We Are Failing The Restaurant Industry

Portraits by Carlo Ricci

If you had been lucky enough to snag a table at Harry Kambolis’s C Restaurant in its early aughts heyday, you were in for a treat. The economy was humming (the average price for a detached home in Vancouver was then a “crazy” $400,000), tables were packed and the food—prepped by Robert Belcham, a young sous chef from Peace River a few years removed from the French Laundry in Yountville—was easily among the best in the province. If you had the money and wanted the best seafood, you made the pilgrimage to the foot of Howe Street—and if you wanted a beautiful piece of wild salmon line-caught by the Hackshaw family of Prince Rupert, it would set you back a cool $25. A small price to pay, thought most Vancouver restaurant patrons.

Now imagine that instead of buying that salmon you took that $25, invested it in the S&P 500 and waited. All the way until July 2019, by which time it had magically transformed into $116.02. To celebrate your enviable restraint, you might want to treat yourself—and, as luck would have it, not only is that same chef still cooking and not only is he still preparing salmon, but he’s still buying it from those exact same fishermen: the Hackshaws. You stroll to Campagnolo, his popular Main Street homage to regional Italian food (that he was able to buy with industry partners on his chef’s salary), and order said salmon… for $28.

That’s a 12-percent increase in 16 years. Detached house prices are now hovering at an average $1,417,000 (more than 300 percent higher). Commercial rents have shot up, and minimum wage has almost doubled: two numbers that are of grave importance to someone running a restaurant. But you the consumer—whose house value has quadrupled, whose stock portfolio has quintupled, whose salary has almost certainly increased—you don’t have to pay for any of that. If you adjust for inflation, the price you’re paying for that salmon has actually decreased in value while all those numbers surrounding it have shot up.

Is anyone surprised that Campagnolo shut its doors last year? And not because of the pandemic, but because, even once recovery began, Belcham still couldn’t see a situation where a reasonable rate of return might be earned from it.

No wonder the restaurant industry is screwed.

What happened? How did a restaurant go from a stable business through which a reasonably successful owner could anticipate having a detached house in Vancouver and taking their family on a few nice vacations a year to where we are now: a hand-to-mouth grind that awards success only to the most lean of operations and punishes any largesse—like a living wage for employees—with a lifetime a money stress?

In the not-too-distant past, restaurants operated on the same basic principles as other successful businesses: when costs go up, so do prices. Now, we have the polarized situation where the only way to make a decent living running a restaurant is to either go big with multiple outlets and the increased buying power that goes with it, or go low, crafting more affordable fare like sandwiches, burgers and pizza, where ingredient prices are more stable and the canny operator can find better margins.

It’s convenient for consumers to assume COVID is the cause of local restaurant woes. And while no one is disputing the devastating effects of the pandemic on the industry, the reality may be that it’s been as much a magnifier of endemic issues as it has been a destroyer in itself. To crib some analysis from current tech sage and NYU professor Scott Galloway:

COVID-19 has initiated some trends and altered the direction of others, but its most enduring impact will be as an accelerant. Take any trend—social, business or personal—and fast-forward 10 years.

What are the issues that need to be addressed if the industry we know and love is to survive? We sat down with a few chefs and owners to chat about the challenges they’ve been facing since long before COVID hit.

Vancouver, You’re a Problem

First and foremost, this is an atrociously expensive city to live in, routinely topping the world’s unaffordability index. And for the vast majority of occupations, there has been no corresponding increase in rates or wages whatsoever to offset the absurd cost of housing and commercial rents. A new line chef fresh out of culinary school (frequently an education expenditure of about $25,000) might hope to make $45,000 in their first year in a Vancouver kitchen. In Calgary, where housing costs are half what they are here, they’d make the same (or more). In Toronto, with similar housing costs, they’d make quite a bit more.

In some ways our low wages are simply a function of the lower amount of money our operations have coming in compared to rival cities. A scan of the menus at Vancouver’s top restaurants shows that entrées priced over $40 are a rarity: Hawksworth—a restaurant synonymous with high-end dining, patronized by movie stars and titans of industry—has only three, while Calgary’s nice-but-not-Hawksworth-nice Teatro has 10. Boulevard, our reigning fine-dining champ, has one entrée over $50; at Montreal’s Toqué, a full 80 percent of the entrées are over $50. The tasting menu at Toronto’s Alo, ranked as Canada’s best restaurant by enRoute, is $185. St. Lawrence, the #2 restaurant on that list, offers their (admittedly smaller) tasting menu for $65. And on it goes. Merde.

Why are our prices so low? To chef Angus An, who worked in London and New York before opening Maenam, it comes down to simple demographics: “We lack the head offices that most other big cities enjoy,” he says. “And we’re far more house-poor to boot.” The result is that we don’t have the expense accounts that help sustain higher-priced spots in places like Calgary and Toronto, and we don’t have the disposable income that helps drive the high-end in cities like Montreal (although somehow, inexplicably, we’re a world leader in Lamborghini ownership and students who buy mansions).

Worse, almost every industry person will admit that Vancouver simply has too many restaurants vying for a paucity of dollars. And the numbers back up this sentiment: Statscan reports that, at 3.6 restaurants, eateries, pubs and bars per every 1,000 residents, Vancouver edges out all other major Canadian cities in terms of sheer number of establishments. The next major city down on that list, Montreal, sits at 2.7. So we have more places going after a smaller pool of money. Not a recipe for long-term economic viability.

So Why Not Just Raise Prices?

One of the most basic answers to this question is hospitality. The majority of people in the industry—both employees and owners—revel in the act of welcoming people into their establishments and enjoying the daily back-and-forth that’s foreign to most other industries. They simply don’t want to charge their patrons huge amounts.

When Gus Stieffenhofer-Brandson opened Published on Main in 2019, it was important for him to have an accessible price point for the neighbourhood, notwithstanding his plans to cook at the highest level with top-drawer ingredients. So when it became clear that the prices of a few menu items had to rise given their attendant costs, he was hesitant: “I had a certain sense of guilt as a chef raising the prices, but at the same time valuing the work we’re doing in the kitchen.”

A similar situation played out at Trans Am, where people lost their collective minds over that restaurant’s much-lauded burger. And why wouldn’t they when a patty made from honest-to-goodness 100-percent wagyu was selling for $17 when it needed to be $27 to break even? Even when Gianmarco Colannino raised the price to $21, he still never came close to breaking even, let alone making a profit. (He subsidized the burger with profits from his liquor sales.)

Colannino’s suppliers implored him to raise the price again, but he couldn’t bring himself to do it. He’d spent his youth working in restaurants in Montreal and he had vowed that when he opened his own spot, he’d do everything he could to make it the watering hole of his dreams. “I knew I was crazy, but this is what I do,” he says. “This is my path. I don’t want to sit at a desk. I want to give a piece of myself.”

And he did. Too much, some might say, as Trans Am is now permanently closed. And while his actions may seem like that of an inveterate dreamer, they hit on another truism: people have long entered the industry even when its barriers to financial success are so high because they love it like nothing else. “There were nights where I had 40 great conversations with 40 different people,” recalls Colannino wistfully. “When a restaurant is working… life is so good.”

The less rosy answer to raising prices is that, given the above, most restaurateurs are fearful that this city won’t accept a hike thanks to a combination of our demographics and our relentless culture of perpetually low prices. One of the harsh truths is that, as friendly as the industry is with each other, there’s always cutthroat competition just below the surface. Of particular note right now is the high degree of poaching that’s going on for both front and back of house among the restaurants that are struggling to find staff. On the one hand, it’s a boon for the employees, at least in the short term. But on the other hand, it’s wreaking havoc within an industry already operating on razor-thin margins. Everyone is friends until someone needs a line cook.

Likewise, notwithstanding common interests, the industry rarely moves together even when it would be in the owners’ self-interest to do so—say, like agreeing to raise the price for a piece of sustainably caught salmon. There’s a reason that supermarkets and gas stations are always profitable—their prices rise and fall in near-perfect lockstep.

And yet, in the restaurant industry, it rarely happens. A few months into the pandemic, for example, restaurants were reeling. And one of the things they all routinely put up with—no-shows—suddenly could mean the difference between a gain or a loss on any given night. Chef JC Poirier of St. Lawrence was the first to implement a solution that’s been growing in popularity at fine-dining restaurants throughout the world: the prepaid reservation. “Why is it okay to not show for your reservation?” wonders the chef. “People prepay for the theatre, cinema, music concert, vacations, even yoga classes—why would restaurants be any different?”

St. Lawrence, desperate to maximize their small number of seats, put the policy in place. You could still cancel free-of-charge, of course, but you couldn’t simply not show up. According to Poirier, the benefits to the system are huge: “We can plan ahead, schedule the right amount of staff, purchase the goods needed for the service, we can schedule payments to suppliers with prompt certainty—it’s just a much healthier environment to run a restaurant.”

But even though a few spots tried the concept out, ultimately everyone but St. Lawrence reverted to the terrible old system, fearful of customer backlash. Perhaps the most ironic aspect is that there is already a level of de facto collusion—it just works against the industry, to keep prices low. Want a piece of halibut? It’ll cost you $44 Boulevard. And at L’Abattoir. And the Botanist. And Bearfoot Bistro. Hawksworth knocks a buck off it.

Of course, there’s no actual collusion, but if an industry leader like Boulevard said their halibut—a product that any consumer who’s been to a local fishmonger knows is ungodly expensive—was going to cost $55, what might happen? This pricing conundrum births yet another problem: a newcomer like Published on Main, which is as ambitious in its cooking and sourcing as any of the spots listed here, has to come in under these heavyweights. Their halibut is $41 for a piece of fish that might cost a consumer $20 at the store—before it’s adorned with exquisite Zaklan Farm vegetables and prepped by a team with decades of experience between them.

Perhaps this is the most disheartening aspect of the pandemic. Throughout the world there are ready examples of industries that took the forced break to re-examine and reimagine their processes. The fashion industry moved together to stop the insanity and grotesque expense of holding dozens of wasteful runway shows a year—not only to stop hemorrhaging corporate cash but also to reignite their designers’ creative process. Huge retailers like Ikea and H&M have moved toward a more sustainable model by offering buy-back and resell programs. Yet early signs show that, as we emerge from COVID, the restaurant industry is sliding back to its old ways, racing to discount fare in order to get some semblance of cash flow back into their strapped bank accounts.

The Fallout

At the end of the day, it’s a simple economic calculation: if not enough money is coming in, costs need to be lowered or you’ll go out of business. The most obvious yet heartbreaking line item is staff salaries. You’d be hard-pressed to find an owner who wouldn’t want to pay all of their employees a living wage (there’s a reason many staffers use the word “family” to describe their work environment). It forces an owner to adopt the truly astonishing system that is the modern tipping culture: an owner delegates what compensation a server makes to a customer they have likely never met before. “It’s an incredibly disrespectful system,” say Belcham, noting that it also rewards a first-day-of-work server the same as a 20-year veteran.

And it’s not just the front of house. The permanent cash crunch means that the proper training of chefs is a luxury that most establishments can’t afford. Poirier came up under the tutelage of Normand Laprise of the famed Toqué, where the concept of mentorship was deeply imprinted upon him. “If you’re serious, you need a minimum of two to three years at one spot to truly learn from that environment,” he says. But he notes this is a rarity these days, especially given the chronic chef shortage, where people finishing the first year of an apprenticeship are routinely offered head chef positions at desperate restaurants anxious to keep their kitchens running.

Mea Culpa

Which leads to our role—the media—and our complicity in this Catherine wheel of an industry. If Published on Main did do the proper thing and charge $50 for their halibut, who do you think would be the first to point it out to the whole wide world? “Newbie thinks they’re better than Boulevard,” the headline would blare.

And that’s not even scratching the surface of what the majority of mouthbreathers on Yelp would unleash. For years I’ve been parsing bottle prices, careful to catch an establishment slipping in a greater-than-3x-markup and castigating them, publicly, for their greed. It was done in the interest of serving the consumers and protecting them from unscrupulous owners. But pull the lens back on that myopia, and see the big picture: in order for the industry to get to a place where establishments can make sufficient profit to pay everyone involved properly, order sustainable local produce and protein and offer an environment of mentorship for both the front and back of house—then costs need to rise, even on those bottles of wine.

The B.C. government’s recent decision to finally allow restaurants to buy liquor at wholesale prices is a help—but it’s not enough. We must evolve our thinking to encapsulate the true cost of running a restaurant. Belcham puts it best: “There’s always a cost to cheap food. Sooner or later down the line someone has to suffer. It might be the owner, it might be the farmer in the Fraser Valley earning less than their parents did on the same land—or the migrant labourer toiling under unreasonable conditions, or an actual enslaved labourer catching shrimp in Southeast Asia. Ultimately, there’s always a cost, and if you care about that, you need to change how you approach dining in a restaurant.”

The Results

Boulevard is hands-down one of the best restaurants in Canada. But it’s also owned by a billionaire. So is Blue Water. And Elisa. And Araxi. Cactus Club is satisfying 1,000 customers as you read this. And Superbaba and the growing Downlow empire are showing that you can do casual fare at a high level with no apparent sacrifices. If that’s enough for you, then don’t worry. They’re probably all safe.

But what about Chambar? L’Abattoir? Burdock & Co? I have no inside knowledge as to their finances, but how do we expect them and their ilk of chef-driven spots with personality to make a continued go at it when the numbers will never add up to a return that is commensurate with their experience and the risks they take? The eating public has a binary approach to a restaurant’s financial health: either you’re out of business or you’re doing great, but the reality is that there’s a huge pool of precariousness in the middle. And, unlike with other speculative industries, there’s almost never a potential pot of gold at the end. Are you comfortable telling JC Poirier that, despite having ascended to the heights of his profession such that, were he a lawyer, he’d be making seven figures, he still needs to continue giving his all for the salary of a first-year associate?

There’s not a single chef or owner whom I talked to who had a bad word to say about customers—even off the record. Most wouldn’t stop talking about their gratitude for the acts of kindness and support they experienced during the pandemic.

But that triage is over. We’re now in the less-exciting rehabilitation stage of the process, where our support is even more important. The easy answer is that everyone has to do more. We need to affirm to the industry that, just as we will not buy a t-shirt made in a Bangladeshi sweat shop, we will likewise pay the appropriate amount of money for food prepared by a seasoned professional that’s supplied in an ethical manner for everyone along the chain. But appreciating the underlying concerns is one thing; getting comfortable saying “I’ll have the $55 halibut please” is quite another.