Call 2023 the year of the shuttered restaurant.
Laguna Beach has seen an unprecedented string of high-profile closures – both expensive restaurants and not so expensive.
Here’s the list (and counting) – just this year:
There are rumors of others to follow, including Roux, which has announced it is trying to sell.
All of these restaurants have their own stories for why they closed, but for most, it was simple economics. Some retooled, like Laguna Fish Company becoming Bodega Laguna, and Sueños morphing into Cabana.
So is Laguna unique? Not really.
The closure rates for restaurants across the country are pretty similar. The difference, perhaps, is that the concentration of restaurants in Laguna is high, plus some of these restaurants have been around for a very long time, so people have become attached.
Which brings up another problem. Restaurants need to adapt to survive, and a few of these did not. Here are some stats to reinforce the point.
With profit margins of only 3-5%, restaurants need to be ruthlessly efficient. According to the National Restaurant Association, there’s only a 20% success rate for all restaurants. About 60% fail in their first year of operation, and 80% fail within five years of opening.
Adding to the challenge is that costs have increased with inflation. Again, according to the National Restaurant Association, 85% of restaurants say they are less profitable now than in 2019 before the pandemic. The reason? More than 90% of restaurants say their total food costs are higher than they were in 2019.
But there is some good news.
In general, restaurant owners are bullish on the remainder of 2023 and next year. About 75% say business conditions are already close to normal — or well on the way, and that they are optimistic on sustaining growth in the coming year.
Furthermore, in order to survive, restaurants need to think creatively and recognize fundamental changes in the market — something that Laguna restaurants need to remember.
“As the restaurant industry adapts to a new normal, operators’ ability to be flexible and diversify their operations is essential to thriving,” said Hudson Riehle, senior vice president of Research for the National Restaurant Association. “With profitability under pressure, operators are launching new business models within the industry, re-engineering current concepts, and allocating more space to off-premises business in order to satisfy customers in 2023.”
All of which means Laguna should give their respects to those restaurants that failed, but there will be others that take their place and try to make their mark.
And if the newcomers have done their homework, expect creativity, quality, and prices that match the market.
