This article has been edited since it first appeared in print.
In January, Kendra Feather sat down with the management staff at Laura Lee’s to discuss a subject that often isn’t on the table: money. She laid out the profit and loss reports from 2024, which revealed that the Forest Hill restaurant made a mere 1.3% profit last year. The moment of transparency was intended to send a very clear message: Money is incredibly tight.
Kendra Feather at Laura Lee’s; she also co-owns Garnett’s Cafe and The Roosevelt. (Photo by Kate Thompson)
“It was something good for them to see, how little money I actually make,” Feather says. “Gone are the days when restaurants made 10% profit. That’s just not a thing anymore. Richmond is an extraordinarily more expensive city than it was just a few years ago.”
A restaurateur with 26 years’ experience, Feather also co-owns local eateries Garnett’s Cafe and The Roosevelt. Not only are profits down and expenses up at all of her establishments, she says, nowadays her worries extend beyond the dining room as she considers the impact of increasing housing costs on her employees and the fallout from events like January’s weeklong water crisis. After that meeting with her staff, she upped menu prices for the first time in years, adding 50 cents or a dollar here and there. The new profit goal is closer to 5%.
“I am both a consumer that says, ‘It’s just too expensive to go out to eat,’ and then, also, running a restaurant, saying, ‘I need to charge more for this, though,’” Feather says. “And so I do get both sides. … It has definitely felt like, since COVID, I’ve been wading my way through something that I don’t really have a blueprint for, you know?”
Five years post-pandemic, new restaurants are opening regularly in the area to excited patrons, and some longtime favorites have lengthy waitlists. However, behind the scenes, owners and operators are facing fluctuating food costs, real estate challenges, wage pressure and consumer spending shifts. For their part, diners are dismayed by pricey tabs and distracted by an array of options. Has the local restaurant scene — part of an industry that is systemically scarred and relies on slim profit margins — rebounded and recovered?
Location, Location
“Sometimes I think you’re just lucky if you’re still here,” Feather says. “Restaurants by fantastic restaurant owners closed [last] year. … If someone who’s had enormous amounts of press and is beloved in the community still closes, then what chance do the rest of us have?”
Many in the local dining industry echoed that thought after Southbound, a decade-old neighborhood restaurant in Bon Air, was closed by owners Lee Gregory — the James Beard Award-nominated chef who also owns Alewife in Church Hill — and Joe Sparatta of Heritage in the Fan. Months prior, Gregory also shuttered Odyssey in the West End, which had been open for about 18 months.
A member of the Richmond restaurant old guard, Gregory helped Feather open The Roosevelt in 2011 and was instrumental in bringing national culinary attention to the city. When a talented and touted chef with the cred to back it up bids farewell to two seemingly successful ventures, eyebrows are raised. The reason for Southbound’s closure, however, was clear: rent. When Sparatta and Gregory went to re-sign their lease after 10 years, the landlord told them their rent would be increasing by 60%.
Given the restaurant’s suburban strip-mall location, Gregory says, “Certainly we didn’t think that it deserved to have current market value for downtown Richmond — or, should I say, Scott’s Addition. We’re just like, ‘Come on, man, you can’t charge this.’ And they wanted to stick to it.” Adding to the bitterness of the rent hike is the knowledge that Southbound had attracted business to the same shopping center that forced them out.
Much like homeowners, restaurant operators are navigating an aggressive and expensive real estate market. Nathan Hughes, principal broker of Sperity Real Estate Ventures, a local commercial real estate firm that has helped secure spaces for many Richmond restaurateurs, puts it plainly: “Prices have gone way up.”
Before the pandemic, he says, “you might have been able to buy something at $10, $12 a square foot, up to $30 or $40 on the high, high end. Now the high, high end is more like $60.” Those prices are alarming for seasoned owners, let alone first-timers.
Restaurants looking to rent face their own set of obstacles. Working in Richmond for over 20 years, Hughes has seen an uptick in landlords making their tenants responsible for expenses such as HVAC and plumbing. In addition, he says, triple-net leases — where tenants agree to pay all of the costs associated with the space, including property taxes, building insurance and maintenance — have become much more common.
Laine Myers, chef-owner of the fresh pasta business and forthcoming brick-and-mortar restaurant Oro, says she doesn’t understand why. “This is not my asset. If your roof is leaking and there’s water damage, why should I be on the hook for having to replace this or spend any extra dollars out of my budget? There’s all these things that should absolutely never be the responsibility of a tenant, and in a normal residential circumstance would never be. It’s already so hard to make it in this industry.”
Even for operators willing to sign leases with less than ideal terms, finding a space is challenging. First-time restaurateurs tend to want turnkey, or move-in ready, spaces with a solid culinary infrastructure that typically requires less money upfront. However, Hughes says, those spaces are few and far between. “We have two dozen-plus restaurants looking at any given point, and there are certainly not two dozen-plus spaces out there,” he says. “And that’s just [Sperity]. So there’s a lot of demand and not a lot of space.”
Paul and Nikki Polk of Charlotte’s Southern Deli (Photo by Jay Paul)
The race for space can force proprietors to forfeit certain features of a build-out or sacrifice elements of their vision. When Paul and Nikki Polk, spouses and owners of Charlotte’s Southern Deli, were looking for a building for their downtown lunch cafe in 2019, they felt rushed to make a decision and quickly signed a 10-year lease.
“They really prey on the fact that most of us that open restaurants have to move as fast as possible because the spaces go so quickly,” Paul says. “So, you have to choose between whether you sign a lease that doesn’t quite have everything you want in it or search for another location for a full year.”
Charlotte’s is located on the first floor of an office building on South 10th Street. Since the pandemic, the bustling downtown lunch crowd has dwindled, along with the Polks’ staff. “We lost the ability to afford employees with the cost of our rent after COVID happened. The inflation was just too harsh,” Paul says.
The Polks are now their cafe’s sole workers and pay themselves $9 an hour, which is below Virginia’s minimum wage. “Those were our unemployment wages, so we decided to match the pay because we were able to maintain with that,” Paul says. “In our case, we had to pause growth for survival.”
If You Build It …
Mixed-use buildings are a category of real estate that has seen growth since the pandemic. The ubiquitous modern structures are changing Richmond’s skyline and its restaurant landscape as developers add retail and dining options to the ground floors of apartment and condominium buildings. According to data from Richmond’s Department of Planning and Development Review, about a third of development projects that either started or finished construction since 2016 were classified as mixed-use.
Megan Fitzroy-Phelan and Patrick Phelan, owners of Lost Letter and Lillian (Photo by Justin Chesney)
These spaces can have lofty price tags but are appealing to restaurant owners who already have a concept under their belts, offering a chance to work with investors and cushion some costs. For developers, a perk is partnering with restaurant owners with established reputations.
Patrick Phelan and his wife, Megan Fitzroy-Phelan, are the owners of the Italian-leaning Lost Letter in Scott’s Addition (originally Longoven). In January 2024, just down the street, they debuted Lillian, an oyster hall located on the ground floor of The Gem apartments. They weren’t necessarily looking for a new opportunity, but after bumping into an investor from Gem developer Capital Square, a “positive partnership” was formed. Their lease includes a “tenant improvement allowance,” or funds allotted for build-out and construction costs. Phelan says, “We can serve as an example to developers that small businesses that offer nuanced and curated experiences can be the lifeblood of an emerging neighborhood.”
The trend in mixed-use developments can also be spotted down the block at the Otis, where brothers Nelson and Paulo Benavides of Y Tu Mama and Hibachi Box introduced their newest dining endeavor, Mexican eatery Cochiloco. At a mixed-used building in Union Hill, the crew behind The Jasper introduced a second cocktail bar, The Emerald Lounge. And across the river on Forest Hill Avenue at the in-progress Evelyn development, EAT Restaurant Partners is debuting another outpost of its sushi spot Lucky AF. That apartment building will also house Janet’s Cafe & Bakery, helmed by a co-owner of Charlottesville’s Petite Marie Bette.
Eric Terry, president of the Virginia Restaurant, Lodging & Travel Association, says dense developments with multiple dining options can help create a draw. “A cluster of restaurants seems to work better than a standalone restaurant out on its own,” he says. “There’s some synergies that happen there that seem to be good for them.”
Distracted Diners
Proximity doesn’t always translate to customers in seats. Brittanny Anderson, the owner of Union Hill’s Metzger Bar & Butchery and Pink Room, as well as Brenner Pass and Black Lodge in Scott’s Addition, says 2024 was one of her slowest summers to date. A three-time James Beard Award nominee and former “Top Chef” contestant, Anderson says her sales were down noticeably at Brenner Pass from the previous year.
Anderson points to shifts in consumers. Inflation has caused many people to eat out less often, and when diners do go out, pop-ups and fun, one-off events can pull attention from established restaurants. Patrons chase culinary clout and seek to see and be seen at the buzziest new hot spot. Restaurants that have been around awhile tend to suffer.
Donnie Glass (Photo by Eileen Mellon)
Influential food critic Robert Sietsema, who has reviewed restaurants in New York for 30 years, recently wrote for Best Food Blog, “Rather than settling in for a full meal at a small business or chatting with a restaurant’s owners about the menu, we are buying the newfangled pastry, unusual sandwich or amped-up pizza slice of the moment.”
Donnie Glass, the chef-owner of Beaucoup, Jardin and Grisette, says that while business has been steady at the latter, it hasn’t been growing. “I think a lot of that has to do with [it being] our sixth year. At a certain point, you’re going to hit your ceiling. It’s never going to just keep getting better, and then squeezing the next drop out of it becomes a lot harder.”
Local spots also face competition from a growing influx of chains. Corporate-owned eateries offer easy-to-access familiarity, parking and menu prices that are less likely to fluctuate due to the volume-led business model. Terry, of the VRLTA, points to Perry’s Steakhouse & Grille, which has more than 20 locations across the U.S.; he says its outpost in Short Pump is thriving while some restaurants in the region are still struggling.
Reality Check, Please
We’ve all seen it: The check hits the table, and instead of carelessly throwing down a card, a diner carefully scans each dollar sign and dish before realizing that, yes, it all adds up. But the math doesn’t seem to equal restaurant success.
Terry says, “Somebody was ranting about the fact that their restaurant meal costs had gone up so much, [asking] ‘How can restaurants do this to me?’ And I’m going, ‘They have to. They’re in a bind right now.’ … The business inputs have changed dramatically. Things like labor costs, food costs, insurance costs, rent; all those things have sort of accelerated. I think the whole thing is just indicative of the fact that the industry is not really healthy today.”
Meal prices are definitely up. According to the National Restaurant Association, average menu prices in the U.S. increased 27.2% between February 2020 and June 2024. However, food costs went up 29%, and labor is up 31%. Those stats don’t include less obvious expenses that factor into the final cost of a meal, such as property and meals taxes, insurance premiums, credit card fees, reservation services, linens, utilities and random repairs.
Everything is more expensive, it seems. When the Phelans purchased a walk-in refrigerator for Longoven before the pandemic, it cost $8,000; the one they purchased for Lillian last year is half the size but cost $18,000. The cost of pumping the grease trap more than doubled from $250 to $516. Gregory says he pays nearly $50,000 in credit card processing fees a year — more than the average annual salary of a line cook in Richmond.
“The model is still very hard to put together,” Phelan says. “If your overhead goes up 20%, if your purchasing goes up 20% and your labor goes up 20%, that calculator is over 100% very quickly. There’s only a couple ways to combat that. There’s a reason you’re seeing $38 entrees.”
Richmond also has an incredibly steep meals tax for a city of its size. “You price out diners when they know they have 13.5% [tax] coming on a check any time they dine in Richmond city proper,” Phelan says.
Feeding others has never been a wildly profitable venture, but since the pandemic, many owners have found themselves anxiously tiptoeing between charging what they need to keep the doors open and what they perceive customers will pay. More than ever, each seat matters. For diners who have less disposable income, a night of $16 cocktails and $35 to $50 entrees can raise the question, “Was it worth it?” Factor in paying a babysitter and a Lyft, and date night may cost as much as a roundtrip plane ticket.
Gregory says restaurants are in a precarious position. “We’ve tried to raise some prices, but at the end of the day, I still feel like we’re Richmond restaurants and, you know, Richmond pockets. I still don’t feel like we charge enough. It seems like people are going out. I think maybe people are just more selective.”
A frequent diner on the restaurant circuit, Liz King has lived in Richmond for 20 years and visits restaurants about six times a month. On average, she says, she and her husband spend about $250 on dinner at places such as Heritage and L’Opossum. They typically order a cocktail or glass of wine each, a couple appetizers, two entrees and dessert. Bad service is a deterrent for King, but of the price tag, she says, “We’re going out once a week. We’re going out for a great meal. We want to have a great experience. If you need to raise my entree price $10 or my app $5, I trust you.”
But earning that trust takes effort and skill. To stay relevant and ensure seats are filled, relationships with diners must be cultivated and staff must be committed. “You’re constantly working towards people showing up,” Glass says. “If I can get someone to skip some other luxury in their lives to come to my restaurant instead — because they can only pick one instead of both — your goal is to remain somebody’s priority.”
Lee Gregory, chef-owner of Alewife (Photo by Marcus Ingram)
Equity vs. Profit
Pricing is also impacted by pay. During the pandemic, there was an industry-wide wage awakening — a push to make workers’ pay more equitable. Many independent restaurant owners are now paying higher wages and offering benefits such as vacation time and health insurance. Feather, who contributes to health care for her employees, says of her payroll, “From 2019 to 2021, there was definitely a jump.”
However, most restaurant pay still falls short of a living wage, which is $21.85 per hour, or just short of $44,000 per year, for a single adult in Richmond, according to a calculator from the Massachusetts Institute of Technology. Info from LinkedIn, which aggregates salary data from member listings, indicates that a line cook in Richmond averages $17.06 per hour, a sous chef averages $18.08 per hour and a server averages $19.40 per hour, including tips. Bartenders average $20.49 per hour, which is above the national figure but still more than $3,000 per year below a living wage.
In terms of benefits, an anonymous poll of 50 local restaurant workers conducted by Richmond magazine in January found nearly 30% of workers receive health insurance, while 15% receive a stipend for health care; 33% are offered paid time off and nearly 40% receive sick pay; 18% reported having retirement options, while 30% reported receiving no benefits.
For restaurant owners, finding the funds to give raises means either passing the cost on to consumers or trimming razor-thin margins even closer to the bone. Gregory says, “In the restaurant business model, we can’t charge what we need to charge, so it does not allow us to take care of people [who work for us] the way they deserve to be taken care of.”
Regardless, many owners are simply taking the hit. The owners interviewed for this article said they have raised their wages since 2019 and also offer benefits. Phelan says that when his restaurants were closed due to the water crisis in early January, he paid more than 45 employees for the missed work. He’s filing an insurance claim but does not yet know if he’ll recoup any of the lost revenue.
Glass, who launched his business just before the pandemic, says he hasn’t felt the impact of labor costs going up quite as much as other restaurateurs, but it’s there. “I think if you’re going to spend your money anywhere in your restaurant, labor is the place to do it,” Glass says. “And I do think that wage growth has outpaced inflation in my restaurants and in a lot of restaurants.”
The question of pay is forcing change at some restaurants. In August 2024, Can Can Brasserie, a seminal Parisian-inspired restaurant in Carytown, was purchased by the Housepitality Family restaurant group, owners of nine area eateries including The Boathouse, Casa Del Barco and Island Shrimp Co. The previous owners, brothers John and Paul Kincaid, saw the sale of the business as a way to support Can Can’s 100-person staff and upkeep of its large, old building. Assistant General Manager Laurel Burnette, who started as a server and has worked at Can Can for 11 years, says she has seen positive change since the sale. There’s a maintenance team if something needs to be fixed, base pay for employees has gone up, and benefits have been extended. “I’m in a dual role. I always have been, but now I’m actually being compensated for both,” she adds.
Every conversation about restaurant pay eventually turns to tipping. Glass says, “I would love to tackle that issue socially, economically, and be like, ‘You know what? F--- this. We’re not going to do tipping anymore.’ But tipping is so, so invaluable. My people wouldn’t be able to be paid as well as they are without tips unless we significantly increased menu prices in order to shoulder those wages as a business.” He estimates he’d have to raise prices 25% to 30% to eliminate tipping. “And even then, I wouldn’t be comfortable. If we eliminated tipping, we’d probably rethink the entire labor and payment structure we use.”
Tipping is a hot topic across the country. In 2022, Washington, D.C., passed Initiative 82, which will phase out tipped wages by July 1, 2027. The minimum wage for tipped employees will increase from $5.05 an hour plus tips to that of nontipped employees. In a different take, President Trump has repeatedly suggested eliminating federal taxes on tipped income. Here in Virginia, a House panel defeated Governor Youngkin’s proposal for a tax deduction on tips in late January.
A Forward Focus
While the post-pandemic period has been arduous logistically, systemically and financially — and last year’s meals tax debacle, where the city mishandled payment notifications, was yet another big bump in the road — there is hope that the restaurant industry can move from processing and coping to stability and success.
Restaurant workers are slowing down and finding an equilibrium seldom seen in the business. Feather says most of her employees work 35 hours each week and are drawing better work-life boundaries, hanging out less often for post-shift drinks, and demanding more of themselves and the industry.
Leah Branch, the executive chef at The Roosevelt, says, “I think it’s nice to have a space where there can be that sort of flow of communication. Especially in restaurants, I think the old-guard way was a little more chef-driven and less team-driven. And I think that’s definitely changed post-pandemic.”
Now, more than ever, operating these cultural cornerstones and community anchors is a complicated course. No one knows what future challenges will arise or when current ones will settle, but for those still choosing this business, there’s a clear reverence and reason. Myers, the chef-owner of Oro, is all in, come what may. “We don’t do this work because we’re looking to get rich. We do this work because we love it. We love hospitality. We love pleasing people. We love the cuisine itself, or the ambience, or an experience, or holidays. We do it because it’s just this incredible thing.”
