Higher costs force Peoria restaurant owners into a delicate balancing act

Owning and operating a restaurant is no simple task.

From finding and retaining staff to drawing in enough traffic to stay afloat, owners must navigate a number of factors that affect business.

Over the past year, Peoria-area restaurant owners have grappled with rising costs, which have influenced everything from food and staffing to energy and insurance.

“Restaurant owners-operators know they used to work on nickels and dimes – now, they’re working on pennies and nickels,” said Sam Toia, president and CEO of the Illinois Restaurant Association. “But as long as (restaurants) have good food and great service, they should survive.”

Keeping up with costs is a delicate balancing act. Raising prices or reducing staff can risk turning customers away, but continuously absorbing the increases is an unsustainable solution.

Despite the challenges, local restaurant owners are finding ways to adjust and persevere.

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Restaurants saw food costs 'jumping and fluctuating' after COVID-19

The producer price index for wholesale food has gradually declined after seeing months of double-digit increases in the wake of COVID-19, according to the National Restaurant Association. The index measures changes in the price producers sell products and services for.

The National Restaurant Association noted a 12-month percent change of negative 5.7% for wholesale food prices in December 2023. According to the research, which examined food costs in the restaurant industry, this "marked the eighth consecutive 12-month decline."

Even so, the costs of some foods, such as beef, saw increases over the same 12-month time period. Along with this, Toia said the producer price index for food remains over 25% higher than what it was in February 2020.

This poses a challenge, he said, in an industry where 95 cents or more of every dollar goes back into costs.

Randy Bassette, who co-owns The Billboard Bistro with his wife and son, said “food prices have been steadily increasing since the pandemic.”

In 2023, he and his wife, Debbie, said the restaurant saw a notable jump in expenses. According to Randy Bassette, the cost of some food rose 20% to 30%.

At The Owl’s Nest, owner Kirstie Doerr said a 12 pack of soda has more than doubled in price – rising from $3 to $8. The cost of beer has also increased twice within the past year, she said.

Sean Kenny, owner of Kenny’s Westside Pub and Friendly Valley Tavern, noticed food costs "jumping and fluctuating" following the pandemic, as well.

“Prices have always risen, but recently they've risen faster than ever before,” Kenny said. “And as long as you're keeping your pricing structure on par with that, then you should be good.”

Kenny said food prices now appear to be more stable but added that costs are continuing to rise.

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A balancing act

Already, Kenny said he has seen local businesses increase menu prices to keep up with expenses.

For some business owners, though, the solution is a double-edged sword. Do you cut into your own bottom line or cut into the buying power of customers?

“When you pass on that cost to the customers, what happens is a lot of customers that might have went out to eat two or three times a week is going out one or two…” Toia said. “So, it definitely affects the industry.”

From Doerr’s perspective, it seems as though consumers are already spending less. She said her delivery drivers noticed a slowdown during the holidays, which is typically a busy time of year. When visiting her local nail salon, she said business has been unusually quiet.

Doerr said she resisted raising prices at The Owl’s Nest for as long as possible, hoping costs would come back down.

“I'm just now redoing my menus and raising the price, but you can only raise it so high,” she said. “I try to keep my specials to bring people in.”

Many restaurants have chosen to pare down their offerings to combat costs, Toia said.

Such was the case for The Billboard Bistro. The restaurant attempted to raise menu prices last year as expenses climbed – only to be met with a significant drop in business.

So, the Bassette family pivoted. They whittled down the menu selection and honed in on the restaurant’s tenderloins – a staple item. Since then, Randy Bassette said the business has begun to gradually reintroduce menu items.

The restaurant has revived its burgers, along with its prime rib special on Saturdays. The business also has reintroduced its fried strawberry dessert to the menu.

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‘It all snowballs together’

Food prices, of course, are not the only cost associated with running a business. It's simply one piece of the puzzle.

Staffing is another factor for restaurant owners.

In 2024, Illinois' minimum wage grew to $14 an hour and a new paid leave law went into effect. The Paid Leave for All Workers Act enables employees to receive up to 40 hours of paid time off each year. Employers may offer the full 40 hours at the start of every 12-month period or may require employees to accrue hours.

Next year, the minimum wage is set to climb upward once more – reaching $15 an hour. In Springfield, there is also a legislative push to end the sub-minimum wage for tipped workers throughout Illinois.

Randy Bassette said the still-tight labor market has influenced costs as well – driving pay up as the restaurant seeks to draw in workers. Gas, electric and garbage service costs have also increased, the Bassettes said.

Multiple restaurants that closed in 2023 cited rising costs as a factor in their decision.

Radish Kitchen owner Jam Rohr said the cost of Ameren tripled and rent and food prices went up, as well. The Noshery, Two P's Pizza & Pub and the Peoria location for Dac’s Smokehouse also attributed their shutdowns – in part – to increasing expenses.

At The Owl’s Nest, Doerr said the cost of “every little thing” has risen – from garbage to delivery prices. Even insurance for the business – which was previously around $400 a month – has tripled in price, she said.

“It all snowballs together,” Doerr said.

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‘Tightening up in all areas’

Aside from raising menu prices, Doerr said she is working to limit costs by reducing day-to-day staffing and putting in more hours herself.

Much like menu prices, though, staffing can be a delicate balancing act.

Some days, when the expected crowds don’t show up, Doerr said she is left with cooks who have nothing to do. However, she said adequate staffing is important when it comes to offering good service.

“If you cut your staff too much, you're not gonna have good service,” Toia said, “and when people go out to eat, they want good service.”

To help manage the cost of labor, Toia said restaurants have begun to implement more technology, such as self-ordering stations and online ordering.

For Kenny, the COVID-19 pandemic and its lingering ramifications on staffing and costs have posed difficulties for the restaurant industry. Even so, he has maintained a full staff and found ways to adapt.

Adjusting menu prices is one way to stay on top of inflation. Kenny said being mindful of expenses – and pivoting when needed – is also important.

“COVID made us all take a second look at our costs and how we're managing loss and waste and all that kind of stuff…” Kenny said. “I would just say it's just about tightening up in all areas.”

This is the goal at the Billboard Bistro, where the Bassette family has found various solutions for reducing costs.

Debbie said the thermostat is adjusted at the end of the day, so the heating and cooling systems do not kick on as much. She also said the business shifted to a cheaper internet provider after encountering “phenomenal” costs.

“So, we're just looking into all these little things that can help us survive,” Debbie Bassette said.

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‘We’ll come up with solutions’

Toia said customers still savor the opportunity to dine out. The key for restaurants, he said, is to provide “good food and great service.”

While the economic landscape may pose challenges, Toia described restaurant owners as “resilient.”

“It’s tough, but they are going to get through it,” he said.

Despite the challenges, Doerr said many customers at The Owl’s Nest are understanding, particularly when it comes to operating with a limited staff.

“We're very, very lucky because a lot of the people are regulars and they're all very nice about it,” Doerr said.

In the future, Doerr is considering investing in a commercial to help draw in additional customers.

At The Billboard Bistro, Randy Bassette said the winter months have brought a bit of a slowdown but added, “We're optimistic that we can weather through the storm.”

Moving forward, the Bassettes hope to encourage continued growth in various ways.

Debbie said she wants to bring food samples to local businesses and spread awareness about the restaurant’s ability to host events. Randy is hoping to update the patio space – should the budget allow – ahead of the summer months.

“We're gonna keep our heads held high and not throw our hands up when something tough comes up and throw the towel in,” Randy Bassette said. “We'll come up with solutions to the problems and hopefully the community will support us and help us prosper.”

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This article originally appeared on Journal Star: Facing unstable costs, Peoria restaurant owners make hard decisions