THREE DAYS A WEEK, Peter Cho is in his small, airy kitchen at Han Oak, plating haute Korean barbecue with just one or two other cooks. One server ferries shio-koji pork belly bo ssam and smoked hangar steak to expectant diners, all of whom paid in advance to eat.
What the dozen or so guests digging into banchan probably don’t know is that Cho’s wife and toddler might be next door—because their space at Northeast Portland’s the Ocean is also their home.
When the Oregon native returned from his time cooking in New York, looking for a place to launch his culinary future in Portland, high rent and little capital stared back at him.
“We’re fortunate to split the cost of rent between our living there and the restaurant,” he says. “It makes sense for us.”
Cho says he quickly realized what every up-and-comer is running into: “There’s way too much talent, there’s way too many restaurants. It’s just hard.”
Cho and other aspiring chef/owners in Portland are increasingly abandoning the idea of opening a traditional restaurant as the city’s costs and competition climb ever higher. Ten years ago, a creative chef could launch her dream with $50,000 and elbow grease. Today, it’s going to cost at least $200,000 to even think about hanging a sign, industry insiders say.
It’s not a coincidence that many of the high-profile openings are well-financed projects from out of state, or a second (or fourth) opening from already established chefs.
Right now, rent in a good, close-in location is commanding $25 to $32 per square foot, says Sara Daley, associate vice president at the Portland commercial real estate firm Kidder Mathews (full disclosure: Daley is married to Mercury Editor in Chief Wm. Steven Humphrey). In 2012, that figure was $18 to $24 per square foot—without taking into account the fact that landlords are typically contributing far less to the cost of outfitting the restaurant space with equipment and other features than they used to.
“In my work, I see tenants over and over again who have just enough to get their doors open, but little to no working capital to withstand slow-growing success,” Daley says. “If you’re not on Eater’s Heatmap, you just might be screwed.”
And the competition is growing ever fiercer. Multnomah County records show that the number of places to grab a bite has exploded. In 2005, there were 2,966 restaurants and food carts in the county. In 2015, preliminary numbers show there were 4,133. And while this growth in restaurants has accompanied a massive influx of people moving into the city, it’s made available spaces scarcer and more expensive—meaning that if you can’t hack it quickly, you’re toast.
St. Jack first opened in 2010 inside a former bar on SE Clinton for $65,000. Since then, chef and co-owner Aaron Barnett has moved his acclaimed restaurant to NW 23rd and opened a second spot, La Moule. He was quick to answer when asked if he thought he could open St. Jack today: “No. I definitely don’t think we could.”
“St. Jack was originally done with such a shoestring budget, I found all the chairs for $10, they were red and beat up and crappy and we spray-painted them black,” Barnett says, adding that touches like mismatched plates or reclaimed wood were done out of necessity. “Today, reclaimed wood is more expensive than real wood. A lot of things that were necessary back in the day, people are charging for as ‘charm.'”
While rising costs, competition, and scarcity have been a factor for a few years, chefs say there are new challenges: namely, the impending minimum wage hike to $14.75 an hour, the new federal requirements to pay overtime to salaried workers who make less than $47,476 a year, and a staggering shortage of line cooks.
Ryan Day, of Podnah’s Pit and La Taq, says he’d be worried trying to open a new restaurant right now, considering that even these two respected establishments are having trouble filling vacancies. He said a vacant line cook job will only bring in a few résumés at a time, and then maybe one of four applicants actually shows up for the interview.
“This is the worst I’ve seen it working and hiring in Portland for 10 years,” Day says. “As far as I know this is happening across the industry. Anytime industry peeps get together this issue will always be part of the conversation.”
Day and others attribute the change to the sheer number of jobs out there; better pay, tips, and hours drawing workers to the front of the house; and to the celebrity myth built up by some culinary schools that being a cook—which is actually a pretty shitty and demanding job—is glamorous.
“They get people who have never worked on a line before with promises and images of becoming the next TV chef,” Day says. “They teach them how to make food, but leave out the real skills of getting in and out of the weeds and consistent repetition.”
The result is a ballooning number of pop-ups, carts, and other low-cost entries into the food scene, like Cho’s hybrid restaurant Han Oak, or Mae, chef Maya Lovelace’s twice-weekly Southern feast run out of the back of Northeast Portland’s Old Salt Marketplace.
Lovelace’s ticketed meals often sell out within minutes of posting, but she says she wouldn’t dream of opening a restaurant right now.
“Pop-ups are the wave of the future, or at least a bridge into a different kind of restaurant industry,” says Lovelace, who spent about $10,000 to bring Mae to life. “Doing fewer services or being open fewer nights means that overtime isn’t an issue… there’s no worry of employees earning time and a half on top of their salaries. Even with higher minimum wages, pop-ups allow chefs to pay their staff well, since general overhead is much lower and operations tend to be smaller.”
Cho, who is 37, says he’s also willing to bide his time before trying to go bigger.
“With the hype machine of the Portland food scene, people can get hot fast, but they can get cold too,” Cho says. “I’m starting off slow. I’d like to fill all the seats we have open now, I’d like to open for service on Sunday and Monday night, until I get to a point where I’m making enough money to hire people. Right now, I’m still bare bones.”
The only labor shortage described in the article is line cooks. There are many people looking for work in this city, the easy solution is to train your own line cooks, which restaurants used to do.
GB1’s Comment above about there being NO LABOR SHORTAGE, however, NO LINE COOK training seems about right. Yet, it begs the question: With all the culinary academies turning out graduates, and not much access to start-up capital available, how low is the pay being offered to line cooks?
Not only can nobody live on $9.25 per hour minimum wage in Po’town, but with the remedy we’ve chosen of phasing in the climb to $15.00 per hour being years away (unlike Seattle, where with the sensible exception of businesses with fewer than 50 employees their $15.00 minimum 4 years ago has created more money circulation on the city’s streets and even the PUGET BUSINESS JOURNAL which cried Cassandra in greeting Socialist Alternative council member Kshama Sawant when she and her fellow labor activists launched the $15.00 NOW! minimum wage movement, the same PUGET BUSINESS JOURNAL went back after 2 years to study the results and headlined their own admission of error in screaming there’d be a mass exodus of locally-owned businesses from Seattle by declaring “APOCALYPSE NOT.”
Moreover, this week’s EAST BAY EXPRESS down in Oakland-Berkeley-Richmond-Albany-El Cerrito-Emeryville etc ran the same scare tactic of floating the ridiculous claim of a LABOR SHORTAGE in explaining why food carts are not the low-overhead remedy to the boombust cycle of commercial real estate markets. THE EB EXPRESS’ reporter Luke Tsai used long-time Oakland food cart and restaurant entrepreneur Gail Lillian as his illustration of why a LABOR SHORTAGE was forcing her to close her popular LIBA FALAFEL food cart. See: http://www.eastbayexpress.com/oakland/li…
I support alternative weeklies that try to broaden coverage, but both the MERCURY & EB EXPRESS could use a BUSINESS section that broadens the discussion of failed local businesses to the wider trends of the 1/10th of 1% that can access capital to start up businesses with asking Kickstarter friends to assume the risk of a new venture. Even the mainstream business community, so slow to recognize the Reagan-Bush-Norquist-Wanniski SUPPLY SIDE HOAX about who creates jobs and who should be able to shift costs & risks to the public while keeping all the profits, even SUPPLY SIDERS are facing the contradiction of cutting costs of LABOR so much over 40 years of Stag-flation on worker wages that DEMAND has dried up because there is no money left for working folks to spend. All those GLOBAL TRADE DEALS never did create a middle class in slave-labor states like Mexico and China so DEMAND has never been made up from where the NIKE’s and other off-shore labor-seekers have gone in shredding the Social Contract and reasonable tariff and trade barriers that once made U.S. internal markets and the growing middle class the envy of the world.
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In Anti-Trust PERP-E-tuity Throughout the Universe
The people who opened restaurants 8-10 years ago, and are now successful, took risks to save money. North Williams was crap, Division was ugly, the West End was not the West End.
All these new, wanna-be restaurateurs are complaining because they are moving to established areas that were once shitholes and wondering why the prices are higher than they used to be… well, they are higher because the place is not a shithole anymore. Here’s an idea: find your own up and coming shithole.
Open on Foster. Open on 72 by Mt. Scott Park. Open in Lents. Open in downtown Milwaukie. Open on Woodstock –east of 52nd. Don’t just follow the trends. Do some demographic trends searches, do real estate searches, and monitor local business journals for trends– find some promising spots.
Then, open the City of Portland zoning map and find commercially zoned parcels in the target areas. There may be a cheap convertable house or older commercial building in one of these zones.Talk to the owners to see if they will lease it to you, then talk to the city to see how much permits and SDCs will cost. You may be to get a great lease deal with great terms on an underutilized property.
If the property is house, you might even be able to live in the converted attic while you start your business or stick a food cart on there and utilize the yard for seating without touching the house when you are just starting out.
Please don’t let restaurant owners who don’t understand Capitalism 101 get away with lazy arguments like “labor shortage.” If there is a shortage of line cooks/restaurant staff, basic economics says you have to either offer higher wages in order to lure workers away from current jobs. Or you go out of business. My guess is that restaurant owners simply want workers to take the low wage on offer and make patrons deal with the wait times. Those who won’t pay higher wages will go under, and that’s probably what they deserve. Also, basic economics says that this is the best way to fight Portland’s housing market price inflation. If workers earn more, they can buy houses and other things and put other people to work through their spending. In this way we can avoid fancy schemes like subsidized housing that don’t really work and which also provide fuel for the 1% to complain about “socialism”.
Sara Dailey was our real estate broker… and our landlord’s. She worked really hard to get us into an overpriced space with a batshit insane landlord in a ‘hot central location,’ We were out of business year one. Yeah, we should have known better… not blaming her… just a cautionary tale: all you idiots going into food – the numbers don’t add up. The only winners are real estate agents like Sara.
Portland certainly needs more restaurants. Make sure the decor is industrial. That’s a sure win.
small players should not be looking for leased space in ‘hot central locations.’ Do you want to complete with Fat Heads, 10Barrel, Marukin, etc? No. Watch the movie Moneyball: your goal is to find unknown/underutilized niches. It will take research and vision.