From fancy Black Dirt to Chuy’s Tex-Mex. Why are so many KC area restaurants closing?
James Beard-nominated chef Jonathan Justus drew customers from across the metro to downtown Smithville for his “farm-to-table, nose-to-tail” menu at Justus Drugstore.
So when he opened Black Dirt south of the Country Club Plaza — with lower prices on the menu — it was expected to become an even bigger success.
But in late October, less than two years after opening the restaurant, Justus announced that it would close in early November, calling it a “difficult decision.”
“Ultimately it was a business decision,” he said in a statement.
Black Dirt’s closing is just one notable example in a rash of high-profile restaurants that have shuttered locally in recent weeks — from mom-and-pops to powerhouse chains.
Hometown favorite Stroud’s recently closed in Fairway after more than a decade. Broadway Deli closed in the Crossroads and Krokstrom Scandinavian Comfort Food in midtown. Ruby Tuesday in North Kansas City and Tex-Mex chain Chuy’s in Olathe turned out the lights. And the Plaza filed a lawsuit for back rent and possession of Fred P. Ott’s after more than 40 years there.
Another sign of struggle is the number of bankruptcy filings by the owners of popular restaurants. Most remain open as their parent companies reorganize.
Two filings within days of each other involved several Kansas City mainstays. One was by the parent company of Houlihan’s, J. Gilbert’s Wood-Fired Steaks & Seafood and Bristol. The other was the fast-growing Bread & Butter Concepts — owner of Gram & Dun, Stock Hill a Kansas City Steakhouse and Urban Table, restaurants located in some of the metro’s top dining destinations. Bread & Butter closed The Oliver on the Plaza, saying ”it didn’t perform to our standards.”
So what’s going on?
Several factors have hampered the industry here and nationally, including rising food and labor costs as well as skyrocketing rents. But the recent closures also highlight another truth:
“There probably are too many restaurants out there. Expect to see additional closings,” said R.J. Hottovy, senior retail and restaurant analyst for Morningstar. “2020 is going to be a tough year for restaurants.”
Still, new restaurants continue to open and more local ones are planned for 2020. Owners and industry experts think the market is adjusting to consumers’ changing habits.
While customer traffic overall is expected to be flat again next year, traffic in the fast food segment is expected to grow 2 percent.
According to market research firm Technomic, restaurants per capita are up 15 percent since 2001. But they now have to compete with new food service segments such as food halls and the growing array of ready-to-eat food options offered by convenience and grocery stores. Commissions from third-party services like Uber Eats cut into restaurant profits and starve operators of in-house liquor sales.
Some customers may be put off by rising prices. The average check amount has gone up 14 percent in the last five years, according to David Portalatin, vice president, food industry adviser with the NPD Group.
Bill Teel, executive director of the Greater Kansas City Restaurant Association, said the most recent closures may have been high profile, but he doesn’t think they point to any weaknesses in the ever-evolving restaurant scene.
“I know there’s been a little spate of activity, but I don’t have a sense that there’s a sudden downturn in the restaurant industry in Kansas City,” he said. “I think a lot these just happened to come at the same time.”
Indeed, each month The Kansas City Star’s update on restaurants lists significantly more openings than closings: Overall, about 250 restaurants opened in the last 12 months and about 75 closed.
“It’s kind of interesting,” Teel said. “The number of restaurants opening is increasing and the number of closures is decreasing.”
But the National Restaurant Association projects that competition for customers will only intensify in the coming decade as labor and real estate costs continue to increase.
Teel said the restaurant industry grows more competitive by the month. He pointed to the growing popularity of ethnic food options like pho and poke and buzzy concepts like Hawaiian Bros Island Grill, which is expanding to North Kansas City soon.
“As you get more competition there’s going to be some fallout. We have seen more restaurants opening in Kansas City — new concepts, new cuisines, lots of interesting stuff,” he said. “So I think that affects some of the older concepts that just haven’t kept up to date.”
But Kansas Citians have kept many local favorites going for decades, said Jasper Mirabile Jr., owner of Jasper’s Restaurant in south Kansas City.
Just look at the longevity of places like Arthur Bryant’s Barbeque and Independence’s 100-year-old Dixon’s Famous Chili, a favorite of President Harry S. Truman. At Jasper’s, he estimates about 60% of the customers eating ravioli or antipasti on any given night are repeat diners.
“There’s still a place for some of these modern places that open up,” he said. “But I think most people stick with the basics.”
He thinks the market has been flooded with out-of-town chains. They frequently steal customers from local restaurants, but often don’t persist in the market, he said.
While he’s not surprised that so many restaurants have closed, Mirabile says the timing has turned heads in the industry. It’s unusual to see closures in the fall, he said, as even struggling restaurant operators generally hold out to capitalize on the busy holiday season.
“I’ve been waiting for this. I told my brother a month ago I hate to see what’s going to happen in January,” he said. “And it came a little earlier than we thought.”
The need to stand out
The ever-expanding inventory of restaurants has started to chip away at some of Kansas City’s favorites, said Robert Joseph, a founder and partner in Banksia, an Australian inspired concept downtown. And the competition is fierce.
“You have to differentiate, well, everything. The architecture, the menu. It needs to be a place that the modern diner sees as an Instagrammable,” he said. “The cookie-cutter strip mall restaurants are challenged.”
Still, Joseph and his partners plan to open another Banksia, as well as the new concept Duck & Roll, in two former restaurant spots in the 4800 Main building south of the Plaza.
He said recently closed restaurants weren’t necessarily poorly operated. Owners face “excessive rent,” he said, with limited tenant incentives and construction allowances that restaurateurs have come to expect.
“On top of that with so many restaurants opening — one a week? — you really have to have a level of excellence, more than just the location. Cool, friendly, hip establishments and food to match that,” he said.
Joseph is negotiating a lease at a new Overland Park development and said he “dropped his jaw” at the rent he was quoted.
“Some places are charging the rents of a big city, $60 a square foot, but my price points are in general 30 percent less than they would be in a big city,” he said.
Joseph said chains will always have an advantage over locally owned restaurants — making up profits at struggling locations with highly profitable spots.
“But with the local, every single one has to be a stand-alone success,” he said.
Yet chains haven’t been entirely spared.
Salty Iguana Mexican Restaurant just downsized an Olathe restaurant and shuttered an outpost in Overland Park in early November.
“The fast-casual market has dramatically changed,” Bailey Chandler, spokeswoman for the company and daughter of founder Dan Chandler, recently told The Star. “You don’t see restaurants opening at our size anymore.”
The local chain left the Overland Park store after a decade because it couldn’t be downsized. Though the restaurants have struggled, Chandler said Salty Iguana’s to-go, catering and food truck businesses continued to grow. The brand, which first opened in Prairie Village in 1992, has also revived its menus with new items like Carne Asada Fries and vegan-friendly, plant-based proteins.
“We are making decisions that will allow us to stay in the market another 27 years,” Chandler said.
The labor challenge
Chef Ryan Brazeal feels fortunate to enjoy a steady stream of customers at his Novel restaurant in the Crossroads Arts District. He started the concept in 2013 but brought the restaurant to its current location last year.
“If we hadn’t established ourselves, I don’t think we’d get off the ground in this market,” he said.
Brazeal keeps a close eye on local restaurant activity.
“I don’t think it’s just Kansas City,” he said. “It’s a tough industry and things are changing.”
A major challenge facing restaurateurs nowadays is a shortage of labor. As the unemployment rate in Kansas City continues to dip, he said, he’s had to raise wages by as much as 40 percent to hire and hold onto his staff.
When he has an opening, he said it’s rare that a potential employee shows up. The last time he had to hire a dishwasher, it took two months to find someone. He hired 10 people over that time. Six of them never showed up for the first day of work. Three of them worked less than three days.
Newly opened restaurants will usually enjoy a honeymoon period as foodies come to taste what’s new or trending, Brazeal said. But that initial buzz isn’t enough to sustain a restaurant. So he’s worked hard to offer value on the menu, focus on more straightforward rather than esoteric dishes, and get to know his regulars.
“You’ve got to get them to come back,” Brazeal said. “That’s the hard part in a market this small with this many restaurants.”
This story was originally published November 29, 2019 at 5:00 AM.
