Customers waited in line for valet parking on East Fourth Street in downtown Cleveland Saturday, Jan. 14. Cordelia, Goma and Pickwick & Frolic restaurants were almost fully booked with reservations.
People stood outside in the cold with friends waiting to get inside Society Lounge. And tourists used the block as a bright shortcut from Prospect Avenue to Euclid Avenue.
That night, spending a little extra on a steak dinner, crab sushi or a bottle of fine wine didn’t seem to matter to patrons. A gourmet meal and a comedy show at Hilarities 4th Street Theatre costs more than it did before the Covid-19 pandemic, but consumers were still dining out — although less frequently than three years prior.
At Pickwick and Hilarities, owner Nick Kostis said he feels the effects of higher prices. Dante Boccuzzi, who opened Goma in July of 2021, said the same. So did the chef at Gabriel's Southern Table and Whiskey, formerly known as Indie Music Bar. The owner of Society Lounge concurred.
The suppliers, farmers, distributors and laborers who are working behind the scenes to help the restaurants and bars on East Fourth Street survive have also felt the impact of inflation.
The dollar doesn’t stretch as far because it has decreased in value due to inflation, which occurs when there is more demand than suppliers have items in stock. Prices of goods and services then increase across the economy.
It’s been three years since the COVID-19 pandemic halted the restaurant industry due to mandatory shut downs, and while Kostis said about 70% of business has returned, inflation has been a challenge for several months.
“You can't keep up with the cost of goods, and you can't pass them through to your patrons,” he said. “You’ll price yourself out of business. So you have to make adjustments without sacrificing quality.”
Kostis said he’s increased the menu prices of more expensive foods, like angus beef, 2% to 3%. And he’s also packaged ticket pricing differently for his downstairs venue, Hilarities 4th Street Theatre, so customers have a variety of prices to choose from.
“Businesses really have to get up and go through a strategy reevaluation,” said John Barker, the president and CEO of the Ohio Restaurant Association.
While the restaurants have great food and good people, “the market has changed loudly,” he added.
A rise in prices
Boccuzzi sells a lot of crab meat at Goma’s, the Japanese sushi restaurant. While the cost can change daily, he said prices have inflated to around $90 per pound from $35 per pound.
“The price is out of control, but it's still something people want, and it's hard to get and to get the right quality,” he said.
Food costs are most impacted by energy costs and then inflation, Barker explained. In grocery stores, food costs were more than 10% higher during the last 12 months, according to the Consumer Price Index (CPI). While restaurant owners say they've been hesitant to raise menu prices, CPI shows an increase of more than 8% for the last year.
“That just puts a lot of stress on the entire operation, right, that the restaurants are under stress,” Barker added. “Consumers see higher prices for all the food that we're purchasing. And so it's just, it's kept the comeback from being as robust as we'd certainly like to see it.”
There is some good news for diners and restaurant owners, though. Prices have actually gone down since the fall of 2022.
The price of Caesar salad illustrates the impact of inflation. Kostis sells it for $8 at his restaurant. Prices for romaine lettuce, Caesar salad’s main ingredient, ebb and flow weekly. Kostis and Boccuzzi both buy romaine lettuce from a local food distributor, Premier Produce One. Boccuzzi said he paid $120 a case for it in December, and he used to pay around $30 a case.
The impact on food distributors
Food distributors are also dealing with inflation.
Premier Produce One's warehouse, located off Interstate 77 in Cuyahoga Heights, stores cases of romaine lettuce from Great Lakes Growers destined for salad plates across the region.
Premier Produce One's owner Tony Anselmo said he was forced to increase his prices.
“If you’re paying, paying more for the employee and the truck and the driver and the fuel, you gotta raise your price,” Anselmo said.
Anselmo also cut back on the number of days his trucks go out for deliveries to save money on fuel. In 2022, diesel fuel reached more than $5 a gallon, costing him $1 million last year. It’s down to more than $4 a gallon in the first quarter of 2023.
“Let’s say everything goes in a corrugated box,” said John Bronner, owner of Great Lakes Growers. “Boxes have gone up 40%. So, before, a box cost us 50 cents, now it costs us 75 cents.”
Supply and demand were thrown out of balance by the impacts of the Covid-19 pandemic due to the lack of demand for goods in 2020, when the economy drastically slowed down. As it began to speed up in 2021 and 2022, people were ready to purchase more than what businesses could supply.
The pandemic disrupted many aspects of the supply chain, delayed shipments of materials and slowed production of manufacturing companies. Fewer workers returned to the job market, which impacted the production and delivery of goods. More than 80 employees worked at Pickwick and Hilarities before the pandemic. Kostis said there are now 45.
Staffing issues
At Gabriel's Southern Table and Whiskey, general manager Aaron Orvis has a hard time keeping his shifts staffed.
Orvis spends his time at work bartending, serving food and adjusting to his new managerial role, which he took on in January of 2023.
“I just do everything that I have to do to make all the shifts work well,” he said.
Executive chef Mark Sanford tells the kitchen staff to double up on stocked items so they can help each other when it gets busy. The bar has six kitchen employees, but when it's fully staffed, there are 10.
“I’m actively hiring,” Sanford said, explaining that a busy night could mean 120 customers filling the 200-seat venue, where four servers wait tables. He said those selected for an interview don’t always show up, so “it’s been quite difficult to get ideal candidates.”
Across the street at Society Lounge, a nostalgic bar with fancy drinks, owner Joseph Fredrickson said he hasn’t had a problem finding staff because a pop-up bar called Miracle was added to the venue in 2018. But recent wage increases are a concern.
“I'm worried that we won't be able to afford the same staffing level we used to have so we're gonna have to have less people working harder,” he explained, noting that labor costs the business 28% in total during the month of February.
He said bar backs, or bartenders' assistants, used to earn a starting wage of $8 an hour plus tips and $12 an hour without tips. Now, they make $12 an hour plus tips and $14 an hour without. That’s a 50% increase for wages plus tips.
Downtown sales
Downtown Cleveland sees the most foot traffic on weekends. The highest traffic on average on a Saturday in January 2023 was 168,000 people. Last January's top average Saturday was 127,000 people, according to David Jarry, the market research manager at the Downtown Cleveland Alliance.
Downtown businesses' sales are nowhere near pre-pandemic levels due to the lack of office workers dining out on their lunch breaks, Barker said. Downtown offices were at 52% capacity in January and 53% capacity in February, according to the Downtown Cleveland Alliance’s recovery dashboard. Numbers are down compared to the summer and fall months of 2022 , when the peak was 62% in September.
While the lack of downtown employees has impacted East Fourth Street, business owners such as Kostis are adapting to serve hungry weekend patrons who will stop in after an event at the Rocket Mortgage Fieldhouse or spend the evening having dinner and enjoying entertainment at Kostis’ establishment. Kostis said he used to open six or seven days a week, and now he opens four days, depending on events.
“We’re concentrating our resources on the hours and days we can be most productive,” he said.
