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Many long-standing and beloved restaurants across America have closed this year, and may have more to come, as the skyrocketing cost of essentials continues to weigh heavily on the industry.
Over the past five years, food and labor costs for the average restaurant have increased by 35 percent National Restaurant Association. Meanwhile, the price tag on other essentials like rent, supplies and credit card processing fees is also rising — meaning lower profit margins for already struggling restaurants.
For Mario Magalhaes, whose family owned the popular Miami lunch spot, Las Palmas, the COVID-19 pandemic resulted in a 30 percent loss in customers, many of whom never returned.
Magalhaes said loyal customers who used to come for lunch or a cup of coffee during the work week have disappeared because of remote and hybrid schedules. However, the high cost of food was the last nail in the coffin, leading to the historic joint’s closure last month after 45 years.
“Las Palmas wasn’t pretentious. It was just like the taste of old Miami, and it set itself apart from what was going on all over the country, which I would say was a little copy and paste, rinse and repeat,” Magalhaes, whose father bought the business from a family friend in 2016, tells SELF. Independent.
According to Magalhães, the restaurant ran “like a machine” until the COVID-19 pandemic, causing prices to rise rapidly – without ever returning to normal.
“Maybe three months ago, I noticed an increase in eggs. A box of 15 dozen eggs used to be $20. About three months ago it went up to $132,” Magalhaes said.
Magalhaes said, “Corporations won’t lower their prices if people are used to paying what they’re already paying.”
He added, “Even my wholesalers were more expensive than Whole Foods at times, which sounds weird, but I was comparing prices at multiple places.”
The rising costs of materials – and Magalhães’ strong belief in remaining a simple and affordable neighborhood watering hole – meant that things quickly became so expensive that they became difficult to maintain.
“Las Palmas is a small, 33-seat eatery — casual, good food — I can’t increase the prices by 1,000 percent, especially as a breakfast and lunch place,” Magalhaes said.
While Magalhaes raised prices only slightly over time to try and keep up, he also tried other avenues to maintain business, including organizing community comedy nights with some of the top local comedians.
Despite Magalhães’ best efforts, Las Palmas closed forever on Friday, November 14.
“We know that the cost of food has increased by 38 percent since the pandemic. That’s the national average. Labor costs have increased by 35 percent, and we’ve also seen pretty significant increases in insurance, taxes and everything else,” said Dr. Chad Mottray, chief economist for the National Restaurant Association. Independent.
All-round higher costs have eaten away at the overall profits of many full-service restaurants, leaving the average profit margin at 2.8 percent in 2024, according to Mottrey.
“If you go back five years to 2019, it’s four percent, so you’ve seen some profit loss there,” Moutray said.
The challenges have long plagued restaurant owners, Moutray said, noting that data shows there are still more openings than closings overall.
“Restaurants and really, all businesses have had to deal with one challenge after another,” Moutray said. “In a market where it’s a tough business anyway, I think restaurant operators have found it quite challenging.
Las Palmas, the popular Miami lunch destination, is far from the only beloved restaurant struggling amid the current economic climate. Owners of closed restaurants from across the country are speaking out online about the many factors, including cost, that have led to their businesses closing forever.
Osteria 545, an Italian restaurant in Paulsboro, New Jersey, announced it would be closing its doors on November 17, thanking customers for five years of business.
“In the past year, we have seen a significant change – fewer people are eating out, while the prices of food, alcohol, electricity and other essentials have risen sharply. These increases are much higher than what small, independent restaurants like ours would expect, making this decision both disappointing and necessary. We hung on as long as we could, adjusted menus, tightened budgets and did everything we could to stay afloat. However, margins slipped and the weight grew unsustainable,” the restaurant owner said. Wrote online.
The owners of City Café, a beloved 124-year-old restaurant in Murfreesboro, Tennessee, also revealed online their plans to close.
“We are heartbroken to post this, but this economy has literally broken us,” Teresa and Rollin Kellogg wrote online. according to Tennessean, “We’ve tried hard to stay ahead, but when you try to go out more than you try to come in, it catches up with you.”
Rising rents and greedy landlords have also been an issue for many restaurants trying to stay afloat.
For Dallas, Texas, Meddlesome Moth, a mainstay of 15 years, a new landlord was demanding a 40 percent rent increase, which led to their closing in May, owner and restaurateur Shannon Wynne explained. Independent.
Wynne said, “They realized that the market could afford our rent increases of about 40 percent, and they really ignored the contributions we made to the neighborhood.” According to Wynne, many developers in Dallas’s Design District are currently de-emphasizing more affordable and accessible spaces like Meddlesome Moth in favor of more “high-end” spots.
“We focused on value and flavor and creativity, but you know, the margins aren’t great,” Wynne said. “When rents go up that much, we’re losing money at that point, and we’re not willing to change our concept because of the portfolio aggressiveness of these landlords.”
Mottray, chief economist for the National Restaurant Association, said that although many restaurants are now starting to cater to a higher-spending crowd, most are still just looking to provide quality service.
“You’re certainly seeing restaurants that are serving more upscale consumers and performing relatively well,” Mottray said. “People with money are still spending it.”
Still, Moutray remains cautiously optimistic about the future of the restaurant industry.
“I think 2026 provides some cautious optimism, right? That we’ll see some tailwinds of growth; hopefully, we can reverse some of those traffic trends. You may see some of those cost pressures start to subside a little bit,” Mottrey said. “I think if that happens, hopefully we’ll have a better 2026.”