Hawaii Restaurant Costs
The Big Squeeze: Restaurants are paying more for everything and they know you don’t want to.
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by John Heckathorn; Illustration by Michael Byers
People complain to me about restaurant prices all the time. “It’s getting hard for two people to go out to dinner somewhere and stay under $100,” someone recently said. “Since when did entrées start costing $40?”
“The sad truth is that, if we put a steak on the plate for $40, we still don’t make our margin,” says D.K. Kodama, who owns Vino Italian Tapas, Sansei Seafood Restaurant and Sushi Bar, Hiroshi Eurasion Tapas and dk Steakhouse.
Consider this: Beef prices are at an all-time high, up more than 12 percent from 2010. It’s going to get more expensive. Ranchers have reduced their herds. The cattle inventory in the United States is the lowest it’s been since the 1950s, largely because corn, the most common cattle feed, has doubled in price.
It’s not just beef: The costs of chicken, turkey, pork and veal are all up. The price for fish is skyrocketing, especially in Hawaii, where the seasonal ban against bottom fishing is underway, meaning there’s no local supply of such popular fish as onaga, ehu and opakapaka.
“Even frozen mahimahi has gone through the roof,” says Russell Siu, who finds cost increases hitting both his white-tablecloth restaurant, 3660 On The Rise, and his casual Kakaako Kitchen. “High-end, low-end, it’s all the same. Even greens are more expensive.”
The rise in food costs is exacerbated by the rising cost of fuel. Deliveries now charge for gas. That’s true on the Mainland, but, in Hawaii, the problem is even more noteworthy, since so much of what Island restaurants have on the table, from salt shakers to wine, has to be shipped here.
“Matson’s fuel surcharge just went up again, to 43.5 percent,” says Gail Ann Chew, executive director of the Hawaii Restaurant Association. “Our guys end up eating that cost.”
“I try to buy local, but I must pay for the gas. It’s totally crazy,” says George Mavrothalassitis, of Chef Mavro. His food costs are up 20 percent. “It’s the worst situation in my 23 years here.”
“Our cost increases are frightening,” says Randy Schoch, whose Desert Island Restaurants owns the Romano’s Macaroni Grills and Ruth’s Chris Steak Houses here. “In fact, I’m frightened right now.”
Food costs are not the only issue. “We have a vegan dish available at Tiki’s,” says Tiki’s Grill and Bar partner Bill Tobin. “The other night a customer scolded me for charging her so much for vegetables she could have bought for $5.”
Tobin finally had to say it wasn’t just the veggies. “We’re paying rent for oceanview property in Waikiki. When people think of the cost of a home-cooked meal, they never factor in what they’re paying for their house. Not to mention our labor costs.”
The runaway cost for restaurants, as it is for many businesses, is healthcare. “I swear our healthcare costs have doubled over the last three years,” says Schoch. “Those are dollars we will never recover.”
Göran Streng has a small, popular restaurant called Tangö in the bottom of the Hokua condominium. “You won’t believe it,” he says. “Healthcare for my little place now costs $80,000 a year.”
So restaurant prices have to go up?
That’s hard in the middle of a recession.
“Raising prices is the kiss of death,” says Schoch. “The customer doesn’t care: He wants only to pay so much for a meal, whether it’s a ribeye at Ruth’s Chris or lasagna at Macaroni. Your problems aren’t his problem.”
“We want Tiki’s to stay a full step below the high end,” says Tobin. “We monitor what’s said about us on the Internet and already local people complain we are expensive, so raising prices isn’t a good option for us.”
“I have half local customers and half visitors. The visitors don’t think we are expensive; local people think we are very,” says Mavro. “I can’t raise my prices and lose half my customers. I need local customers.”
“We have many local restaurants that haven’t raised their prices in three or four years,” says the HRA’s Chew.
That’s where the squeeze comes in.
“I’m not going to make budget this year,” says Mavro. “And it’s not revenue. Our revenues are up.”
“Revenue isn’t profit,” says Streng. “You work super hard, and after you’ve paid everyone at the end of the month, there’s not much left for you.”
“We’re OK,” says Schoch, “because we’ve paid our debt down. But where are the new restaurants going to come from? You can’t start a restaurant now, because you can’t promise investors a decent return.”
“For heaven’s sake, it’s always been brutal to get a return in this business,” says Dave Stewart, of Bar 35, Bambu2 and Brasserie Du Vin. Stewart admits that having major bar business is a help. “When times are good, people drink because they’re happy,” he says. “Times are bad, they drink because they are sad. We’re up 13 percent this year.”