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Laguna Beach restaurateurs chime in on biggest challenges

By Diane Armitage

In the last two weeks, I’ve written about restaurant growth, changes, and trends over the last decade in Laguna Beach.

Local restaurateurs have found themselves facing significant changes and trends in the last decade at both state and local levels. As a result, net profitability is shrinking, leaving owners to grapple with finding new solutions or closing their doors. 

In this third and last column, a few well-known restaurant owners note the biggest challenges – and wins – as restaurateurs in Laguna Beach. 

It was an education for me. Despite the close work I do with restaurants, their candid responses heightened my respect for these individuals who still have a sense of humor and an unrelenting passion for serving their patrons in Laguna Beach. 

Here’s where they’re feeling the greatest impact: 

Minimum wage increases aren’t so ‘minimum’

“The minimum wage has gone up every year for the last three years,” said Chef Rainer Schwarz of The Deck and Driftwood Kitchen. “It only goes up a dollar or so each year, which doesn’t seem like a lot, but I have over 250 employees and that really makes an impact.

laguna beach rainer

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Rainer Schwarz, co-owner The Deck Laguna and Driftwood, and Hendrix in Ocean Ranch

“In places like San Francisco, the restaurateurs are adding a new line item in each dining bill to help offset employee costs, but – in my opinion – you can’t pass this on to your customers,” continued Schwarz. 

“They say, ‘This is your problem, it’s not my problem,’ and I understand that thinking.”

Added Schwarz, “We see the shift to counter service happening in an attempt to reduce one’s cost of employees. But our Laguna Beach residents are established in a prosperous town – they love eating out, and they like the full dining experience. 

“Bottom line…we do what our patrons prefer, especially when our success relies so heavily on our locals frequenting our restaurants year-round. So, we have to look at other ways to keep afloat and, hopefully, profitable.”

Minimum wage spawns larger pool of costs

“Each time the minimum wage goes up, it’s exponential,” said Chef Owner Cary Redfearn of Lumberyard and Slice Pizza and Beer. “I want my servers and bartenders to be able to work as many hours as possible. I’ll gladly pay for that consistency in service, and I’m happy to provide more income to them. 

laguna beach cary

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Cary Redfearn, owner, Lumberyard & Slice Pizza and Beer

“But, as their hours go up, we edge into overtime, and that takes minimum wage from about $12 to over $19 an hour. That’s just not sustainable. And, as the payroll total goes up, workers’ comp payments go up, too.

“We’re also one of just six or seven states remaining that won’t allow us to count tips toward wages, but we are required to count tips when it comes to taxes. So, my employees pay taxes on their tips and we, as restaurateurs, also pay tax on those same tips.

“In a world where the price of everything is going up, you just try to find solutions to keep it balanced and viable,” continued Redfearn. 

“But there are a lot of unintended consequences that haven’t really been thought out, and that’s forcing more chefs and owners to close their doors.” 

Rising rents and lease factors

“The biggest change we’ve seen since we’ve been in Laguna as Wine Gallery is the rise in minimum wage and the rent increases,” said Chris Olsen, founder and co-owner of Wine Gallery Laguna Beach.

laguna beach chris

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Chris Olsen, co-owner, Wine Gallery Laguna Beach

“As an example, the building we are in was sold. Even though our lease was protected, it ultimately increased our monthly nut because of the new property taxes and the required tenants’ share of that tax on our triple-net leases. 

“The growing industry of third-party delivery has made an impact, too,” added Olsen. “Although we have more orders happening with Uber Eats and such, patrons are obviously not coming into the restaurant where they might also order an appetizer or a couple of drinks.”

Added Sharon Haron of long-standing The Cliff, “My Dad built our restaurant from the ground up and, when he opened in 1980, the rent was reasonable. The rent, though, goes up every year, and the last 10 years have been absolutely dramatic. It’s a leaps and bounds kind of thing.”

“My kingdom for a dishwasher”

“A dishwasher is the most important person in our kitchens now,” said Chef Owner Maro Molteni of Royal Hawaiian Fire Grill with a laugh. 

laguna beach maro

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Maro Molteni, co-owner Royal Hawaiian Grill (right), with co-owner and brother Martin

“Most of the line cooks and dishwashers working in Laguna can’t afford to live here, so they choose to drive here from places like Santa Ana…and that choice is usually related to us negotiating a much higher than minimum wage,” he said.

Chef Owner Rainer Schwarz agreed, “The 100-plus restaurants here in Laguna are definitely grappling for the same line cooks and dishwashers because there are many, many restaurants between us here, and where they live there. We have to get creative to entice and keep them working for us in our restaurants.”

Meet the new beast: Social media

“Social media came out of nowhere a few years ago and now it dominates the conversation about every experience everywhere,” said Owner Scott McIntosh of Reunion Kitchen and Asada Cantina. “This can be a blessing and a curse…and both can happen many times on the same day!”

Said Rainer Schwarz, “If I overcook a chicken at Hendrix in Ocean Ranch, 100 people in Laguna Beach know about it the next morning.”

(He pauses to chuckle.)

“For the most part, though, people are forgiving. If they’re regular patrons, they remain supportive and continue to return to your restaurant,” said Schwarz.

Maro Molteni added, “Sometimes it feels like the people who love you the most don’t post reviews, even though you see them in your restaurant a lot. And, sometimes the lowest reviews come from people who haven’t stepped foot in your restaurant. Those are the hardest reviews to stomach because they didn’t even give you a chance.”

He paused to think a moment. “But, that’s OK. It just makes me love and appreciate more the people who come in again and again. Social media, yes, it can be good feedback and it matters. But Laguna residents and visitors who support you…that’s what really matters, and that’s where I like to direct my energy.”

A changing demographic

“Seeing the changes that have evolved since I was a child in Laguna Beach is really eye-opening,” said Lindsay Smith-Rosales of Nirvana Grille.

laguna beach lindsay

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Lindsay Smith-Rosales co-owner Nirvana Grille (in center)

“Something that’s completely out of our control here is that our summer season is now shorter. Where we used to have a few solid months of summer visitors, many kids from various states and countries now have to be back in school in the first three weeks of August. Two or three weeks of MIA summer traffic makes a really big difference for those of us gathering nuts for winter.”

Chef Lindsay added, “But the bigger deal lies in the fact that, over the last 10 years, both the local residents and incoming visitors have changed. Many of our residents don’t live here full time, and that percentage has gone up as more have aged and retired. They travel more and have homes elsewhere, or they’re simply not eating out as much as they did 10 years ago.

“And, now we also have thousands of confirmed ‘day trippers’ who bring coolers of food with them rather than dining in our restaurants,” she added. 

“Combine all of that with – now – 60 to 70 dine-in restaurants in the same city limits we’ve always had, and you can see why even the best restaurants in town aren’t full and are possibly struggling.” 

A changing…or non-changing…Laguna

“What makes Laguna Beach such a gem is that we’re this secluded, wonderful town,” said Cary Redfearn. “And that’s exactly why it’s difficult, too. 

“We’re difficult to get to. And when you do finally crawl your way into town as part of these long lines of bottle-necked cars, there’s nowhere to park,” continued Redfearn.

The parking puzzle

“As much as people love and use our trolley system, many visitors want to be in closer proximity to their cars while they spend the day in Laguna Beach. So they ignore the trolleys and circle around and around looking for parking.

laguna beach traffic

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Photo by Mike Altishin for BestofLagunaBeach.com

A typical busy day of traffic during a Laguna summer

“We need more parking,” Redfearn said flatly. “The City hasn’t built new parking in 30 years, and the new Village Entrance took parking away. Many locals don’t even want to come into Laguna during the summer because they anticipate a parking issue. 

“So, our residents have chosen Laguna Beach because they love its special culture,” said Redfearn. “But they can’t experience that culture as much as they’d like to because they feel parking is such a hassle.”

The parking requirement

“When you want to put your restaurant in Laguna Beach, the first thing you find is the space. And the second thing you find is the parking requirement for that space,” said Reunion’s McIntosh.

“When we opened Nick’s, and when I later opened Asada in that same block in the old Javier’s space, we had the fortune of being able to access the Glenneyre parking structure as part of our fulfillment of the parking requirement,” he said. 

“The main reason I chose to build Reunion in the old Umami Burger location was because of all that great parking in Boat Canyon. But I can’t tell you how many times I’ve turned away from a potential restaurant site here in Laguna Beach because of the parking requirements. It’s usually an unforeseen struggle for restaurateurs who really just want to open and operate a restaurant here in Laguna.”

Bruce Russo, the General Contractor for what would become the Taverna space (now Ocean at Main), said he had more delays in trying to find the required parking spaces for the proposed restaurant than in entirely converting the weathered retail space to restaurant use.

“Nothing is grandfathered in Laguna Beach when it changes ownership,” said Russo. “So, you might have had a retail or restaurant space that had existed here in Laguna Beach for 20 years, but when you come in with new ownership and plans for revamp…even if you’re in the same square footage…the parking requirements of 20 years past are obsolete. It’s a new rule, and a new requirement.”

laguna beach sharon

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(L-R) Co-owners and sisters Sharon Haron and Kathy Gibson ofThe Cliff

Added Sharon Haron of The Cliff, “The parking requirement is a bit of a double-edged sword. Over the years, we’ve tried applications to expand our footprint for the restaurant – our kitchen is the size of a postage stamp – but we can’t because of our parking restrictions. In the end, it ultimately constrains the square footage of our restaurants and how big we can grow.”

They’d still choose to be restaurateurs

As restaurant owners talked candidly over these many weeks, one truth emerged: They each chose Laguna Beach for its unique town and people, and they are committed to staying here.

“Clearly, the last couple of years have been an educational forum for all the residents in Laguna Beach,” said Redfearn. 

“We’re all more aware of challenges and issues here, and hopefully as the light shines on the dark corners, we will all find a way to make it a better place. It’s important that we understand and recognize the challenges and act as one community in concert to find a better solution…because I know, as far as restaurants go, we all want to stay and thrive.”

Said Smith-Rosales of Nirvana Grille, “You start to wonder, ‘why in the hell am I in this business?’ and then you remember…because I love it! The energy of it, the ability to be connecting with people, the ability to make a difference and be in people’s memories as they experience your food and celebrate a special occasion. It is magical!”

And they’d still choose Laguna Beach

Added Wine Gallery’s Olsen, “We’re just trying to cater to our locals and build a sense of community for them here at Wine Gallery. It’s amazing how supportive our locals really are. They really do keep us all afloat.”

Said Molteni of Royal Hawaiian Fire Grill, “I’ve chosen Laguna twice: Once when I moved my family here in 2008 because no other city in Orange County had a vibrant downtown like Laguna. We had a great time in my first restaurant, but eventually I sold it and took my kids to Argentina for a year to explore my homeland. When I returned to the States in 2017, I chose Laguna again because I had missed the people of Laguna Beach. 

“That’s the best reason in the world to return to something.

“Right now, our downtown isn’t as vibrant,” continued Molteni. “We’re dealing with a lot of vacancies and viewpoints from both sides. But the people here are good people. And when you have good people working together, you always find a way.”

The best-selling author and blogger on The Best of Laguna Beach™, Diane Armitage is on an endless quest for the most imaginative adventures in Laguna’s restaurants, events, and lifestyle. Check out chef interviews, retail and restaurant news, and favorite events at www.TheBestofLagunaBeach.com and follow on Instagram @BestOfLagunaBeach (look for Diane’s smiling face)