The flip side

Local restaurants are feeling the pinch from soaring food and fuel prices and an increase in the minimum wage.

Restaurant owners, though, are reluctant to pass on those increased costs to their customers by hiking menu prices.

“Right now, we’re just trying to suck it up,” said Ralph Brown, operations manager for Conway’s Red Top restaurants.

Conway’s increased menu prices twice in 2007, Brown said. Go any higher, he said, and there’s worry customers will steer clear.

“We’re at almost $10 for a cheeseburger, fries and drink and people are saying, ‘Hey, I’m not going to pay this much.’”

Restaurants leery of raising menu prices, though, must find other ways to cope with the largest increase in food prices since 1990. Prices soared in several categories last year. Milk prices climbed nearly 20 percent and egg prices more than 30 percent. Wheat prices reached a record high in December.

“We’ve seen a huge increase in tomato prices, which really affects Jose’s since we give away complimentary salsa to guests,” said Luke Travins, managing partner of Concept Restaurants, whose downtown restaurants include Jose Muldoon’s and Ritz Grill.

For Conway’s Red Top restaurants, a key concern is the rising cost of corn oil.

“We’re spending about $425 more a week just on oil,” Brown said.

Another worry is fuel prices, said Steve Kanatzar, owner of Solo’s Restaurant and president of the Pikes Peak chapter of the Colorado Restaurant Association. Crude oil prices recently climbed to a record $100 a barrel.

“When fuel goes up, everything that we buy goes up,” Kanatzar said.

Despite those pressures, restaurant owner Randall Price said he has no plans to raise menu prices. Consumers already are feeling strapped as they face higher prices at the gas pump, said Price, owner of Sonterra Grill, Slayton’s Barbecue & Creamery and two Salsa Brava Fresh Mexican Grills. “It’s not like they’ve got more to spend,” he said.

Travins is also committed to holding the line — for now at least.

“I think now would be a very difficult time to significantly raise prices to cover these increases,” he said.

Restaurants and other businesses also are dealing with an increase in the minimum wage that took effect Jan. 1, from $6.85 to $7.02 an hour for nontipped workers and $3.83 to $4 an hour for tipped workers such as restaurant servers. Those increases are minor, though, compared with those at the start of 2007: from $5.15 an hour to $6.85 for nontipped workers and $2.13 to $3.83 an hour — an 80 percent increase — for tipped workers.

The increases were mandated by voter approval of Amendment 42 in 2006. After the initial hikes, the amendment calls for the minimum wage to be adjusted annually for inflation.

“It’s not a huge thing for us,” Conway’s Red Top’s Brown said of the latest increase. But it does nibble away at the bottom line at a time when every penny counts, he said.

“It’s hard to make ends meet every single month,” he said.

Restaurants find different ways to counter rising costs, Kanatzar said, from keeping a close eye on payroll to having waitresses push an extra dessert here and there.

Another strategy, he said, is to be more proactive in buying goods, such as stockpiling cheeses that can be frozen, thus avoiding future price increases.

“There are all kinds of things you can do,” said Pete Meersman, president and chief executive officer of the Colorado Restaurant Association. “But at some point, all of those things will have been done. And if the costs keep going up, then obviously there has to be price increases.”

CONTACT THE WRITER: 636-0272 or bill.radford@gazette.com

TROUBLED TIMES FOR EATERY OWNERS

- Fifty-four percent of Americans said they would dine at restaurants less in the next three months in a survey released in late September by RBC Capital Markets. Two in five said they already were eating out less often than six months before.

- The National Restaurant Association’s comprehensive index of restaurant activity fell in November, the latest available, to its lowest level in more than four years. The association’s Restaurant Performance Index is a monthly composite index that tracks the health and outlook for the U.S. restaurant industry.

GOING UP

According to the Consumer Price Index report for December, food prices rose 4.9 percent in 2007, compared with 2.1 percent in 2006. The 2007 increase was the largest since 1990. Price increases in 2007 included:

5.4%

Cereals and bakery products

5.0%

Beef and veal

6.3%

Poultry

13.4%

Dairy

32.6%

Eggs