‘A mass exodus’: Why so many LA restaurants are closing

Running a restaurant in California is no small feat, even when times are good. But with rising food and labor costs, a massive entertainment industry strike, and the long tail of the COVID-19 pandemic, many Los Angeles restaurant owners have begun to feel like operating a restaurant in Southern California is becoming next to impossible. Just this year alone, many of the area’s biggest and most heralded restaurants have closed up shop.

There are few silver linings. Some businesses are turning to wholesale production; others say they’ll be back somewhere else down the line. But absolutely everyone says that it’s a scary time to run restaurants right now.

Walter and Margarita Manzke, chef-owners of the uber-successful and long-standing Republique and newer fine-dining restaurants Bicyclette and Manzke, have closed two of their restaurants over the past few months: Petty Cash Taqueria, which opened on Beverly Boulevard in 2013, and their casual Filipino concept Sari Sari Store at downtown’s Grand Central Market. 

“Neither of those restaurants were financially very strong coming into this year,” Walter Manzke tells SFGATE. “I don’t know if we’ve seen the end of how the pandemic has affected restaurants. People are being more careful about where they’re spending their money.”

He continues, “We’re not looking to open a new restaurant in the next few months. Even chefs who’ve been in the business a long time and have helped to shape LA dining are struggling. It’s tough to get buzz for a new spot.”

The challenges don’t discriminate between fine-dining and mom-and-pop shops, which have all been hit hard. Restaurants that have shut their doors this year include icons like 15-year-old Animal from Jon Shook and Vinny Dotolo, media darlings like Carlos Salgado’s Michelin-starred Taco Maria, and beloved neighborhood spots like the legendary Jewish bakery Diamond Bakery and Wes Avila’s charming Chinatown sandwich shop Angry Egret Dinette (which will end its run on New Year’s Eve).

Kristin Ciccolella, who announced yesterday that she’s closing her 9-year-old Venice seafood restaurant the Anchor this weekend, also points to the pandemic’s long-lasting effect as a contributing factor to her decision. “I had to pivot my menu from seafood only when we shut down, because who wants to order mussels for delivery? And then my indoor business just never came back, which was really disappointing,” she says. 

Meanwhile, pandemic-era government assistance in the form of Paycheck Protection Program loans and the Restaurant Revitalization Fund ran out long ago, and commercial rents in Los Angeles remain staggeringly high.

Operators are also feeling a major squeeze due to rising food and labor costs. Industry vet Jeremy Adler, who is a partner in the Santa Monica Southeast Asian restaurant Cobi’s and is in construction on a new restaurant in Mar Vista, points to expensive liquor licenses and new California laws like Assembly Bill 1228 as challenges for owners. AB 1228 is intended to create a liveable wage by raising the minimum wage for fast food workers to $20 in April 2024.

“That law puts pressure on independent restaurants as well,” Adler says. “When the average profit margin at a restaurant is 5-7%, 1% really matters.”

“The economics of owning a restaurant are completely out of whack right now,” says seasoned chef Chris Feldmeier, who shuttered his Silver Lake Spanish restaurant Bar Moruno in November. “We used to try to keep our labor costs under 30%, but now they’re inching up closer to 40%. With cooks making $22 to $25 an hour, it’s just hard for a small, private restaurant.”

Ciccolella adds, “It’s impossible to get quality food at a fair price. I have to sell my lobster roll for $29 at the restaurant, but I can sell it for $20 at my new Little Anchor truck because it’s just me and I don’t have all the labor costs.”

Manzke and the others also note that the Hollywood strikes this year were a major blow to restaurants.

“We always had a lot of support from Netflix at Republique. There would be someone there from the company every night, and that just stopped overnight,” he says. “Los Angeles is so tied to the entertainment industry.”

“We used to cater for all of the studios in Culver City, and that completely went away,” Ciccolella says. Adler, meanwhile, notes that event business in early December, usually a way for restaurants to balance out the slower weeks at the end of the month, was also severely mitigated by the strike.

Despite Hollywood business slowly trickling back, restaurant owners aren’t optimistic that next year will be much different.

“Typically, January is when you see a lot of closures because it’s such a slow time,” Manzke says. “I don’t know that we’ve seen the worst of it, but I hope we have.” 

“I think it’s been the worst year and that this is just the scraping of the surface,” Ciccolella adds. “I think there’s going to be a mass exodus by March, if places even survive January. It’s brutal out there.”