Most businesses in this town, none more than restaurants, are in a life and death struggle for survival. The town itself is facing a similar struggle, as evidenced by the City Council’s budget review hearing held this week that revealed just how tough things are and how difficult they are likely to remain. As one who has been in the restaurant business in Chicago for over 50 years and has lived here in Laguna for the past four years, let me try to put a little perspective on the scope of the problem as it pertains to restaurants in Laguna.
- Morgan Stanley Research estimates that 5% to 30% of all independent restaurants in the country will remain permanently closed, with a likely number being around 15%. The most vulnerable are the full service restaurants who rely on dine-in traffic as opposed to fast food or fast-casual establishments who generate the majority of their sales from carryout.
- The Laguna Beach Chamber of Commerce lists 53 restaurant members on its website, made up almost entirely of those highly vulnerable full service places.
For most of these restaurants, the business is highly seasonal. One longtime owner told me that over 40% of his restaurant business is generated in just the three months of summer. This makes the likelihood of survival of Laguna Beach restaurants even more difficult.
- Most full service restaurants are lucky to make a net profit of 3 to 5%. At a 4% profit, a restaurant that serves 100 people a night at $40 per person and is open 365 days a year would only generate a net profit of $58,400. A skilled cook working for $16 an hour would make around 60% of that with no economic risk. Making big bucks is not an incentive for most restaurant owners.
These few facts would lead one to believe that the mortality rate for Laguna’s full service restaurants in the next year could well be in the 20 to 30% range. That means that even with federal and state stimulus money, somewhere between 11 and 16 Laguna Beach full service restaurants won’t survive until this time next year.
With these sobering statistics in mind, isn’t it time we stop harping about how the city is going to be overrun with restaurants if we reduce parking restrictions and start figuring out how to support and save the restaurants we still have?
Daniel Rosenthal, Laguna Beach