The Iowa restaurant industry is navigating a perfect storm of rising costs and shifting consumer habits that have left nearly half of all establishments struggling for profitability. Jessica Dunker, CEO of the Iowa Restaurant Association, and Bruce Gerleman, owner of Splash and Jethro’s Barbecue, describe a landscape where the traditional “dimes” of profit have been whittled down to pennies. While consumers are paying more, Dunker notes that “profitability eludes us” because the cost of goods and labor has outpaced menu pricing.
Check out the following highlight reel from a previous interview!
The DoorDash Dilemma and Shifting Demographics
A primary concern for local owners is the rise of third-party delivery services like DoorDash and Uber Eats, which strip away the high-margin “experiential” sales of alcohol and appetizers. Gerleman points out that while they appreciate the sales volume, delivery kills the quality control and hospitality that define a brand. Furthermore, a “Gen Z” shift is impacting foot traffic. Younger diners are drinking less alcohol and often choose “brunching” over traditional dinner service.
“When I started my job in about 2005, we talked about profits in the restaurant industry being dimes, and then by the early 2010s, we started talking about nickels, and now we’re talking about pennies,” Dunker explains regarding the tightening margins.
Strategies for Long-Term Viability
To stay viable, Gerleman and Dunker urge restaurateurs to treat their kitchens like tech companies: lean, data-driven, and efficient. This includes using distributor tools to track the profitability of every menu item to the half-cent. Gerleman is currently transitioning to handheld point-of-sale systems to increase staff efficiency amidst a persistent labor shortage.
“Take your heart out of it and put your head into it and make the math work,” Dunker advises owners who may be clinging to unprofitable traditions.
The industry is also grappling with record-high beef prices and a “war on seed oils” that has some consumers demanding animal fats like tallow, which remains difficult to source. Despite these hurdles, the guests remain optimistic about the industry’s ability to adapt. As Dunker concludes, “We have been serving food for money for millennia, and we will do it again.”
Bruce Gerleman 