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New Mexico restaurant survey reveals litany of challenges faced by operators

'You can see why they're depressed,' says NMRA executive director

Show Caption
  • The New Mexico Restaurant Association survey drew 100 responses from restaurants across New Mexico.
  • It was conducted in early December.
  • More than a quarter of those surveyed said they expect business conditions will never return to normal for their restaurant.

FARMINGTON — By the time the end of 2021 rolled around, Carol Wight, the executive director of the New Mexico Restaurant Association, said she had received enough feedback from her members to conclude that her beleaguered industry finally was beginning to recover from the effects of the COVID-19 pandemic.

Then came the results of a survey her organization conducted of restaurant operators across the state. Wight's cautious optimism vanished as soon as she saw the survey.

"I had been hearing anecdotally that things have been getting better in the industry," she said. "But then I realized that we're not recovering as fast as I hoped."

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Wight acknowledged that restaurant operators tend to be, by nature, optimistic folks, the kind of people who believe in themselves enough to try to run a business that has a significant failure rate even in a solid economic environment. But the challenges presented by the pandemic, which soon will enter its third year, have crippled the industry and left many of Wight's members in a state of outright despair.

According to the survey, which Wight said drew 100 responses from New Mexico restaurant operators in early December, 46% of respondents said they experienced a decline in customer demand for indoor, on-premises dining over the previous three months. And more than a quarter of those surveyed — 27% — said they expect business conditions will never return to normal for their restaurant.

"We figure it out, we create, we recreate, we pivot," Wight said, describing the typical mindset of restaurateurs when faced with a challenge.

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But Wight said the problems presented by the pandemic — everything from restrictions on indoor dining and the inability hire enough people to disruptions in the supply chain, and rising food and fuel costs — have left many restaurant operators at the end of their rope. Approximately 350 restaurants in the state have closed since the pandemic began, she said, many of them in the Farmington area.

"Someone said to me to the other day, 'Carol, I have pivoted and pivoted and pivoted until I'm pirouetting now,'" Wight said. "You have to think of the mental exhaustion of what they're going through. You can see why they're depressed. One of my board members is getting close to retiring, and he told me, 'I have worked harder in the last three years then when I opened my restaurant.'"

John Silva, the owner of the Three Rivers Brewery group of enterprises in downtown Farmington, said he agreed with the sentiments his fellow operators expressed in the survey.

"It's awful," he said. "Prices are high, nobody wants to work and utilities are going up. It's the worst time in the world to be in the restaurant business."

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Silva said he hears stories about new restaurant franchises coming to the city, and he wonders what they're thinking.

"It's crazy," he said. "Anybody who's thinking about opening a restaurant business right now isn't doing their research."

Silva said he has friends in the restaurant business in New York and California who already have given up and closed their doors. He said the number of customers at Three Rivers has declined 33% during the pandemic, and sales are way down.

"I question daily what the hell I'm doing," he said.

Not all restaurant operators in Farmington are taking such a gloomy perspective. Phillip Nyce, the general manager of Dad's Diner at 4395 Largo St. in Farmington, said his restaurant was closed for a little more than a year when the pandemic began but has rebounded nicely since reopening in March 2021.

"I kind of feel like we are in a little bit of a different (situation) than a lot of others," he said.

Dad's Diner is a family owned establishment and had enough money set aside so that it could close its doors for a year and wait out the worst of the pandemic-related restrictions, Nyce said. It also doesn't have to pay franchise fees, partners or a mortgage, he said.

When the diner did reopen, he said, its loyal customer base quickly returned.

"Within the last nine months, we made all the money back we lost (during the closure)," he said. "We're back in the black."

Dad's Diner is now open only six days a week instead of seven and has reduced its operating hours, but Nyce said the eatery nevertheless just enjoyed its best month ever in December.

"It was the busiest, most prolific month we've ever had in the history of our diner in 25 years," he said.

New Mexico restaurant survey: Breaking down the numbers

While 61% of respondents in the NMRA survey say their total sales volume in October 2021 was higher than it was in October 2020, 53% of respondents say those sales were still lower than they were compared to October 2019 pre-pandemic levels.

Other significant findings include:

• 44% of operators expect their 2022 sales volume to remain less than 2019 levels

• 71% of operators say their restaurant does not have enough employees to support existing customer demand

• among restaurants that are understaffed, 75% say their restaurant is more than 10% below necessary staffing levels

• 36% say they are more than 20% below necessary staffing levels

• 76% of operators say their total labor costs as a percentage of sales are higher than they were prior to the pandemic

• only 8% say their labor costs declined as a percentage of sales

• 97% of operators say their restaurant has experienced supply delays or shortages of key food or beverage items over the previous three months

• 92% say their total food costs as a percentage of sales are higher than they were prior to the pandemic

• 58% of operators say their occupancy costs are higher than they were prior to the pandemic

• 72% of operators say their profit margin is lower than it was before the pandemic

• and 41% of operators expect to be less profitable in 2022.

In regard to rising costs, Wight said that while the consumer price index — a national measure of the change over time in the prices paid by urban consumers for goods and services — is up 5%, she said the CPI does not take into account food and fuel costs, both of which affect restaurants to a high degree.

"Wholesale costs jumped 12% in the last year, and everything we get has to come in by fuel, so a lot of restaurants are charged a fuel surcharge," she said. "Those have gone up exponentially."

Disruptions to the supply chain have been especially frustrating, Wight said, explaining that, in many cases, it is the packaging of products, rather than the products themselves, that are holding things up. She said some restaurants have been unable to source the tequilas they use for their house margaritas or even the beans they serve with their entrees from wholesalers because of shortages of glass and plastic packaging.

"It's things you don't even think about that can take a supply chain and just stop it," she said.

While business for his restaurant has been good, Nyce of Dad's Diner did confirm his eatery has experienced many of the other same issues that operators across the state cited in the NMRA survey. He described the supply chain disruptions as a nightmare, explaining that it has been difficult for him to keep everything from chicken wings and onion rings to plastic utensils, napkins and to-go boxes in stock.

He said only two of his four distributors used to charge Dad's Diner a fuel surcharge, but now all of them do. And the price of cooking oil has more than tripled, he said, just one factor in the restaurant's decision to raise its menu prices 7% over the last year.

Dad's Diner has avoided further price increases by cutting back in other areas, he said.

"There are still ways you can cut costs and do more with less," he said.

Wight said labor shortages are another significant hurdle for restaurant operators.

"It's harder to get people and keep people," she said. "We're paying them more to show up, but some are and some aren't."

Nyce said Dad's Diner hasn't been immune to those challenges, either.

"Our staffing shortages have been horrendous," he said, explaining the eatery had great difficulty hiring enough workers when it reopened in March 2021. "We're having to pay people more just to retain them."

Nyce said his restaurant keeps things running smoothly by constantly training people for new jobs. That way, it is never caught short handed, he said.

"That was our answer to that problem," he said. "We always have someone training regardless of if we're (fully staffed) or not. And we use every tool we can find to hire people – paper applications, Facebook, we just hire who we can. And if they're not good, we get rid of them. We don't keep them just because they're a warm body."

Wight said a new phenomenon has been sweeping the industry in recent months in which workers interview for a job, accept it, pick up a uniform, take home a copy of their schedule, then are never heard from again.

"We're calling it ghosting," she said. "And you can't get a hold of them."

To address some of those issues, Wight said the NMRA is asking state lawmakers to pour more money into the New Mexico Tourism Department to promote the state's hospitality industry. She said her organization also is asking for more funding for New Mexico Department of Workforce Solutions programs that supply training for restaurant workers.

But the onset of the Omicron variant has presented yet another challenge to restaurant operators, Wight said, one that could further delay the recovery of her industry.

"I'm praying Omicron is (the end), and we get to move out of this," she said. "But as long as we keep being in fear of each other and (being in fear of) going out, then restaurants are going to suffer. We keep talking about learning to live with it, and I don't think we've done that."

Three Rivers' Silva said what he has experienced over the last two years is simply unprecedented.

"I never thought in my lifetime I would see something like this happen in our world," he said.

Wight urged restaurant patrons to be patient with the level of service they receive in restaurants, explaining that staffing issues have created major challenges for everyone.

"Have patience, give them a little grace and maybe don't write that scathing criticism you might write on social media," she said. "We need to remember how to treat people right, so please give them room."

Mike Easterling can be reached at 505-564-4610 or Support local journalism with a digital subscription.