Restaurant openings are on the up and up in most counties across South Carolina.
Close to 2,833 cut the ribbon across the state in 2023, according to a report provided to SC Biz News by the South Carolina Restaurant and Lodging Association.
But for many other restaurants and bars, cuts of another kind have landed the final blow: staffing shortages, strained budgets and limited hours to counteract those two challenges.
“The industry is doing quite well, there’s a lot of growth,” said Susan Cohen, CEO of the South Carolina Restaurant and Lodging Association and former CEO of the Clemson Area Chamber of Commerce. “Which means that there is even more need for staff. So even those who were having problems before COVID finding staff, it’s doubled now.”
In 2023, close to 2,100 restaurants shuttered across the state, leaving a net total of 758 newcomers to the sector. Bamberg, Cherokee, Edgefield, Greenwood, Lancaster, Marion, Marlboro and Saluda counties lost more restaurants than they gained last year, according to a South Carolina Department of Health and Environmental Services report.
The cost of doing business has gone up by 25% to 35% for many restaurants, according to Cohen.
And smaller businesses, especially those with a long-time, regular customer base, have been disproportionately impacted. While restaurant owners just starting out may be more likely to anticipate the new costs, many legacy brands are still playing catch up.
“Most of them don’t want to tack those costs onto their regular customers, because they’re going to quit coming anyway,” she said. Restaurant owners have changed up menu items and cut hours to bring down the overhead, but these decisions disappoint customers too.
“They can’t afford the 35% increases themselves, and their customers can’t afford to pay that additional price, so many of them have unfortunately opted to close,” Cohen told SC Biz News.
One of these local standards, Paw’s Diner, dished out hand-patted burgers and classic Southern cooking in Seneca for 25 years before it closed on June 13.
“It is with a devastated heart that we announce that at 3 p.m. today we will close indefinitely,” said a final Facebook post from Paw’s Diner. “We thank you for almost 26 years of friendship and support. This was a sudden decision and saddens us as much as you.”
Hartwell Ridge, a new student housing community developed by Texas-based Fountain Residential, was expected to hug the Clemson Boulevard site with a promise of a new community of customers, but according to a statement from Paw’s Diner, the restaurant struggled to keep consistent hours and staff throughout June before shuttering its doors.
A double whammy for local restaurants
Paw’s Diner follows the path of Central’s Rails 133, Spartanburg’s Tulip Tree, and Greenville’s Habitap, K&S Restaurant and Southern Culture Kitchen. Poogan’s Southern Kitchen in Columbia closed after two years.
“If they’re independent, it’s almost a double-whammy there as well, because they just are out there on their own,” Cohen said.
Costs are exacerbated by credit card swipe fees, typically 3% to 3.5% of each transaction, and a spike in South Carolina’s liquor liability insurance prices.
“The cost of liquor liability insurance in South Carolina has skyrocketed,” she said. “That’s even if you will find a carrier who will do it.”
Cohen told SC Biz News that one SCRLA member is struggling to keep pace with a 70% increase in operating insurance this year despite having a clean record and bars that close after dinner service. Many other members have reported a 300% insurance increase.
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But independent restaurants aren’t the only ones shouldering impossible operating costs.
Denny’s executives expect to close between 60 and 70 restaurants throughout 2024, a net of 10 to 20 locations, according to the Spartanburg-based chain’s latest Q1 earning report. Sales at both company and franchised locations are expected to experience 0% to 3% growth.
Last year, at least 44 Denny’s shuttered across the country; 2022 saw 114 closures.
“Most people don’t realize how small the profit margin is for even a healthy restaurant,” Cohen said. “Most often, it is single digits.”
Human help wanted
Many industries in the state are hurting for talent, but the restaurant sector is particularly labor intensive.
“In South Carolina, if you put every unemployed person to work, just for the jobs that the Department of Employment and Workforce knows about, you’re still at least 50,000 people short,” according to Cohen. “And that’s not counting the ‘Help Wanted’ signs that are posted (only) in everybody’s window. That’s the jobs that they know about that are posted on their website.”
A recent study cited by Cohen revealed that it takes an average of 3.2 employees for a grocery store to make $1 million in revenue, 3.7 at a clothing or merchandising store.
Compare that to 12.1 people for a restaurant. Meanwhile, in South Carolina, jobs openings for chefs in the state outpace the number of actual applicants by about 10 to 1, according to Cohen.
As costs continue to spike across the economy, COVID-19 recovery aside, restaurants still can’t afford to pay their employees what they need to cover housing, groceries or the transit to get to work.
“There’s no affordable housing close by,” she told SC Biz News. “You do have some public transportation in the Clemson area, but if you don’t have that and people can’t get to work from outlying areas, then that just exacerbates that problem as well.”
Much of the growth in areas with a Seneca address are close to Lake Hartwell, like Paw’s Diner, making them miles closer to the Clemson city limits than Seneca’s borders.
A college town like Seneca may be impacted less by staffing shortages than other regions, but Cohen reiterated that the talent pool is temporary and traffic is driven by seasonal events, like the college football schedule.
“You would think, ‘wow, all these college kids, they want a part-time job,’” Cohen said. “They really don’t if you talk to them.”
To help offset staffing challenges, restaurants are forced to consider digitized stand-ins even if they may seem to subvert the meaning of human-driven “hospitality.”
“I went to the National Restaurant Show in Chicago back in May, and it’s been interesting over the last year or two to see how much larger the technology section of that show has gotten,” the SCRLA CEO and president said. “Everybody is looking for any way they can possibly automate certain tasks.”
Upstate diners may have met their first serving robot, “Rosey,” at downtown Greenville’s Roost over the past year, or at Iso Iso Ramen in Seneca, but the trend is catching on across the country alongside other forms of no-contact ordering.
Meanwhile, the SCRLA continues seek ways to foster long-term hospitality skills among humans, including a job training curriculum in South Carolina high schools sponsored by the U.S. Coast Guard, as well as programs tailored for retirees and former inmates.
“We’re looking at every possible resource for staff,” she said.
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