Written by Bismarck Andino, Jayla Ball, Emily Hyatt, and Anissa Reyes.
Graphic by Emma Robinson.
Austin’s rapid growth is challenging the food service industry as business owners struggle with today’s competitive market, staff turnover, and the high rate of property taxes and rent, an industry official said Nov. 19 in an interview.
“It is tough out there,” said Kenneth Besserman, a general counsel for the Texas Restaurant Association. “Twenty years ago, there were not many restaurants in Austin, and the ones that were here thrived because there were very few.”
Restaurants in Texas are a substantial component for the state’s economy, generating $54.1 billion in sales and providing about 1.3 million jobs for Texans in 2017, the association reported.
According to the local food news website, Eater Austin, over 273 restaurants have closed their doors since 2016, due to various circumstances including the lack of a full staff.
Besserman said there are not enough people working in restaurants in Austin and sometimes business owners have to battle the low unemployment rate. That unemployment rate, according to the Texas Workforce Commission, is at 2.2%.
“Unemployment is so low, businesses have to pay more to get people,” Besserman said. “So, if they want servers or cooks, they’re going to have to pay $12, $15 or $20 an hour, and that’s a lot.”
Besserman said this is a struggle for many restaurant owners because they only make 3% in return, which he said he believes is not enough considering their expenses.
“If they’re having to spend every dollar on rent, labor and food, there’s nothing left for them,” Besserman said. “So, it becomes a little bit of a struggle.”
Instead, Besserman said a higher unemployment rate would be beneficial for the hospitality industry because more people would be willing to work and keep their jobs.
Staff retention is a constant issue for many restaurants. Even popular restaurants like Home Slice Pizza, which has been operating in Austin since 2005, struggle to retain a full staff according to a part-owner of one of the locations.
Jeff Mettler has worked for Home Slice for 10 years and is currently part-owner of the North Loop Home Slice location. He said the lack of quality employees poses the main challenge with employment.
“We definitely have really high standards and are looking for people that are trying to enlighten others through hospitality, not just make a paycheck to pay rent,” Mettler said. “So, we kind of eliminate a lot of people in the job.”
Home Slice has grown into three different locations, two on South Congress and one on North Loop and Duval. Mettler said the multiple storefronts help the staffing problem rather than make it worse.
“The more you grow and the more relevant you are and the more you’re on people’s radar,” Mettler said, “the more people are coming to you.”
Even Threadgill’s, a Southern-style restaurant, which has been a part of Austin’s history since 1933, has struggled with keeping long-term employees.
Eddie Wilson, owner of Threadgill’s, said they mostly hire students who later graduate and pursue higher-paying jobs.
“They come and they go,” Wilson said. “A lot of them don’t stay for a long time.”
Wilson also said the lack of available staff throughout the day causes management to cover the necessary duties to maintain the restaurant. Wilson said he and his wife sometimes have to serve food and clean the restaurant at these times.
“We’ve managed the flow at this point,” Wilson said. “But sometimes we run with fewer wait staff than we would like, but [employees] have learned that when we’re short they work harder and make more money.”
Sled Allen, one of the five co-owners of El Patio, a Tex-Mex restaurant on Guadalupe Street, said their restaurant is thriving just like it was 65 years ago when it first opened.
A positive element of their business is the treatment they give to their staff, Allen said.
“This industry is notorious for being a very hustle and bustle … you’ve got a manager who’s yelling at you all day and it’s frustrating,” Allen said. “We approach our staff differently, we view them as family and friends, and I think people really respect and enjoy that.”
Allen said the restaurant closed last August because the family was ready to retire, but a month later they decided to hand the business to their son. He said there was no financial issues involved in their decision.
Another issue restaurants experience is the increase in property taxes, said Robert Mayfield, the owner of Wally’s Burger Express.
“Wally’s is an excellent example as to why property taxes have become burdensome and why we needed this bill,” Mayfield said last June at a ceremony where Gov. Greg Abbott signed Senate Bill 2, which requires voter approval before local governments can increase property tax revenues by more than 3.5%.
This year, without this bill, Wally’s property taxes would have gone up by 44% over last year, Mayfield said.
“That’s an extra $8,000 we (would) have to pay,” Mayfield said. “From 2016 to the present, our taxes at Wally’s are up 80%. That’s just not sustainable.”
Senate Bill 2 makes it harder for cities to increase taxes, which is a big win for the industry, Besserman said.
“More people coming into town means you need more fire [department personnel], more police, better roads, and infrastructure,” Besserman said. “Austin and the big cities fought a bit against that burden of having to go to the voters every time they wanted to increase taxes.”
Besserman also said the recent property tax reform was pushed by Gov. Greg Abbott and Lt. Gov. Dan Patrick. The Texas Restaurant Association supported it because one of its missions is to advocate for the restaurant industry at the Capitol to pass legislation to benefit business owners.
“Everything from taxes, to alcohol laws, to labor laws, to regulations that touch the industry,” Besserman said. “We go over there, we advocate, and we talk to members of the legislature.”
However, restaurants like Threadgill’s did not survive long enough to benefit from Senate Bill 2.
Wilson said Threadgill’s lost one of its two locations due to an increase of property taxes and rent in November 2018. The Threadgill’s location in South Austin on Riverside Drive closed due to a monthly rent increase from $35,000 to $50,000, Wilson said.
“There’s just not that much margin in meatloaf,” Wilson said. “We always just kind of scraped by.”
Wilson said he was urged to bargain and ask for public help, but he could tell there was nothing he could do to control the rising rent and property taxes.
“The same problems are there for everybody — property tax,” Wilson said. “There are controllable costs and then costs you can’t control.”
“If you keep food and labor in line, you can’t do anything about insurance and property taxes that go up without any reason having to do with performance,” Wilson continued.
Meanwhile, in order for a restaurant to survive in Austin, Allen said he believes small business owners need to be committed and passionate about the industry.
“I think that you have to come up with a really good concept,” Allen said. “You have to come up with an enticing way of presenting a menu in the sense of pricing, making sure that you’re hitting the right market.”
But, Wilson’s sentiment differs, which he said he has learned from many years of experience as a restaurant owner.
“Small business has a tendency to let you wake up every day with a start,” Wilson said. “You’re always worried about everything.”