Metro Detroit restaurants face mounting financial pressures

Royal Oak's Sign of the Beef Carver is closing after nearly 70 years, and it's not alone. Long-time Metro Detroit favorites are disappearing as rising costs and fewer customers put restaurants in a financial squeeze. But one Redford restaurant, Mr. Rigatoni, got a second chance after the community rallied to support it. Business analyst Mark Lee joins us to talk about why so many restaurants are struggling right now. Hi, Mark. How are you doing? Good. Good to see you again. Good to see you, too. You know, we have been covering this all week, Sign of the Beef Carver. leaving i mean that's a staple in this community 70 years 70 years how you know what has to happen for a business with that kind of longevity to close its doors well i think what's got to happen is that businesses need to continue to adjust and what we're beginning to see in terms of these closings actually started back towards the pandemic when obviously a lot of people couldn't go out people would stay at home and consumer behavior tastes started to change but to answer your question what do these businesses need to do restaurants need to do they need to go back and review the menus. They need to go back and review the costs because we know the costs continue to increase and revenue continues to flatten for most people. So the bottom line is that, you know, customers' tastes are continuing to change as well. So make sure that you're still, make sure you're still in tune with what the customers are looking for and control your costs. So this is one restaurant. I want to read some stats from the Michigan Licensed Beverage Association. 87% of people saw a local bar or restaurant close in the last year alone. 61% reported weaker financial health. That's like from the business side, obviously. And then 17% of the people polled in this said they're considering a permanent closure in two years. What kind of landscape does that speak to? The landscape is what we're in right now. We're seeing stagnant revenue for restaurants, but we're seeing an increase in costs. And the increase in costs is a direct result of inflation, which is about 4%, basically a stagnant wage growth. So if you think about it, inflation is at four percent excuse me and wage growth is about three percent so people are saying i can't even afford to go out because my wages can't keep up with inflation the other part of this equation is that the high gas cost you just talked about the gas price increases um you know and the diesel fuel cost costs as well so the food has to get shipped to the restaurants and the bottom line is somebody's got to eat that cost either the restaurant's going to eat the cost we're going to pass it on to the consumer so we're in a perfect storm right now in terms of stagnant revenues and increasing costs. And what about, you know, for businesses, and I've talked to plenty of restaurant owners over the years, retaining employees on salaries, thinking and saying, maybe I can't afford in this economy to work at a restaurant. I need to think bigger picture to make more money. Is that an issue? Absolutely. Retaining employees is truly an issue right now as well. You're talking about insurance. Insurance continues to increase, even if you have part-time employees. And also employees are trying to figure out, where do I get more money? I'm making minimum wage. I'm making so much money per hour. And clearly, there are additional opportunities for them. So they're going to continue to shop around to make sure they can get an increase in income to cover their costs as well. Talk a little bit about a story that we covered this week. Mr. Rigatoni in Redford, they were about to shut their doors. Relatively new business, really cool place, kind of like a build-your-own-pasta place. And a couple of local folks, social media people, went there, kind of advertised, we've done the story. And it literally saved this business from closing. Brings me to my next point. These businesses got to get on social media, right? They got to try their strategies. If you're not on social media, you are definitely in trouble. Yeah. Here's the challenge with that particular strategy. I mean, it's great to see that the local community came back and relied upon this business. The question is what happens after that momentum dies? True. I was thinking that. That's the sustainability. That's the issue at this point. So yes, what I always encourage people to do is support your local businesses, support your local restaurants social media is a it's an opportunity a great way to connect directly to customers but the bottom line is what happens when that momentum dies down so businesses need to figure out how to connect with these restaurants their customers their long-term basis and maybe an option is when you know in the past when you'd go have a three-course meal maybe you'd go and at least have some drinks and apps and you're injecting a little bit of money back into those local businesses that's where the business are really making their money yeah i mean the food is certainly critical but you're also making money in terms of the drinks and other the desserts and all the secondary items that go with the meal. But the bottom line is get out and support those businesses. Talk them up. Talk to your friends. Spend your money. Because right now, the restaurant industry is always going to be churned. No matter what you do, it's always going to be churned out for you. And I keep a little list of places that I want to go. So when you're having that conversation with your spouse or whatever, you can say, I got a little list in my notes. Let's support that local business. I've been doing that. There's some restaurants I've been going to for 20 years for that reason. Just continue to support them. Just continue to support them. Absolutely right. All right. Mark Lee, thank you so much. Thank you.