Cheesecake Factory’s exit a sign of change
BO U LDER» Sharp increases in rent and rising costs for a diminishing pool of labor have restaurateurs along Boulder’s Pearl Street scrambling to evolve and remain profitable.
Similar challenges are facing eateries in the Denver area and along the Front Range.
News that The Cheesecake Factory will be leaving its Pearl Street location at the end of 2018, after nearly 20 years in operation, is the latest sign of the coming change.
Although Sean Maher, Downtown Boulder Partnership CEO, said The Cheesecake Factory’s decision to leave was more of a result of the Pearl Street location no longer fitting its business model of operating large restaurants in suburban locations, the rising costs of rent and labor, as well as an everincreasing base of competition, certainly contributed.
Carolyn Livingston, communication director for the Colorado Restaurant Association, said restaurants often operate on razorthin margins of 3 percent to 6 percent. Any sort of increase in operating costs can necessitate a restau rant to reevaluate its business model, and in the current environment “many of our members are telling us they’ve never seen it so difficult to run a restaurant,” she said.
With increases in rent on Pearl Street as high as 30 percent, there is a growing belief among industry experts that the restaurants along Boulder’s iconic pedestrian walkway might soon begin to change their approach.
Eric Skokan, owner of the Black Cat Farm Table Bistro, said he’s seen his rent and labor costs increase by 30 percent over the past year, and he expects the costs to keep rising as the new minimum wage law is phased in.
To offset those costs, he said all restaurant operators are increasing their prices — but it is a tricky balance to ensure they don’t price out their customers. Instead of trying to walk that line, he believes more restaurateurs will alter their models to require fewer servers and sell more affordable products, similar to Ruthie’s Boardwalk Social, the grilled cheese shop that recently opened at 1397 Pearl St.
“By 2020, the minimum wage will be $12 for standard employees and $9 for
tipped employees,” said Peter Waters, an owner of Ruthie’s and T/aco. “It’s not that I mind paying the $9 an hour, I just don’t need it to go to the servers. I’d love to pay my kitchen staff $22 an hour, but the government’s telling me I need to throw $9 an hour at somebody already making $25 an hour in tips.”
In reaction, Waters cut out the frontofhouse staff at Ruthie’s, and simplified the kitchen so an inexperienced chef can operate it and crank out inexpensive food.
“We took a lot of frontofhouse people and trained them to work in the kitchen for a slightly lesser wage than they could make in one of the top restaurants in town, but definitely above the median of what people are walking out of a restaurant in Boulder with,” he said. “The goal is to be able to go to an employee who’s making $13, $14, $15 an hour and say, ‘Hey we’ve got a very simple kitchen, we’re averaging roughly 20 bucks an hour and we think we can give you a very substantial pay increase that will allow you to live in Boulder.’ ”
While it’s easier to imagine this type of business model working in a grilled cheese shop, Maher noted this trend can be seen in some of the higherend restaurants in Seattle, which enacted a $15 minimum wage in 2014. Restaurants there, he said, are converting to buffetstyle service.
“That whole fastcasual eatery is probably going to become more prevalent just because it’s so hard to find employees these days,” he said. “I’m not happy to see The Cheesecake Factory go, but I’m confident it will be replaced with something a little more in sync with the Boulder market.”