Central Austin restaurants battle ‘perfect storm’ of challenges

Report: More than 50 Central Austin businesses have closed since January 2017

Report: More than 50 Central Austin businesses have closed since January 2017

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Local restaurants battle ‘perfect storm’ of challenges
Image description
Local restaurants battle ‘perfect storm’ of challenges
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Local restaurants battle ‘perfect storm’ of challenges
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Local restaurants battle ‘perfect storm’ of challenges
On Jan. 31 Glenn and Paula Foore announced the closing of their business, Springdale Farm, this summer, citing retirement plans.

The East Austin urban farm opened nine years ago and is one of more than 50 restaurant and bar closings Community Impact Newspaper confirmed in Central Austin between January 2017 and March 2018.

In 2016, Community Impact Newspaper reported 15 bar and restaurant closings in Central Austin.

Although no local agency tracks restaurant closings, Community Impact Newspaper reviewed more than 3,350 inspection records from the city of Austin’s Health and Human Services Department. In doing so, reporters were able to confirm at least 11 additional bars and restaurants in Central Austin that were inspected in 2017 but have since closed.

The majority of these closings are concentrated in the 78701, 78702 and 78704 ZIP codes, where restaurants and bars are most densely located, according to health inspection records.

The reasons for the closings are manifold and include increasing rent and property taxes, labor shortages, burdensome regulations and permitting delays.

“It’s a perfect storm that’s breaking us apart,” said Hoover Alexander, chef and owner of Hoover’s Cooking on Manor Road. The restaurant opened in 1998 and has no plans to close.

“Small businesses are an endangered species,” the lifelong Austinite said.

Entrepreneurial spirit

The Foores purchased the 5-acre property that would become Springdale Farm in 1992.

They operated it as a landscaping business before forming Springdale Farm in 2009 after the recession. The urban farm now grows more than 75 seasonal fruits and vegetables and supplies produce for many local restaurants, including Olamaie, Bufalina and Barley Swine.

“Buying even 5 acres in ’92 was scary for us,” Glenn Foore said.

But the financial risk paid off.

“It’s turned into our American dream and our ability to retire and open another chapter in our lives,” he said.

“It’s just sad that it’s going to be so much more difficult for young people [to replicate our experience],” he said.

Rising costs

Last fall Threadgill’s World Headquarters, located at 301 W. Riverside Drive, announced it would close in 2018 after 22 years in business.

In the last five years, the restaurant’s rent has increased approximately 350 percent, per owner Eddie Wilson, as the property value more than doubled.

Due to public support, Wilson ultimately changed course and signed a four-year lease. But increasing tax rates and insurance costs remain a concern.

Rising property values increase costs for renters and landowners alike.

The Foores have owned their property for more than 25 years.

Since 2013 Springdale Farm’s land value has increased nearly 50 percent, from $355,668 to $523,560, according to the Travis Central Appraisal District.

“Let’s just say [our property tax bill] went from dropping change into a jar to quite a bit of money,” Glenn Foore said.

The average rent per square foot of retail space, including restaurants, in Central Austin is $27.50, according to commercial real estate firm JLL. In 2009, the average rent was nearly $4 cheaper per square foot at $23.88.

Rent and property taxes are not the only costs that are rising.

“Everything increases every year,” said Jodi Mozeika, business team leader at Black Star Co-op, a cooperatively run brewpub that opened in 2010.

“Health care goes up every year. Rent goes up every year. All of our vendors’ prices go up every year,” Mozeika said.

Black Star nearly closed in 2017 because of this cost crunch. After a public appeal for support, the brewery bounced back, but not without compromises.

In addition to taking pay cuts, many workers have been on a wage freeze for nearly three years, Mozeika said.

Labor pains

On Nov. 25 Fair Bean Coffee in South Austin closed after 10 years in business. Owner Andres Salvador attributed the closing to staffing challenges.

Many others echoed this concern.

“It’s still not easy to find people to do these jobs because there is a manual labor component,” said Deborah Donovan, Chez Zee general manager and Greater Austin Restaurant Association president. “They don’t want to mop floors. They don’t want to pick up trash.”

Chez Zee has no plans to close and will celebrate its 30th anniversary in May 2019.

Moreover, such jobs were never intended as career employment or to support a family, Donovan said.

At Springdale Farm, employees who have worked at the company for 10 years are considered new. Still, Paula Foore acknowledged staffing pressures.

“You’ve got to keep your people, so you’ve got to pay your people more,” she said.

Aaron Johnson, an attorney who represents low-income workers in wage theft cases at the Equal Justice Center in Austin, said that what business owners may perceive as a labor shortage is instead market forces at work.

“Just like every industry across the country, there’s going to be a labor shortage in Austin and Central Texas until restaurants raise wages to what workers are willing to work for,” he said.

The minimum wage in Texas is $7.25 a hour. A full-time worker would take home $15,080 a year before taxes. This is not enough to live on in Austin, Johnson said, let alone to raise a family.

Yet even Black Star, which offers a living wage and health insurance, struggles to find back-of-house workers because of the competition in Austin.

“With so many restaurants opening all the time, businesses are just short on chefs right now,” Mozeika said.

Between January 2017 and March 2018, Community Impact Newspaper has reported 103 restaurant and bar openings in Central Austin. In the same period, another 38 have announced plans to open this year.

Moving forward

Michael Fojtasek opened Olamaie in 2014, more than a year after signing the restaurant’s lease.

“I spent seven months and eight days inside the city’s permit office,” the James Beard semifinalist said. “It was a capital killer.”

The city’s permitting system has improved since then, Fojtasek said, but it could still be streamlined.

The Foores said they also struggled to obtain the proper permits to operate as a commercial urban farm.

They spent years lobbying the city for a conditional-use permit that would allow Springdale Farm to host events, a process that was resolved in 2015.

“If we had known that it would have taken three years to get a conditional-use permit, we’d have been out,” Paula said. “Maybe it’s good you don’t know. But surely [Austin] could be easier on small businesses.”

Donovan recommends that the city of Austin offer businesses concessions to counterbalance mandates, such as the new paid sick leave ordinance.

As an example, Donovan proposed that the city provide a two-year property tax reprieve to small businesses when a new mandate is passed to help assuage the increase in cost.

Otherwise, she asked, “Where are our people going to go if they mandate us out of business?”

Alexander and the Foores suggest the city create a new position—small-business ombudsperson—to liaise between small businesses and policy makers.

This position does not currently exist in Austin, but the Economic Development Department’s small-business program serves a similar function.

“We need a voice at the table,” Alexander said. “We want to be part of the solutions because we do care.”

“We’re really happy to write a big check to Amazon or somebody else,” Glenn Foore said. “But what about the small businesses that actually employ a lot more people across the country?”


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