California Restaurants Are In Crisis As Regulations, Inflation Cost Owners

(REUTERS/Patrick T. Fallon)

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Will Kessler Contributor
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Restaurant owners in California are collapsing under the weight of costly regulations in the state and widespread inflation, the Los Angeles Times reported Wednesday.

A number of California’s most popular restaurants have had to close their doors so far this year, such as award-winning Manzkes’ Bicyclette and Patrick’s Roadhouse, according to the LA Times. Struggling restaurants could be due for even higher costs and lower profits due to new regulations in the state, such as a minimum wage hike and rules on benefits. (RELATED: Building A Few Miles Of California Railway Currently Projected To Cost More Than NASA Mars Mission)

The state of the industry at the start of 2024 mirrors conditions that resulted in huge shutdowns across the state in 2023, particularly in Los Angeles, which recorded more than 65 restaurant closures in the year, according to the LA Times.

Vietnamese restaurant Bé Ù’s ingredients and packaging costs have increased between 35% and 50% since 2021, according to the LA Times. Prices in the country, overall, have increased 19.3% since January 2021, rising 3.4% in just the last year ending in April.

“Vendors do not hesitate to raise their prices regularly on products,” Uyên Lê, owner of Bé Ù, told the LA Times. “And we are often very reluctant to pass those heavy costs on to our guests … I am sure you understand considering the sticker shock most of you probably experienced at the grocery store lately.”

Increases in the price of gas in California, where the commodity is already more expensive than the rest of the country, led bakery Bub and Grandma’s to raise its delivery fees and to consider possibly outsourcing to a separate delivery company to cut costs, according to the LA Times.

“There are thresholds that, once they go over that, people aren’t going to pay $12, $15 for a single loaf of bread,” Andy Kadin, owner of Bub and Grandma’s, told the LA Times. “I hope we don’t get there. If we do, we’re going to have to get very creative and have to do more with less.”

California’s new minimum wage for chain restaurants like fast food went into effect on April 1, raising the hourly minimum wage from $16 to $20 across the state. Many restaurant owners, including a major Pizza Hut franchisee, announced substantial layoffs ahead of the change.

Even more costly changes are set to take effect in July, including outlawing surcharges on employee tips, health insurance and other benefits, according to the LA Times. Restaurant owners and trade groups have claimed that they have largely been left out of talks about the details by lawmakers.

“They should want to be looking for ways to help the restaurants recover and survive,” Jot Condie, president of the California Restaurant Association, told the LA Times. “I think they should first start from a place of doing no harm, or in other words: Take your foot off our neck and don’t make it worse. Then look for ways to help restaurants survive.”

The state’s economy is struggling as a whole, with job growth outside of government positions lagging and unemployment rising to the highest in the nation. Retail theft, high taxes and huge population outflows have all added to California’s economic malaise.

The California governor’s office did not immediately respond to a request to comment from the Daily Caller News Foundation.

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