How San Francisco North Bay restaurants are tackling inflation pressures

Restaurants that have survived two years of the pandemic are now facing rising prices and labor costs, with inflation expected to rise by 4% this year in the food industry alone.

“We have continued to see price escalation essentially across the board,” said Will Seppi, president and CEO of Costeaux French Bakery in Healdsburg. Seppi also operates Costeaux on the Go at Charles M. Schulz–Sonoma County Airport, two vending machines inside the airport terminal and a commercial baking plant nearby. “From packaging supplies and materials to food items, we continue to work at adjusting the business to accommodate for those price increases.”

To date, Costeaux has absorbed the majority of all cost increases, but is now looking at pricing changes, including raising menu prices between 3% and 10%, depending on the product, Seppi said.

Inflationary costs often get passed to the consumer, and it’s no different for Costeaux, according to Seppi.

“From our standpoint, we certainly don't want to erode our quality, so we're not willing to trade down on raw materials,” he said. “We need to continue to preserve what we're known for and our commitment to the type of foods that all of our guests have come to expect from us.”

In general, inflation is at its highest level in 40 years. According to the Economic Research Service arm of the U.S. Department of Agriculture, grocery store prices this year are forecast to increase between 1.5% and 2.5%, while restaurant prices are expected to rise between 3% and 4%.

The rates, however, are not unprecedented, according to the USDA. It states that between the 1970s and early 2000s, both grocery and restaurant prices grew at similar rates.

Managing more than food

Transportation costs also have skyrocketed for the wholesale arm of Costeaux, which delivers its products throughout Sonoma, Napa, Mendocino, Marin, San Francisco and the East Bay counties.

“The increase in gas prices is a big piece of the business,” Seppi said, adding that the cost of labor also is steep. “The continued upward pressures that we have on wages and the general cost of living in Sonoma County compounds matters further.”

In addition, the café in downtown Healdsburg continues to remain open just five days week rather than seven, a move that was made during the pandemic and that won’t change anytime soon, he said.

Seppi has seen some turnover and labor shortages throughout the pandemic, but for the most part has been OK with staffing.

“By and large, we've been very fortunate to have a great core group that just continued to navigate the turbulent waters,” he said.

Staffing, supply chain headaches

Other North Bay area restaurants have not been so lucky.

John Ash & Co. at Vintners Resort in Santa Rosa has raised its hourly wages by between 15% to 20%, said Robin Ameral, food and beverage director.

But even higher wages haven’t moved the needle much in attracting qualified job candidates in an expensive county that has seen more people leave than arrive, let alone the mass exodus of hospitality workers since the pandemic began.

The resumes that do trickle in often don’t match the job qualifications.

“We are in the process of trying to hire a sous chef, and we're just having trouble finding anybody with that skill set,” Ameral said.

A sous chef is typically second in command in a kitchen, right behind the executive chef. The sous chef opening that John Ash & Co. is trying to fill also is intended to help offset the restaurant’s ongoing shortage of line cooks.

And then there are the rising food costs and supply chain issues to contend with. Wine and liquor is mostly out of stock, Ameral noted, and food prices, particularly for beef and seafood, have become exorbitant.

“We used to have an add-scallops option, but scallops are so expensive we took it off the menu because we didn't want people to have to pay $15 for a scallop,” Ameral said. “So we have a scallop dish, but it comes with prawns, too.”

Inflation’s biting impact

Inflationary costs have become part of everyday life for Felicia Ferguson, co-owner of Piazza D’Angelo, a family-owned Italian restaurant in Mill Valley in business for 40 years.

“I am getting every vendor that we work with saying they are increasing prices,” Ferguson said. The biggest hikes are in meat and imported goods, such as the wines she purchases from Europe.

“The vendors have had a lot of shipping costs that they’ve had to incur, and we have had to raise prices to keep up,” Ferguson said. “Restaurant margins are so small to begin with, so in order to even break even, we've had to raise some prices.”

More than that, Piazza D’Angelo needs to be profitable, she said.

“We also don't want to be priced out and be really expensive or really low compared to other restaurants around us,” she said. “So it's kind of finding that happy balance too.”

On average, menu prices have been raised between 50 cents to $1, and some items that already have high margins have mostly gone unchanged, such as cocktails made in-house and wine by the glass, she said.

“I think, from a consumer perspective, people are really kind of getting sticker-shocked but not realizing why the prices are rising,” Ferguson said. “So I think it’s helpful for people to be aware and to understand that it’s happening all over.”

Over in Point Reyes Station in West Marin, Sheryl Cahill, owner of Station House Café, said she hasn’t raised menu prices in quite some time.

But that may soon change.

Food costs are going up, especially for produce, beef and poultry, she noted.

“Value has always been at the top of my list for criterion and it’s hard to raise prices,” Cahill said. “But when we're paying more, we can only absorb so much because the profit margin is quite narrow in this business.”

Cahill will have decisions to make when her fiscal year ends on Jan. 31.

“We’ll be looking at the historical pattern and see what we need to do going forward for this coming year,” she said. “I hate raising prices, but sometimes you just have to.”

Baris Yaldiz, who for 19 years has co-owned downtown Napa’s Ristorante Allegria with his brother, Rodi, also has been bitten by inflation.

“We are definitely paying a lot more for everything,” Baris Yaldiz said. “Food and labor costs keep going up.”

Yaldiz said he’s raised wages, mostly for kitchen staff, and that menu prices have gone up, but he declined to give particulars.

Inflationary costs also are impacting restaurants in ways one might not expect.

“Even our computer paper, where we run our computerized ordering, has gone up 150% from what it was a year ago,” said Ameral of John Ash & Co. “Everything is more expensive. The cost of doing business has just gone up.”

Cheryl Sarfaty covers tourism, hospitality, health care and education. She previously worked for a Gannett daily newspaper in New Jersey and NJBIZ, the state’s business journal. Cheryl has freelanced for business journals in Sacramento, Silicon Valley, San Francisco and Lehigh Valley, Pennsylvania. She has a bachelor’s degree in journalism from California State University, Northridge. Reach her at cheryl.sarfaty@busjrnl.com or 707-521-4259.