Restaurant owners and operators like to point to a statistic that underscores the value of their industry: 100% of people get hungry.

Even with that degree of certainty, however, restaurants still have their share of problems. And right now, restaurant industry members say they’re facing some of their toughest challenges in years.

Since late summer, at least a dozen Pikes Peak region restaurants have closed or announced plans to shut their doors, according to an informal count by The Gazette. Among them are longtime favorites such as Mountain Shadows, Drifter’s Hamburgers and China Town.

Though the total number of shuttered restaurants is hard to come by, industry leaders fear more closings are on the way.

“Far too many Colorado restaurants have closed this year and that trend will most likely continue in 2025,” Sonia Riggs, president and CEO of the Colorado Restaurant Association trade group, said via email. “It’s not possible to remain in business when operational costs consistently rise and restaurants can’t increase menu prices accordingly or customers complain and dine out less. Sustainability is a real issue right now.”

The list of reasons for the rash of local restaurant closings and challenging business conditions seems as long as a Cheesecake Factory menu.

Restaurant profit margins are notoriously thin to begin with; the National Restaurant Association, the trade group that represents the industry, estimates restaurant operators only have about 3 cents left over for every $1 they spend on food, overhead and labor.

Nearly five years ago, Colorado — like other states — ordered the closure of dining rooms for the first few months of the COVID-19 pandemic, which created financial chaos for many restaurants and other businesses.

Though dining room closures are a thing of the past, inflationary pressures over the last few years have sent prices soaring for food, paper products and other goods, restaurant owners and operators say. At the same time, utilities, insurance and taxes all have spiked, while lease rates for restaurants that rent their space also have jumped.

Labor is another problem. Restaurant owners and operators say it’s difficult to find the workers they need. When they do, government-mandated minimum wage hikes and social programs have pushed their costs of doing business even higher, owners and operators say.

“There’s no question at all that the headwinds in Colorado have become more and more challenging each and every year,” said Randy Price, founder of the Urban Egg chain that has a total of nine locations in Colorado Springs, Denver, Fort Collins, Johnstown and suburban Kansas City, Mo., with an expansion planned in Texas.

“We’re seeing record real estate taxes, which drive (property operating expenses) through the roof,” Price said. “You have new costs of construction impacted by higher interest rates, which is driving the costs of opening business higher and higher. You have record high wages; we’re nearing California in what we pay tipped employees and hourly employees. It seems like sometimes it’s a barrage.”

Plea for leeway

Compounding the problem of higher costs, whether for food, wages or other expenses: restaurants walk a fine line on what they charge and can’t just hike menu prices without the risk of alienating customers.

“We have California-like expenses, but we can’t charge California-like prices,” said Luke Travins, co-owner of Colorado Springs-based Concept Restaurants that operates José Muldoon’s — the Tex-Mex restaurant that marked its 50th anniversary this year — and MacKenzie’s Chop House, both downtown.

He added: “We need to charge $30 for a burger. But we can’t.”

When it comes to labor costs, restaurants that were required by the state to pay a minimum wage of $8 an hour 10 years ago paid $14.42 an hour this year for non-tipped employees and will pay $14.81 in 2025, according to the Colorado Department of Labor and Employment. Denver’s required minimum wage will edge up to $18.81 next year, while Boulder’s will rise to $15.57; Colorado Springs has no mandated minimum wage.

Businesses also must pay into new social programs, which adds more costs for employees, employers and third-party vendors, said Hannah Campana. She and her husband, Joe Campana, own several restaurants in Colorado Springs, including Bonny and Read, The Rabbit Hole and SuperNova.

The Campanas employ about 186 people across their restaurants.

“Some of these are great programs,” said Hannah, who oversees various administrative duties for the couple’s restaurants and is hands-on with their payroll and budgets. “They protect jobs and ensure that if you’re sick you can get help. The issue … is a lot of these costs fall onto family-owned businesses.”

One example: the voter-approved Colorado Family and Medical Leave Insurance (FAMLI) program that took effect Jan. 1. It allows eligible employees up to 12 weeks of paid leave every year to care for themselves or family members during significant events like illness or childbirth.

Businesses with 10 or more employees must contribute 0.9% of a worker’s gross paycheck toward the program every quarter; businesses with fewer than 10 employees must contribute 0.45% of wages. Businesses of any size can choose to deduct up to 0.45% from their employees’ paychecks to contribute to the quarterly payment.

“That ends up being a cost that you have to pass onto your employees, on top of (their) increased grocery costs and rent, for a program they might not use,” Hannah Campana said. “And it’s another cost the payroll company passes to us, because now they have to track it. If payroll isn’t handling it, then you (the business owner) have to register for the program, submit required reports, and if you don’t submit the reports on time, you get fined. It’s a simple thing that can really snowball in costs and requirements.”

More notice to employers about new state-required programs and more leeway for businesses to offer those programs could help ease some of the added workload, she said.

Pressure-cooker costs 

Besides big-picture costs, restaurants have other expenses that customers aren’t aware of, but which all add up, said Phil Duhon, who owns and operates Burnt Toast, a breakfast and lunch spot with locations downtown and on North Academy Boulevard. He also runs the Avenue 19 food hall on Tejon Street in the heart of downtown.

At his restaurants, roughly 9 in 10 customers use credit cards to pay for meals, which requires his restaurants to pay processing fees for the use of those cards, Duhon said. Restaurants don’t have to pay the processing fee when customers add an employee tip via a credit card, but most do anyway, he said.

Like other restaurants, he’s been hit by fuel surcharges for deliveries from vendors and purveyors, while insurance premiums and rents have increased citywide for commercial and residential users.

Those behind-the scenes expenses come in addition to the cost of goods, he said.

“I’m in the breakfast business,” Duhon said. “Eggs and commodities have shot through the roof over the last couple of years.”

The higher costs that he and other restaurateurs face, Duhon said, have nothing to do with their experience or their skill in running their businesses.

Even if they serve quality food, offer an appealing concept, employ good accounting methods and inventory controls and have little employee turnover and low rates of theft, restaurants can’t do anything to control their rising overhead, he said.

“We’ve got 10% to 15% of our costs that have gone up that have nothing to do with the business whatsoever, other than additional costs,” Duhon said. “And that used to be our profit margin. So now we have to make up our profit margin from something else. We used to have a little room for theft or breakage or if something gets thrown out or something’s not working. But we don’t have that wiggle room.”

On top of everything else, local independents and mom-and-pops face stiff competition from national chains, which have more financial and strategic resources to advertise, scout locations and position their individual restaurant sites for success, Duhon said.

“Look at what In-N-Out Burger does,” he said of the California chain that expanded to Colorado Springs and the state in November 2020. “They change the dynamic of the parking lot and the off ramps, the merge lanes. These guys come in and they’ve done their homework. And we don’t have that.”

National chains also offer a familiarity — from their menus, to their food, to their dining rooms — that customers are comfortable with, Duhon said. Though local independents can offer an amazing restaurant experience with attentive and knowledgeable servers, some diners want to be sure that they’ll get what they want, he said.

“The consumer out there, they’re spending more money, so they’re going to want to be guaranteed a better meal or better service,” Duhon said. “They’re a little bit less likely to give an independent a chance. … They don’t want a surprise.

“For example, I’m not a big fan of Chili’s, OK? But Chili’s is consistent,” Duhon said of the casual restaurant chain. “You’re going to get sat the same way, you’re going to get greeted the same way. They’re going to come and they’re going to present the menu that you’re familiar with. They’re going to have a price point that you’re familiar with. And you already know what it’s going to taste like before you get the food. Is it phenomenal? No. But you know what you’re getting when you walk in the door. And so if you’re spending $30 a person at a Chili’s, you know what you’re going to get for $30.”

Value of experience

So what can restaurants do as they seek to overcome higher costs, competition and what they believe are burdensome government regulations?

For one, having skilled and experienced employees is a big help during “difficult margin times,” said Travins, of Concept Restaurants.

“We can do more with less,” he said. “We’ve got people who know every nook and cranny of our restaurants, they know the operation inside and out. They’re able to go dual-role, where they can host and manage a little bit. Or they can bar tend and pick up tables. It’s just more of a collaborative work environment than (if) everybody’s just in their little station.”

Duhon said, like other restaurants, he tries to be smart about how he schedules his workers.

“We don’t have extra people around if we don’t need them,” he said.

He’s also increased wages to retain employees and avoid turnover.

“I’m way, way, way above minimums,” Duhon said. “I don’t even worry about what minimum is. I don’t get a lot of turnover. I’ve found that it’s better to pay your people and get some good loyal people. It seems to actually come out ahead. I don’t retrain as much, and that’s where you lose a lot of money.”

Price, of Urban Egg, said more efficient ways of doing business can be big cost savers. One example: a new point-of-sale program implemented over the last 12 months that allows his servers to take customer orders tableside and present their checks to them tableside.

“We’ve eliminated all that writing the order down, going to the computer, ringing the thing in, coming back to the table, (along with) when someone’s going to make a payment, taking the credit card, walking across the restaurant to make the payment, bringing the credit card receipt back,” Price said. “We’re trying to look at everything our team members are doing and figure out where we can make it easier for them, where we can make it efficient for them. That may lead to, on a Monday or a Tuesday, rather than having seven team members on, we might be able to operate with five or six. But that still saves us $15 an hour. It all adds up.”

Like many other restaurant owners, the Campanas are figuring out how to cut nonessential costs without sacrificing quality or affecting the customer experience too much. For instance, they removed linen tablecloths at Bonny and Read to save about $2,000 a month.

With other business partners, the Campanas have also purchased additional businesses to make more products in-house and save on supplier costs.

Alongside Matt Baumgartner, the Campanas’ partner at the Shame & Regret cocktail bar downtown, they’ve purchased the vegan restaurant Fern’s Diner & Drinkery in Cascade so they can make desserts they can offer at their other restaurants. The Campanas, Baumgartner and Lucas Fry of Cork & Cask also all pitched in to purchase Bell Brothers Brewing on Tejon Street so they can make and sell their own beer.

“It’s different now. It’s just harder,” Joe Campana said of running a restaurant. “We’re trying to get through it. You have to adapt or die.”

Positive signs

Restaurants and other small businesses aren’t alone, however, said Jessie Kimber, director of the city of Colorado Springs’ Economic Development Division.

The Pikes Peak Small Business Development Center, the Exponential Impact business development support group,  Better Business Bureau of Southern Colorado, the Colorado Springs Chamber of Commerce & EDC and other local chambers and the city’s own Economic Development Division and its Small Business Development administrator are among resources that restaurants can turn to for help, Kimber said.

“We have so many folks that just run out and open a business and then try and learn on the fly,” Kimber said. “I would always say, pause, connect with the city, connect with (the Small Business Development Center) and make sure that you are not, several years in, learning things for the first time on how to run a business or not seeking mentorship opportunities and connecting with other businesses who do a great job of sharing best practices.”

Even as restaurant industry members lament today’s financial and operational challenges, the actual number of restaurants statewide continues to grow — though those figures include the chains that Duhon and others say have advantages over the independents and mom-and-pops.

Colorado had 13,424 restaurants in 2024, according to the latest data from the National Restaurant Association. That’s up by more than 1,000, or 8.6%, from 12,359 in 2020.

Likewise, for as many obstacles as restaurants face, there still are positive signs for owners and operators in Colorado Springs, Travins said.

The city’s population continues to grow, it remains an attractive tourist destination, and 1,500 apartments will open in the next 18 months in downtown alone — all of which are positives for restaurants like José Muldoon’s, MacKenzie’s and others.

“Our foot traffic is still really good at both our locations,” Travins said. “So, we’re fortunate. We also have really, really good employees and our core employees have been with us for a long time. We’ve got a lot of tenure.

“Is this the toughest time?” he asked. “Not yet, because we’re not in a recession where foot traffic is an issue. If we had a big drop in revenue — boy, that would be difficult. You’d really see a lot of locally owned businesses shuttering their doors, more so than you’re seeing now.”

But make no mistake: Even restaurants that survived the pandemic are struggling, Travins said. Asked how bad things are for the industry, he pegged conditions as “60% doom and gloom” because of historical expenses tied in part to labor costs and government mandates.

“The biggest difference with COVID is that all of our vendors and our landlords and so forth didn’t expect to get paid,” Travins said. “The whole payment circle stopped and everybody worked with everyone on what was fair and market rate at the time, so to speak. This is different because Sysco, Shamrock and US Foods (wholesalers and suppliers) still want their weekly check for their orders.

“If you’re able to manage your expenses and you don’t have debt, you can stay in business,” he added. “I can’t imagine some of these newer restaurants that … also have a $5,000 to $10,000 a month loan payment on their opening expenses. That is crushing. Do I expect 60% of locally owned places to go out of business? I don’t. Could I see 10% to 15% of locally owned restaurants in the city going out of (business)? Yeah, that’s a definite possibility. And that’s a big number.”

New restaurants arrive

Even so, some restauranteurs aren’t deterred.

Amar Mand and his wife, Jasdeep Mand, opened two restaurants in the past year, King Restaurant Indian Kitchen and Bar on Barnes Road and Curry Culture, which has moved from its location on Platte Avenue to Tracker Drive near North Gate Boulevard on Colorado Springs’ far north side.

The couple is gearing up to open a third restaurant in the spring — Masala Mingle at 326 S. Nevada Ave. in downtown at the current location of China Town restaurant. The Chinese restaurant will close its doors and move out at the end of the year.

Business has so far been good for Mand’s existing restaurants; he’s saved costs by taking on some of the front- and back-of-house responsibilities, such as arriving at the restaurants early to prepare them for opening.

“This way, I can minimize hours I must pay employees and I can do things myself, so that helps keep costs down,” he said.

Though the climate has been tough for restaurants in recent years, Mand leans on his 35 years of experience in the restaurant industry to get through it. Growing up, his father owned and operated several restaurants in Minnesota and North Dakota.

“I think there’s always a concern there, whatever time we’re going into. … I’m trying to stay positive and not think about the negative too much. I try to do whatever I can do that is within my (power), and know that certain things are out of my control,” Mand said.

“My dad always said that business is a gamble. You never know what’s going to happen and you never know when it’s going to happen. That’s the biggest thing you’ve got to keep in mind: Nothing is sure in business, and you have to work really hard to get where you want to go.”