Andy Larsen: Annie’s Diner is an all-too-familiar tale — good food, good people, and losing money

You can probably picture Annie’s Diner from the name alone.

It is a quintessential example of an American dining experience. Decor out of a movie set, all-day breakfast — and an owner struggling to pay the bills.

The family-owned Kaysville diner lost more than $93,000 last year.

Since I started writing data columns for The Tribune in 2020, I’ve had this idea on my list: I wanted to get into the nitty-gritty and examine why exactly the restaurant industry is so tough. What are the biggest expenses? How do restaurants get customers in the door? How do they set menu prices?

More than 60% of restaurants fail within three years of opening, according to one widely cited study.

But why? Why is your favorite restaurant closing its doors?

Jason Sanders, the owner of Annie’s Diner — yes, there’s a story there — agreed to open the entire establishment’s books for me. Over the course of multiple hours-long conversations, visits to the diner, and texts afterward, I got an intimate look at a beloved local establishment.

The numbers depressed me. The diner delighted me.

Here’s the story of Annie’s Diner.

The backstory

Annie’s Diner began as Joanie’s Restaurant. Built in 1995 at the direction of then-owner Joanie Putnam, the restaurant sits just off Interstate 15 in Davis County. In 2002, the daughter of Sill’s Cafe namesake John Sill, Annie Sill Curry, bought the restaurant from Putnam, and renamed it “Granny Annie’s.” That’s what it was called for the next 18 years, as Granny and family ran the establishment.

And that’s when Sanders first experienced the restaurant, with his wife Dani. Sanders grew up in Utah, attending college at Utah State before getting a law degree from Georgetown. He moved around the country working in intellectual property law, but when he came back to have dinner with his in-laws, they only wanted to eat at one place: Granny Annie’s.

Dani’s parents were beyond regulars at Granny Annie’s — they went twice on some days, and even had menu items named after them. Jason Sanders had a realization: “At some point, they’re going to want to sell this place, and no one’s going to want to buy it,” he said.

He vowed that he’d fill that need for those he loved.

That point came in August 2020. While Granny Annie had put the restaurant and land on the market for a while, no one wanted to keep the diner around ... except for Sanders. They cut a deal.

Sanders, now in his 40s, has moved back to Utah, and runs a law firm that, among other clients, represents Dirty Dough in the infamous Utah cookie trademark wars. He spends a lot of his time working from Annie’s Diner, which he renamed in recognition that “I’m not a granny.” On some days, he regrets the name change.

While the restaurant is now owned by someone other than Annie, Sanders still maintains the diner’s family feel. Two of his daughters were working at the restaurant when I visited last Saturday, and lollipops made by another daughter are for sale at the diner’s checkout table. The business is closed on Sundays, as Sanders is a Latter-day Saint, but he says his employees appreciate the set day off no matter their beliefs.

At this writing, Annie’s Diner has 2,169 reviews on Google for a 4.3 star rating.

The menu

If you’re not familiar with Annie’s Diner in particular, you’re almost certainly familiar with the concept.

Like most diners, Annie’s Diner serves all three meals, but nearly half of its two-page menu are breakfast items. The cheapest of these, Ellie’s Waffle, begins at $6.99, while the Steak and Eggs, Jason’s Eggs Benedict, and the Everything Omelet cost $15.99. They also have early-bird specials for those coming from 7-8:30 a.m., which give their clientele a cheap breakfast for under $7.

The most popular items are Annie’s Combo (with eggs, a choice of bacon, ham, or sausage, and toast) for $8.99 or the Kaysville Special (an egg, bacon, and hash browns with gravy on top) for $10.99.

I had the latter, and it was delicious. The bacon is thick-cut — when Sanders accidentally changed the bacon purchased in the weeks after buying the restaurant, customers revolted en masse in an incident his family still calls “Bacongate.” They changed back.

But the highlight of the dish is the hash browns and gravy. Those are both individually homemade, the gravy (one of three sold by Annie’s Diner) by the restaurant’s chefs starting at 6 a.m. before they open at 7. Sanders’ potato peeler machine broke a few months back — “the bearings are shot” — so the staff also spends key early-morning minutes peeling those potatoes for the hash browns, too. You understand why Saturday mornings bring a crowd, filling the diner to its 178-seat capacity.

Annie’s also serves lunch and dinner, though breakfast accounts for the majority of the restaurant’s sales. Burgers, salads, and sandwiches are on the menu, with a variety of comfort food entrees for dinner, served after 3:30 p.m. Early-bird dinner specials cost $8.99, and run from 3:30-5:30 p.m.

On Friday nights, the restaurant serves a 12-ounce slab of Prime Rib for $21.99 which sold out on the most recent evening. The prime rib, Sanders says, is a loss leader for the restaurant, but fills many more tables than they’d otherwise see on a Friday night. Meanwhile, Annie’s Diner makes more money on the Kaysville Special, pancakes, their famous Utah scones, and of course, sodas.

In general, Sanders tries to price his items by keeping food costs under 30% of his restaurant’s sales per industry recommendations, but that’s easier said than done. In 2023, food costs were 30.3% of his sales.

Perhaps it’s just my city-trained eye, but the prices at Annie’s Diner strike me as more than reasonable. But not all of his customers agree. Sanders sent me the notes from his comment box, one of which read:

“McDonald’s can make a profit on a $1 large drink. You must be a friend, a best friend, of Joe [Biden]’s, and inflation is your best friend. Inflation gave you an excuse to gouge people — maybe you own a gas station too. You’re going to retire early, huh!”

The business

If Sanders is going to retire early, it’s going to take a massive turnaround in the business of Annie’s Diner.

That’s because it’s losing money at a significant rate. In 2023, the business lost a whopping $93,379.03.

Here’s the breakdown of Annie’s Diner’s income and expenses:

Income

In all, Annie’s Diner saw $1,336,790 come into its accounts last year.

There were 41,741 checks run in 2023, with over 98% of Sanders’ tables paying on just one check and under 2% choosing to split the check. His per-check average was $26.66, which doesn’t include tips or taxes. Patrons tipped Sanders’ wait staff an additional $180,710.63 on credit cards, which are all kept by the individual waiters or waitresses.

That represents Sanders’ in-restaurant and call-in business. For Annie’s, DoorDash business is a small portion of overall demand, he sees only about $5,000 per month in those orders. The back of the restaurant features a banquet space that hosts numerous community events, but it’s not a large portion of his business now, representing about 5% of the total.

Sanders told me he was delighted in his first days of owning the restaurant, seeing customers’ payments come in to his account almost as soon as they were charged. It’s very different than the legal business, where invoices can take weeks or months to lead to payment.

Food costs

But that delight turned to disappointment when the money came out of his bank account even faster.

The biggest costs were food costs, in which Sanders spent $405,600 last year. While numbers change as prices go up and down in the food market, Sanders sent me the restaurant’s costs for November. In that month, he spent $1,564 with Kessimakis Produce, $1,665 on coffee from Farmer Brothers, $2,667 from egg supplier Rogers Eggs, and $6,000 from Oscar’s Wholesale Meats — all local food distributors. In addition, $907 was spent on Coca-Cola syrups and products, $2,740 was spent at WebstaurantStore, an online supplier, and $19,121 was spent from major food supplier U.S. Foods.

Fluctuating food costs hit small restaurants like Sanders’ hard. Last winter, egg prices spiked, which meant Annie’s Diner spent his usually $2,500 monthly allotment on eggs in 10 days. Lately, he’s been trying to do more to negotiate his food costs down by pitting U.S. Foods and fellow major food supplier Sysco against each other — while also trying to avoid a repeat of Bacongate.

Labor costs

Sanders’ other major cost source is his labor cost. Last year, he spent $362,059.77 on employees’ wages. He currently has 66 people on payroll, though some don’t work regular shifts. Many are teenagers. On a typical weekday slow period, 6-8 people will be working at one time.

On Saturdays, though, the operation completely changes. Sanders will have 24-30 people working at the restaurant in the mornings; last Saturday he had seven cooks, three dishwashers, seven servers, three hosts, and four bussers working, plus a kitchen counter manager who distributes completed food to the servers in correct order. It feels like a lot, but Sanders says that when he employs less, he sees negative comments in the restaurant’s reviews.

Those waiters and waitresses are paid the minimum $2.13 per hour wage for tipped employees in Utah. Tips are not split, and Sanders said his wait staff can come out of a busy Saturday morning shift with $400-$500. Most other employees make anywhere from minimum wage to $22 per hour, with a key manager making $55,000 per year.

I talked to some of Annie’s employees, and they love the place. One high school student, Sophie Nielsen, had been working there for three years, and frequently walked two miles to the diner from her home to make it work. Why? Because it’s “really fun,” she says, especially when it gets busy. “There’s just like, lots of laughter and sometimes it’s kind of loud, but it’s, like, nice. It’s like a good feeling.”

While some of the restaurant’s employees have been around for years, others come and go far more often. Sanders employs a hiring service to post job ads on Indeed.com and other employment sites. Even without a current opening, he’ll interview workers, knowing someone is likely to leave on their own accord in a matter of days or weeks.

Still, it’s a lot for Sanders. “My least favorite thing to do is to use money from my law firm to pay the payroll,” he said.

Other costs

Sanders owns the restaurant and the land it sits on, but pays $10,700 per month on his mortgage. He also spends about $5,700 per month on utilities for the 11,000 square-foot building. Various supplies and kitchen equipment also constituted a significant cost last year, $41,014 in 2023.

Taxes were also a significant sum — $66,491 of sales tax paid back to the government, plus $9,293 in restaurant taxes. Among all of his employees, $48,596 was spent on payroll taxes. The property tax for the property was $13,837.

Annie’s Diner spent $17,807 on advertising and marketing last year, a relatively small sum. Sanders says most of that cost comes from Facebook ads he’ll run to keep customers coming in; he says he notices about a 10-table difference in his sales on a given day that come in when he runs the ads. He’s tried paying more for marketing specialists, but didn’t notice any advantage to that against simply running the ads himself to Kaysville residents on the website.

While Sanders does much of the labor in fixing various things around the restaurant himself — just in the last week when I was around Annie’s Diner, I saw him fixing a wheel on a refrigerator and the place’s hot water heater — he spent $17,019 on hiring others to fix the things he couldn’t.

There were more boring expenses. A further $15,753 was spent on the software needed to run the business, including Annie’s point of sale system, Aloha. $13,250 was paid in accounting fees last year. $12,354 was spent on insurance, $11,408 was spent on Workers’ Compensation costs. Credit card processing fees ate up $6,453, and other bank fees cost $6,855. Other uncategorized expenses totaled $2,359.

Overall, Sanders’ goal in 2024 is to simply bring more customers into the business. He feels he’s finally well established in his food and labor costs, and now it’s time to make his restaurant busier.

Facing the costs

The picture isn’t pretty, but it is improving. It’s certainly a whole lot better than Annie’s Diner’s 2022 year, for which he also shared the profit and loss statement with the Tribune. That year, the restaurant lost a whopping $333,050; in order to cut his losses down to five figures, he had to let go of some highly-paid employees.

The good news is that Sanders’ massive losses in running the restaurant have been matched in real estate value gains for his Kaysville location. The 1.5 acre property, just 800 feet from a major freeway exit, has attracted interested buyers, though they want to close Annie’s Diner for their own selected variety of businesses.

Selling would probably be the prudent financial move. Sanders, though, doesn’t want to. “I think we’re turning a corner,” he said. “My wife definitely does not think so.”

He gets too much joy from the diner — its regulars, its employees, its stake in the community.

As I sit on the diner stool, Sanders tells me the stories of those who come in the door. One employee, checking in for her shift, sends most of her salary to her mother. One older patron used to come in with his brother — then recently he passed away, so he comes in alone. Another customer is a daily regular, usually ordering the same item — but today he’s looking at the menu. Something’s happened.

Annie’s Diner, and restaurants like it, serve an important function. They serve as gathering places for people, sure, but more importantly, they stand as bedrocks for those who need them. For as long as folks can remember, Annie’s Diner has delivered reliable, quality, homemade food — and that matters.

So when I ask Sanders what he’d tell the Tribune’s readership, he generalizes. It’s not just his restaurant, but all of them.

“Go to your mom and pop restaurants,” he says. “Help them stay open. Without that, they may not be around much longer. So go.”