Chef Ramiro Alarcon
Chef Ramiro Alarcon of Cielito Lindo Mexican Gastronomy, Sacramento, California.
By Ed Avis
What is an independent Mexican restaurant today? The average independent Mexican restaurant in the United States serves lunch and dinner, offers take-out, has sales between $500,000 and $1 million, has an average check size of $10 to $15, and has been open at least 5 years.
That “average” restaurant has enjoyed stronger business overall in 2015, including increased alcohol sales. But the owner of that restaurant is worried about increasing labor and food costs.
“It’s a chess game every day,” says Robert Mercado, owner of Viva Mercados Mexican Bar and Grill in Las Vegas. “You have to mold yourself to the times and circumstances. I’ve been in the business since I was 14 years old,” says the 60-year-old Mercado, who was born in Mexico City and came to the United States when he was five.
The bottom line? The Mexican restaurant industry is strong and growing in the United States, with alcohol sales an especially strong area. But like all independent Mexican restaurant owners, Mexican restaurant own- ers work on tight margins that are under constant pressure from food and labor costs. The future is bright, but navigating a clear path to a successful future is not always easy.
The Positive Signs
The Mexican restaurant industry in the United States has a lot going for it. It is large—after excluding 50-plus-unit chains, our data show that there are about 47,000 Mexican restaurant loca- tions across the country. The majority of these locations—about 45,000—are run by small operators, each with just one to nine locations.
These restaurants vary widely, from quick service taco shops to fine restaurants. But 69 percent of these restaurants are considered “traditional,” which means they are typical family-style restaurants with table service. This is the kind of place many Americans go when they want a delicious, affordable Mexican meal in a comfortable atmosphere.
A September 2015 reader survey conducted by el Restaurante shows that 2015 has been better than 2014 for most of these restaurants. Overall, 58 percent say their business is up and 28 percent say it is about the same as last year.
However, the news is not great for all operators: 14 percent report that business has slowed in 2014.
Alcohol sales are a high point for these restaurants. About 75 percent of the respondents sell alcohol, and of those, 62 percent report increased sales so far this year. About 32 report that sales have remained the same, and only 6 percent report a decline in alcohol sales.
The Top Concerns: Labor and Food Costs
Sales are up in 2015, but costs are up, too. For example, 86 percent of survey respondents say their labor costs are up in 2015. Increases in the minimum wage are the main reason for that increase, and potential additional increases are a major concern.
“For example, I hire a host person or a bus person at $7.25 to start,” says Jim Urdiales, owner and chef of Mestizo Louisana Mexican Cuisine in Baton Rouge, La. “I hire a dish person at $9 to start. I have people who have been with me more than five years and earn around $11 to $14 an hour. If I was suddenly forced to hire all employees at $10 or $15 an hour, the employees at a higher rate will expect an increase higher than the starting rate according to that increase.”
Food costs have increased for all restaurants this year, but Mexican restaurants typically serve a lot of protein, and those costs jumped especially high. Sixty-nine percent of el Restaurante readers say food costs are up in 2015.
“Steak was the food that increased most for us,” says Brian Malinowski, director of operations for Carbon Live Fire Mexican Grill in Chicago. “It went up roughly 30 percent in a one-year time period. We are just now starting to see some relief after over two years of inflated prices.”
How have Mexican restaurants responded? Many raised prices, and that has affected business in some cases.
“We did see a shift of people ordering the less expensive items, and some customers who only came for the steak stopped ordering, or ordered less frequently,” Malinowski says. “While it is difficult to pinpoint exactly how much of an impact it had, we do believe it has had a negative impact on our business.”
In other cases, customers have not complained. Mi Casa Mexican Grill in Appleton, Wisc. raised some menu prices when meat, eggs, and some vegetable prices jumped, but it did not affect business. “I have not heard one complaint, nor has anyone even mentioned it,” says Mi Casa owner Michael Whiting.
The Future
Serving more customers in the year ahead, of course, is most Mexican restaurant owners’ goal. During the interviews el Restaurante conducted to follow up on the survey, several readers offered advice:
“We should have passion for the food, for the Mexican concepts,” says César Hernandez, manager of Besito Mexican Restaurant in Huntington, N.Y. “Most American people already know the common Mexican dishes. We should innovate, and bring new authentic recipes never seen around here, dishes that come from our Mexican towns and that the Americans do not yet know about.”
Chef Ramiro Alarcon of Cielito Lindo Mexican Gastronomy in Sacramento, Calif. echoes that advice: “We should research our Mexican cuisine to give variety to our customers. The American customer pays warmly for food that is good and novel.”
Hopefully, more American customers will be paying warmly in the coming year. Stay tuned to el Restaurante magazine for further data and trends in future issues.
Ed Avis is the publisher of el Restaurante magazine. He welcomes questions about the Mexican/Latin restaurant industry via email at edavis@restmex.com. Avis was assisted in reporting for this article by Jorge Rennella, who is el Restaurante’s advertising representative for Spanish-speaking accounts. Jorge can be reached at jorge@restmex.com. Much of the data for this article and the accompanying charts came from CHD expert, which provides deep data about the restaurant industry. Contact CHD expert at http://www.chd-expert.com/.
About the Data: The data in this article was compiled from four primary sources: el Restaurante subscriber information; a survey of el Restaurante readers conducted in September; subsequent phone interviews with some survey respondents; and a mountain of data about Mexican restaurants across the United States compiled by CHD expert, a company that compiles data about restaurants. The data is all about Mexican restaurants that are independently owned—only companies with 50 or fewer locations were included. That means Taco Bell, Chipotle, and all of the other large chains were excluded.