EDITOR'S NOTE: This is the final installment of interviews in which LehighValleyNews.com recently spoke to restaurant owners who were candid about the struggles the industry is facing, including inflation, labor challenges and more, including one area that has borne the brunt of the changes. Read the full story HERE.
EASTON, Pa. — As the restaurant industry grapples with profitability, some restaurant owners say they remain cautiously optimistic about the year ahead.
Juan Martinez is among those people.
He said he understands that average food costs have increased more than 20% and average wages more than 30% from 2019 — both affecting his bottom line.
But Martinez said his Don Juan Mex Grill locations are mostly going strong, thanks to investments in technology to enhance customer experience, making ordering and paying easier and faster.
To further fuel customer retention, he said he also focuses on loyalty and rewards programs and much more.
Here are his thoughts on a range of subjects, with his responses edited for length and clarity.
Q: Even as restaurant owners continue to struggle with high food costs, inflation, staffing and more, the word of the year from the National Restaurant Association is “resilient.” What are you experiencing and what are your thoughts going forward, as far as the state of the restaurant scene in the Lehigh Valley?
Martinez: “As far as the industry goes, those of us who are still here after COVID, we have nothing but optimism ahead of us. Those who were able to survive all the challenges and COVID are still here. That big hurdle — we’re over that.
“But one of the things that the industry continues to face right now is higher costs of credit card fees. That's one of the biggest expenses as a restaurant owner that we see. The fees that are charged, compared to if you go overseas, are night and day. So overcoming that.
“Another one is tip credit. In the restaurant industry, some of the different states are getting rid of tip credit, which is a big help for operators across the country. But for a restaurant like myself, we are fast casual, so we’re not impacted by it. But for other food service operators, if they get rid of tip credit it’s going to kill their business model.”
Q: Can you elaborate on that a bit more?
Martinez: “Servers come in because of the flexibilities that the restaurant industry offers, and they love working and earning their tips. At a busy restaurant, a server who comes in and even though it's $2.75 per hour minimum wage for a server, they end up making $35 or $40 an hour on a busy Friday, you know, for them to lose the tip credit.
“Now you tell this person, 'Guess what? You're no longer gonna make this, but we're gonna pay you $15 an hour.' You're taking money away. So that's one thing that is pressing for not only operators, but for the people, the servers that depend on that, and they only have a three- or four-hour commitment. They are going to make under $50 in that short shift. So getting rid of tip credit, it's actually hurting."
Q: Another thing is that food costs continue to rise. The report from the National Restaurant Association said it’s about 25% across the board, compared with the previous year. Is that accurate?
Martinez: “Yeah. You can only charge so much for the products and sell until you price yourself out. And the customers say, ‘You know what, we're not going out. Things are too expensive.’
“So that's something that we're fighting to see done in D.C., with legislators to kind of have better control out of that. The supply chain has gotten a lot better since COVID. That was terrible. But now, it's getting better, but we're still facing challenges with supply chains across the nation. Not only in the Lehigh Valley, but everywhere.”
Q: Across the Lehigh Valley, it seems restaurant owners are altering their menus based on things that aren’t available, but customers don’t understand why the thing on the menu they really loved has changed.
Martinez: “You're seeing more and more of that, when you go to Giant and Weis, you're seeing more of their label compared to the different kinds of products that they used to carry, because it's not available.
“Now, combine this with the fact that consumers are a little more conscious of how they spend their money. We have seen customers who love coming to our restaurant, however, now they're on a budget, more so than ever.
“We had a customer who said, ‘It’s not like we don’t like the food, we love you. However, instead of going out four times a month, we're only doing it once because things are out of hand.’
“It’s a big reality of our current economy, right? When I go to the supermarket I come out with three bags of groceries and it’s $100.”
Q: Do you have confidence that will turn around at some point?
Martinez: “Consumers still like to go out. Consumers still like the flexibility and the convenience of stopping at a restaurant, especially if they're running around with the kids and busy all day. The last thing they want to do is go home and cook, so that's never going to go away.
“Right now it's just looking forward to overcoming the current economic situation that we're facing with high inflation costs, high food costs, labor costs. Eventually, everything is going to level out and [we’ll] go about our business and good times will come.
“Again, bad times will come and this is the ebb and flow though it. As a business owner, you have to prepare.”
Q: You have a background that seems like it really helped you figure out the business end of things to keep going. You’re a graduate of the Walt Disney Leadership and Hospitality College program. After college, you focused on the banking industry. How much did all of it help to get you where you are now?
Martinez: “My background from the business perspective, from a business point of view, my job is to manage the things that I could control, OK? And that is how much food I buy, as a percentage of sale, and how my labor is. How can I best control my labor based on the current demand?
"And I think we do a good job by keeping an eye on demand, and adjusting, and adjusting our inventory counts on a daily weekly basis. So even though, you know, some weeks profit might slow down, we're still able to make a profit. There are some operators that don't do that. And those are the ones that get in big trouble.
“We’ve been disciplined for years to manage what we call prime costs. These are the things that we can control. You know, we cannot control if a compressor breaks down, we cannot control if our taxes go up, we cannot control if the price of electricity goes up. But we can control our prime costs.
"And the better that an operator could control their prime costs, the better the chances that they could be here for the long term. You keep a close eye. Otherwise, we wouldn't be here. Even in good times, you’ve got to keep a close eye on those things, because when it’s not and the bad times come, you're able to weather through it. That's kind of my philosophy.”
“We all have different processes. You have internal processes, you have financial processes, you have people processes. You hopefully have a good understanding of resources and where to put your energy, you know, making sure that you're being responsible, and managing all of those financial resources, people resources, to be the best that you can.”
Q: So in terms of where you are now as compared to when you first broke into the industry, you seem pretty optimistic.
Martinez: There's this saying in Latin America that the devil is not bad because a devil is bad, but because he’s old and he's seen a lot. You make mistakes, you fall, you learn, you fall again, as you continue to learn on the job you start to see patterns. The older you get in the industry, the more knowledge you have, so when things come at you, you might have to adjust here and there. But now you have knowledge.
“You know, I'm not at work, I don't work. I'm doing what I love. I'm passionate about hospitality and I’m passionate about what I do.”
Q: Data from the National Restaurant Association shows customers prefer establishments that offer loyalty rewards and things like that. How do you meet customers where they are and how often do you change things up to try and get people in the door?
Martinez: “We're here for the customer. You have to meet with a customer right where they're going to be, and as a business owner, you're always looking for ways to add more value for the customer.
"Rewards, loyalty points, you know, that does something big and our customers expect that and they love that. They use their points and we send out birthday gifts to them. Every time they come in, and they put in their phone number they get a reward.
"And there's also another interesting trend that's happening. That is back in the days when you read a book, you went to the library. Well, now, you go into Instagram and you see the stories from people all over the world and interesting food, interesting posts from people that travel, so the new generation is seeing those things.
"I don't want to be everything for everybody. You know, we specialize in bringing Latin, Latin-inspired foods, that's what we do. I'm not trying to be, you know, a five-star restaurant, but there's a large part of the population that might be attracted to what we do, and that's my customer base.
"You know, most people have never tried it, and they try it. And then engaging in social media, being out there posting, you know, telling our story. This is what we do, this is what we're all about."
Q: What has it been like to try and attract and retain employees?
Martinez: “One of the biggest things that I foresaw was issues with the labor in America [and that] a lot of people are going to go more toward technology. And the newer generation, you know, they don't feel like doing the manual labor and entry-level. So one of the things that we did right before the pandemic, we invested in self-service kiosks, online ordering and a mobile platform. So that has helped us tremendously.
“We run a very limited, very lean restaurant in comparison to somebody who has a full-service restaurant. You know, I like that, but the people we do have here, most of them have been with us for a long time. We do weekly training and we’re always presenting new information on food safety, customer retention, customer service, all that stuff, so they understand how what they do impacts customers.
“I think our consistency and our commitment to doing that kept us where we are in the market. We just did an update to our menu to offer more value to customers. We've been getting a lot of positive feedback.”
Q: So overall, you’re excited for the future?
Martinez: “I'm excited. More customers are coming out. More supportive people want to dine out. People want to go out to eat, people like to go out. There are a lot of busy professionals, and we live in the United States where we’re like, ‘Go, go, go!’
"So the restaurant industry is essential to our culture, and I don't see it going anywhere. Operators just need to adjust to the ways society is evolving, and I feel most confident.
“We’re looking to open one new location by the end of the year. But restaurant owners are downsizing, making and developing smaller locations. Even the national guys are doing a new prototype, where their stores are half the size of what they used to be.
"And that’s the trend. That’s where the industry is going and I don't see it changing anytime soon.”
Read our interview with Blended Bar + Grill owner Eric Cutting HERE.
Read our interview with Fegley's Brew Works owner Jeff Fegley HERE
