say nothing of the rank and file, who are harder and harder to come by.
“There’s less and less people going into restaurants, because why would you?” Binkley says. “You work your ass off, you make no money, your hours are crazy. I can make way more doing something else and working half as hard. I love the kitchen, but I hate the business.”
While a shortage of restaurant workers is a national trend, many local chefs and restaurateurs suggest the Valley is having a particularly difficult time retaining culinary talent, leading to an industry brain drain.
“I still have a connection in Phoenix. I love the place. I just felt like I didn’t be-