Why Utah restaurants close — from food to finances to family

She opened the dessert shop four years ago, offering customers a chance to design their own doughnuts and brownies with gooey glazes, candy sprinkles and dollops of fruit and whipped cream.

Parents brought their children for afternoon treats and birthday parties. Couples came for date nights. And sweet-toothed folks of all stripes came for the gelato-sampling classes.

Behind the sugar-coated exterior of Create Donuts, LaDonnia Jones was tasting the bitter realities of being an independent restaurant owner.

She rarely took a paycheck, never took days off and slept only a few hours — if at all — each night. She fretted about hiring employees, covering food costs, paying quarterly taxes and honoring payroll.

On an especially busy day not long ago, a distracted Jones accidentally bit on the bait set by a telemarketer — a scam that ultimately cost her thousands of dollars.

The Sandy shop, she said, affected her marriage and — she suspects — triggered her life-threatening illness.

Lying in a hospital bed on blood thinners, the doctor warned Jones she needed to stop lifting heavy equipment and avoid stress or the massive clots could kill her.

“Running a small restaurant business,” she said before closing in late July, “is more intense than anyone can ever imagine.”

Statistically, opening and then closing a restaurant — even a successful one — is hardly unusual. About 60,000 new restaurants will open each year across the nation and 50,000 will shut down, said Hudson Riehle, senior vice president for research at the National Restaurant Association in Washington, D.C.

There are countless reasons for the closures — from government regulation and increasing competition to fading food fads, personal struggles and, yes, bottom lines that bottom out.

Despite the failure rate, Riehle said, U.S. restaurant sales grew by 3.6% last year to a record $863 billion, the 10th consecutive year of industry growth.

“One out of every two Americans use restaurants on a daily basis,” he said. Because of the stiff competition, “if the experience does not meet the value received, consumers are quick to vote with their feet.”

Technology and consumer habits — fueled by a demand for quick service and convenience — have changed the traditional sit-down dining experience, he said. Nowadays, 63% of all restaurant traffic is off-premises — takeout, delivery, drive-thru, food trucks.

“For the decade ahead,” Riehle said, “that is where the primary industry growth with be.”

That may not bode well for many business owners in Utah.

For now, the state’s restaurant growth rate is outpacing the national average, he said, namely because of its rising population and expanding economy. In 2018, Utah had more than 5,200 restaurants. The industry employed almost 130,000 people and racked up $5.5 billion in sales. For every $1 spent in a restaurant, Riehle said, $1.96 was pumped into the economy.

Despite the potential for profits, he said, many restaurateurs cause their own demise. They launch a place with an unfocused concept, provide mediocre food or poor service, or overspend and miscalculate costs.

“There is no substitute for a well-thought-out, developed business plan,” he said. “A love of food and beverage is not enough to ensure long-term success.”

In hindsight, Jones wishes she had considered the pitfalls before jumping into the business.

But there is something enticing about owning a restaurant. Some leap in because they are passionate about food, others want to be their own boss, and still others want a business where family members can work together.

Everyone, of course, is interested in making money. And, despite the financial gambles, owning a restaurant can indeed be fruitful.

Making good food was the easy part for Jones. It was everything else that was hard.

“Eating and sharing food with other people is part of the human experience,” she said. “It’s part of who we are and what we like to do. It seemed like it would be easier to make it [succeed] than it is.”

Small margins, big risks

Sometimes, though, forces outside a restaurant’s control are the culprits.

A landlord may decide to sell the building or the city may launch a big road project that cuts traffic and slices into the already small profits that sustain even thriving eateries.

Generally, about a third of a restaurant’s income goes toward labor costs. Another third buys the food and beverages. The rest covers all other expenses from rent to marketing to taxes.

If owners manage all that successfully, they may get to pocket 3% to 6% of the profits.

In fact, it’s usually not one thing that shutters a restaurant but rather a series of unfortunate events.

A Salt Lake City construction project proved to be the final blow for Alamexo Cantina on 900 South. “It’s going to be a mess,” chef-owner Matthew Lake said back in March, “and I can’t survive it.”

The neighborhood spot had never attracted a business lunch or weeknight crowd — like Alamexo, Lake’s successful downtown restaurant.

Employees at the Cantina were lucky, though. After the closure, Lake expanded the hours at his downtown diner to ensure they kept their jobs.

Oftentimes, when restaurants shut down in a rush, cooks, hosts and waitstaff get blindsided, left without jobs and often still owed paychecks.

That’s what happened to the former employees of Iggy’s Sports Grill in Centerville in May, when the eatery suddenly went dark, according to a lawsuit in 2nd District Court in Davis County.

More than two dozen ex-employees are listed on the suit that alleges the owners owe them back pay, as well as money for accrued vacation and fees they incurred when paychecks bounced.

The liquor conundrum

State liquor laws also make it harder for restaurateurs to survive, explained Kestrel Liedtke, general manager and co-owner of Tin Angel in Salt Lake City.

“In other states, alcohol is a big revenue driver for restaurants,” she said. “It isn’t here.”

Restaurants in other states pay wholesale prices for beer, wine and spirits. Utah restaurants foot the same prices — which include a mandated 88% markup on wine and spirits — as consumers do at state-run liquor stores.

Yet, Liedtke said, the prices that a restaurant can charge on the menu need to be competitive. “We can’t charge more than California, but we’re paying more per bottle.”

On Tuesday, Liedtke and her husband, chef Jerry Liedtke, opened Tin Angel at Eccles — inside the Eccles Theater on Main Street. They also decided not to renew the lease at the original Tin Angel at 365 W. 400 South.

The 12-year-old restaurant at that location will close for good at the end of September. It already has stopped serving lunch. “By then, we will be fully ramped up at the Eccles,” said an emotional Kestrel Liedtke, who called the move bittersweet.

But the location near Pioneer Park — oftentimes a hangout for the homeless, which kept many people from visiting — and the high cost of running a restaurant factored into their decision.

“People don’t realize when they pay for a meal that it’s not just the cost of food or liquor. Every single thing — rent, utilities, ambience — goes into it,” she said. “I don’t think they comprehend all the moving parts.”

While serving liquor might be a hassle, losing a state liquor license can spell certain doom.

Aristo’s, a 16-year-old Greek restaurant in Salt Lake City, had its state liquor license suspended in February after the Utah Department of Alcoholic Beverage Control discovered owner Aristides Boutsikakis had applied for the permit under a corporate entity that had not been active since 2014.

Aristo’s continued to operate for a few months but ultimately bowed out in May.

Liquor was a main reason the 70-year-old Cinegrill, one of Utah’s oldest restaurants, closed in 2016. It had moved from a downtown location with limited parking to a spot farther south. When it applied for a liquor license at the new location, the DABC determined that the building was too close to a worship hall operated by The Church of Jesus Christ of Latter-day Saints — even though church officials had given the Italian restaurant permission for a variance to sell alcohol.

But rules are rules. Without the liquor license, Cinegrill lost about 25% of its revenue and vanished.

Falling-outs, cashing in

Even restaurants that hang on the first year or two cannot rest on yesterday’s positive reviews. Diners are fickle. Trends come and go. Restaurants must evolve or go extinct.

Sometimes, small changes will do. Add fresh paint. Update tired decor. Other times, overhauls are required. Switch from formal dining to casual. Make over the menu. Replace the chef. If online reviewers seem to have the same complaints over and over — restaurateurs would be wise to address them.

Then there are the times that the clock simply runs out — not on the restaurant but on the restaurateurs.

Three venerable Utah eateries have shut down this year. Cedars of Lebanon in Salt Lake City closed after 38 years; Kowloon Cafe in West Valley City shuttered after 60 years; and The Oaks in Ogden stopped serving after more than a century in business.

In all three cases, the owners simply were ready to retire. Their children didn’t want to take over the business and investors offered more money for the building and land than the offspring could make by staying open.

Several patrons asked Raymond Wang, owner of the Kowloon Cafe, to reconsider when he decided to exit in May. But the 73-year-old said, “I want retire and enjoy my grandchildren before it’s too late.”

There are other life events that might close a restaurant — like a partner who wants out or an employee who steals, explained Utah restaurateur Glen Overton.

During the past half-century, Overton has opened more than a dozen restaurants — he currently owns Ruth’s Chris Steak House and Bandana’s Bar and Grill in Park City, Wildfire Smokehaus in Midway and three Marco’s Pizza franchises.

He’s also been forced to close a few.

In one instance, his partner backed away. “We went into it as a joint venture,” he said. “But it takes a couple years to break even, and he decided a year into it that it wasn’t for him.”

What did Overton learn from the experience? “Make sure you know your partner,” he said. “It’s like a marriage, and if things don’t go well in the household, you’ll go through an ugly divorce.”

In May, Overton closed Billy B’s Hash House in Midvale — the restaurant had been operating for only a few months.

“It was a great concept and a great location,” Overton said. But he discovered shortly after opening that the partner running the day-to-day operations had not been paying the bills.

When the utilities were turned off and the state called about back taxes, Overton and the remaining partners decided they could not bail out a sinking ship.

That is an extreme case, he acknowledges. “Most people are not going to be that dishonest.”

Still, it’s one of the myriad things that makes being in the restaurant business risky. “It’s the toughest business there is to keep going.”