The restaurant industry in Louisville is healthy, experts say, and they expect it to stay that way. Now, instead of restaurants closing because of a sour economy, it is competition that has some shuttering.
“With a city like Louisville, I think there is always room for more to come in, but it’s just survival of the best restaurants, the best food, the best service,” said Steve Brooks, president of the Louisville chapter of the Kentucky Restaurant Association and director of purchasing, beverage development and IT at Tumbleweed.
“They can’t all survive,” he added.
Restaurateur Ryan Rogers, who owns Bar Vetti, Feast BBQ and Royals Hot Chicken, said he expects to see locally owned restaurants in oversaturated corridors close as competition continues to increase.
“Diners continue to shift toward convenience, which can be seen with the proliferation of fast casual restaurants, restaurant delivery services, and meal kit home delivery. The restaurants that should be weary of these shifts are the ones that have not embraced this new reality,” Rogers said in an email. “Within our own business we’re looking to continue to pioneer into new neighborhoods that we haven’t previously ventured into, as well as looking for concept opportunities that our community is currently lacking in.”
There is no doubt that development in the Louisville is booming, with more than $11 billion in investment under way or planned in Jefferson County, but according to numbers provided by the Louisville Metro Public Health Department, the number of restaurants opening during the past four years has remained relatively steady.
Although the health department doesn’t have numbers on how many restaurants are currently operating in Louisville, they do have to perform an inspection on every restaurant before it opens. According to the health department, 355 restaurants opened their doors in Louisville from Jan. 1 to Dec. 18 of this year.
For comparison, 408 restaurants opened in 2016; 355 debuted in 2015; and 348 opened in 2014, according to information provided by the health department.
“I think there will always be the perception that there is more going on here because there are two schools here,” Stacy Roof, president and CEO of the Kentucky Restaurant Association, said, referencing the culinary and hospitality programs at Sullivan University and Jefferson Community and Technical College. “I think that it will always make it a very attractive place” to open a restaurant.
Of course, what isn’t known is how many restaurants close each year. Has the number of closures remained steady as well, risen or declined? The restaurants that don’t make it are the ones that aren’t changing their menu with the times or can’t find enough employees, the experts said.
As the economy has improved, the competition for quality employees has become fierce. Successful restaurants can afford to pay their employees more, said David Oetken, director of the Kentucky Small Business Development Center.
With the opening of new Italian restaurant Bar Vetti, Rogers introduced a no tipping policy and instead said he is paying all employees above minimum wage and paying half of their health insurance premiums.
“The restaurant industry as a whole took a negative trajectory when it proliferated publicly traded and privately held chain restaurants that were focused on the bottom line and returning value to shareholders. These restaurants used their power to stagnate wages, cut access to health care and other benefits, and lower the quality and variety of food for diners,” he said. “As we grow, I hope that we can help change this discourse within the restaurant industry, and provide greater opportunities to our employees and a better dining experience on a larger scale.”
A higher wage, some benefits and the chance to work in different restaurants allows Rogers to hire experienced restaurant employees who can then be promoted from within as his restaurant company HiCotton Hospitality grows, he said.
For its part, the Kentucky Restaurant Association is encouraging more people to enter the industry by offering ProStart Kentucky, a high school culinary arts and hospitality management program, to train young people and give them a taste of what working in the industry is like.
Staffing is “a huge problem,” Roof said, adding that the organization is expanding the program into new schools each year. The association also is in the process of creating a program for people who don’t want to go to culinary school or pursue a secondary education.
Restaurants also remain one of the hardest businesses to get funding for, which can be deterrent to opening a restaurant. Poor planning can also lead to closures.
The top question possible restaurant owner have for the Kentucky Small Business Development Center is “how they are going to pay for it. Restaurants are notoriously hard to finance,” Oetken said. “It’s a big turnover, a big risk. It’s like anything else, it’s all in the preparation.”
The center can help someone opening figure out the numbers and offer business advice, he said, but the person really needs experience.
“The people who are successful are ones who have working in the industry for a long time, and they know what the lifestyle is,” Oetken said. The popular restaurants tend to focus on the microeconomy, buying food from producers nearby and putting money back into the local economy, he added.
While there are plenty of headwinds for new and existing restaurants, there also are neighborhoods in Louisville that are still underserved when it comes to dining out options, which can be a positive for the person who decides to the plunge and invest in an underserved area.
And recent changes to the tax code could help more restaurants make ends meet, Brooks said. The corporate tax rate was lowered to 21 percent from 35 percent, and the average small businesses owner will pay 29.6 percent in taxes compared to a previous maximum tax rate of 39.6 percent.
“I think that will have an impact on restaurants. I think there will be more restaurants that open up and more that can survive,” he said. “There will be more jobs and more to pass back to the employees.”
While restaurant owners may be getting a tax cut at the federal level, Roof told Insider that the Kentucky Restaurant Association is always keeping an eye out for proposals to raise permit fees or institute a restaurant-specific tax that would impact the industry.
“We always oppose that,” she said. “We do not believe our industry should be singled out to help a city pay its bills.”