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Failing restaurants
updated: Sep 18, 2012, 2:39 PM

By Edhat Subscriber

The Snack Shack on State and Paseo Nuevo, 5 months of remodeling, open for business for about a month. Now closed and up for lease. Why are there so many restaurants that don't do their financial and marketing research so they go belly up?

Comments in order of when they were received | (reverse order)

COMMENT 321554	2012-09-18 02:57 PM
Because of so many landlords screwing them. Once they start to make it, they get jacked on their lease.
COMMENT 321556	2012-09-18 03:01 PM
There are any number of reasons why restaurants here fail; the latest is that the cost of food has sky-rocketed. Another way of asking the question is what makes restaurants here succeed? Is it fixed rent or owning the building? Other people's money as out-of-town investors who don't mind breaking even or losing money? Even established restaurants struggle in these times. Finding a way to make it work is almost the exception. I can't afford to dine out as I used to. I often wonder how many restaurants here are laundering money from illegal drug sales. I know it probably isn't many, but probably more than anyone in the business would admit.
COMMENT 321557	2012-09-18 03:01 PM
I think that is a very interesting question and I was wondering the same thing. I really don't like to see anyone go bankrupt and lose a business. I think the restaurant business is so competitive, but if you have a great location and offer excellent food and service there is no reason you shouldn't succeed in a tourist town like SB, but you also have to cater to the locals, they will be the ones who ultimately sustain your business. I think many young people have a dream but don't do the appropriate research or have the background to succeed.
COMMENT 321558P	2012-09-18 03:04 PM
I remember reading years ago that only San Francisco has more restaurant turnover than Santa Barbara.
COMMENT 321560	2012-09-18 03:06 PM
We have a favorite restaurant in Long Beach. While down there we asked the manager why didn't he open another one here, since he has opened a couple more in other places. His answer was that he would never open a restaurant in Santa Barbara...more restaurants fail here than almost anywhere else. He said it was to difficult a venue for a new place.
COMMENT 321561	2012-09-18 03:06 PM
556... why in the world would you make a connection to drug money laundering?? Keeping a successfu restaurant open here in town is very difficult for many many reasons. Rent, market, economy, etc. I myself have been trying to figure out what the "secret" is to the few very successful ones. I think it's good quality food at a good price with EXCEPTIONAL customer service.
COMMENT 321562	2012-09-18 03:08 PM
Want to count the days until Maggie's goes belly up on the corner of State and A? Talk about an over-thought restaurant that has already alienated everyone walking by watching its slow progress into glitzy oblivion. We go to restaurants for food in this town, well-priced for appropriate quality. We don't go to restaurants that put all their money into effect and faux ambiance which we cannot eat and do not need. Get that, LA?
COMMENT 321564	2012-09-18 03:13 PM
Because the creative types of people who open restaurants are not often the detail oriented types of people who are good at bookkeeping. I know a vendor who works with many local restaurants and he is often paid with wads of cash out of the register...money that is likely not properly accounted for at the end of the month. Anyone thinks they can cook something...not everyone has the follow through to own a business.
COMMENT 321565	2012-09-18 03:14 PM
Is this rhetorical? Human nature? They believe themselves? Unaccounted for costs?
COMMENT 321568	2012-09-18 03:21 PM
El Paseo Nuevo tenants have to pay the landlord a percentage of their earnings as well as rent.
COMMENT 321571	2012-09-18 03:22 PM
I have friends that own 3-4 spots here in town - they keep their overhead low and serve great food with a limited menu -He is up at 3:30 every day to get supplies - stocks the kitchens - starts cooking - she starts at 8 am and helps with all aspects of the business - Let me tell you they work hard and make a great living - PS they donate a ton of time and food to local schools and charities - Great people - bottom line - they work 16- 18 hr days -
COMMENT 321575	2012-09-18 03:25 PM
Everything in this town is horrible so we should all move. If it's not the noise, gangs, homeless, wild pit bulls - it's all of the restaurants closing.
COMMENT 321579	2012-09-18 03:30 PM
"Financial and marketing research" isn't exactly a science. How do you factor in the cook having a bad day and an unfavorable reputation starting within the community? How do you predict if something is going to move in nearby and take all your business? If all you had to do was look up data on a chart and expect humans to act in a deterministic way , life would be very different.
COMMENT 321583	2012-09-18 03:48 PM
Marketing and research for a restaurant. Hmm. How to factor in the quality of your cooks, the personalities of your wait staff, plus that distinctive "something" that will make Santa Barbarans come back again and again? We rarely go out to eat anymore. It's just too darn expensive. Even the places that used to be okay, expense-wise, now will cost you (including 20% tip) approx $35-40 per couple. And that's if you drink water only. What Santa Barbara really needs is to bring back "Skandia" buffet and some "Ruth & Rogers" style home-cooking, at a reasonable price. But, ay, there's the rub. Everything costs too much. I doubt if it can be done, and allow the owners to break even.
COMMENT 321586	2012-09-18 03:55 PM
@564 hit one problem on right on the head. I used to do sound for bands back in the 90s who would often play at bars and restaurants in downtown SB and none of the people involved on either side of the job had any business handling money. Whether I was paid by the band or the venue, I was never asked for a receipt. And the venue would usually load me up with more than my fee in food and drink through the night, again with no receipt or record that it was a business expense. I certainly never got 1099'd by any band or venue. Had to keep track of that myself. This is why good bands pay their managers 10% and good restaurant owners pay a lot of money for a good general manager. If you're going to own a business, you must have someone in the company who keeps track of the details.
COMMENT 321589	2012-09-18 04:07 PM
568 - it's very common to pay a percentage of the sales to the landlord in a commercial lease agreement. This arrangement is not unique to Paseo Nuevo. I believe it's called NNN or a triple net lease.
COMMENT 321591	2012-09-18 04:10 PM
@561 I did not mean to suggest, and in fact made it quite clear that I do not in any way attribute, drug money laundering (or outright drug dealing) to success by local restaurants in general. But based on comments I've heard over the decades by many credible sources, yeah, there are restaurants I know of that did or do depend upon or launder drug money and probably many more I don't want to know about that did/do. I was merely speculating on how restaurants manage to stay in business here. It's a super tough business that's getting tougher. Anyone who can pull it off has my respect and admiration. But dining out isn't fun if the food is only average but expensive.
COMMENT 321593	2012-09-18 04:12 PM
Lots of good comments. May I add that sometimes the reason might be it's hard to find 'good' help, that is, people who can concentrate on the job and not on Facebook and the iPhone. A very tight margin business so every detail counts. Santa Barbara has a lot of great restaurants so the competition is stiff. The ones that last offer great food, great service from entrance to exit, and professionalism. Rents are astronomical, especially on State St., and the plethora of empty store fronts attests to the greed fest on the landlords part.
COMMENT 321596	2012-09-18 04:24 PM
If your business does well or you invest in remodeling anywhere near State St. your rent will spike. If your profits don't match your landlords expectations you will go under.
CAPTAIN HALEY	2012-09-18 04:44 PM
Profit margins in the restaurant business typically run between 2 and 6%. Any unexpected or uncontrolled expense can push you into the red. The prep cook slices the meat extra thick, too much food is wasted, an extra waiter is brought in on a night he is not needed, somebody is filching high-end wine...any of these things can spell disaster. It's a tough world out there.
COMMENT 321607	2012-09-18 04:55 PM
@589 that is not a NNN lease. I'm not sure what that would be called. NNN lease means that you pay for everything, taxes, insurance, etc.. but not a cut in your sales.
COMMENT 321608	2012-09-18 04:56 PM
If they got proper financial advise they would never go into business on State St. but everyone wants to be close to the foot traffic and see dollar signs in every footstep that goes by. It takes more than eyeballs and footsteps to break even in the first or even second year. Going under in 30 days, as you say, means they hadn't prepared to go anywhere near that long.
COMMENT 321610	2012-09-18 05:02 PM
They spend too much on construction and are closed for too long during construction. Casablanca, Maggies... tick tick tick.
COMMENT 321614	2012-09-18 05:06 PM
In this economic environment when 400-500 eateries in our area are all competing for a dwindling share of disposable income, a concept embodied in the old "Copper Coffee Pot" would probably succeed. In those days it was frequented mostly by an older crowd, but now many young folks are un or under-employed and need to mind their pennies. Bring back "The Copper Coffee Pot"!
COMMENT 321618	2012-09-18 05:11 PM
Many restaurants in SB have changed. A lot good places we could go with no questions about food quality, cleanliness, and excellent service have really fallen by the wayside. We're eating at home now more than ever because things we experienced in our favorite places shocked us. Come on now, going out to eat is expensive, it's supposed to be enjoyable. I'm not going to pay top dollar to eat questionable quality food in a semi-clean environment, from lazy help who (as one poster stated ) are texting rather than working. Going out to eat has become as enjoyable as air travel-- charge a lot, pack 'em in dirty seats, throw'em peanuts, hustle them out and repeat.
COMMENT 321621	2012-09-18 05:16 PM
Here's a question - How on earth does that flip flop place in Paseo Nuevo near the theatre stay open? Do people really buy that many $30 flip flops?! I hardly see anyone in there, yet they stay open...
COMMENT 321624	2012-09-18 05:25 PM
There's a lot of great food and restaurants and food in town that are reasonably priced where the staff isn't "texting". People need to get outside more. Wow.
COMMENT 321637	2012-09-18 06:33 PM
Old people won't go downtown any more so forget the Copper Coffee Pot. That was when State Street felt safe and the shops downtown were friendly to older people. No more. It is not such a stretch to speculate that restaurants can be used very easily to launder money -- no names mentioned so don't discount the general possibility. Same for weird shops with weird oddly-priced non-standard inventory which can do the same thing. Who is to say what really got sold for what price when it comes to non-standard consumables or immediate spoilage of high-end perishables. Can happen. Just sayin. Some of the more inviting dining options are now found off of State Street downtown, and even in Carpinteria now. Just like before. State Street was never known historically as a dining destination.
COMMENT 321639	2012-09-18 06:40 PM
I always wonder about Derf's they have been there forever yet I never see a crowd they must own the location.
COMMENT 321642P	2012-09-18 06:58 PM
Out of curiosity, what are the restaurants that have survived for at least FIVE years here in SB? Let the list begin!
COMMENT 321643	2012-09-18 07:07 PM
@575, I'm sure you were just being entertaining, but if you are thinking of leaving Santa Barbara and taking a scores of folks with you, I would like to have less competition for a dinner table on Friday nights....... at Opal, The Palace, Beachside Bar Cafe, Ca Dario, Brophy Bros, Paradise Cafe, or Stella Mares. Thank you!
COMMENT 321646	2012-09-18 07:12 PM
621, I don't know, but I have been in there twice in the last year and bought sandals. The only other State street business I've been in is the Habit. And over the year I've probably spent the same at each store. Get it?
COMMENT 321648	2012-09-18 07:13 PM
A rule of thumb, when you're going into the restaurant/food services business, is to have enough money so that you can weather the first year. You cannot depend on income made from your restaurant in that first year. I think that's where a lot of these start-ups get into trouble. What I really miss is the familiarity of dining in a place where you know the owners, the manager, the wait staff. It used to be fun to step into a place, be greeted by name. "Your" table was sometimes awaiting you. Just as an aside, an acquaintance of mine used to be the health inspector for SB restaurants/fast food places. He told me two places you could "eat off the floor" were McDonald's and the California Pizza Kitchen. I wonder if that's still true. Oh. And Copper Coffee Pot was beloved by kids,too. I know. I was one of them. Fresh strawberry pie, oh my.
COMMENT 321665P	2012-09-18 07:45 PM
Commanders Palace has been around for 27 years. Clementines in Carpinteria has had the same owner for the last 30 years and she is 82. Cajun Kitchen and Summerland Beach Cafe have been around for many years. I never can get a table at Brophy Brothers but they have been around a long time. I could go on and on but there are a lot of successful and long time restaurants in the area.
CAPTAIN HALEY	2012-09-18 08:24 PM
I am sorry 665P...where is Commanders Palace? I have eaten at a place by that name in New Orleans, but I don't know of one in Santa Barbara.
COMMENT 321671	2012-09-18 08:30 PM
I wonder if what some are lamenting is a lack of sense of community provided through family-owned affordable neighborhood eating establishments. The lack of these restaurants is also a function of Santa Barbara redevelopment and having less of a sense of place. Dutch Garden, Pepe's in Goleta, Rose Cafe, Arnoldi's are a few places I can think of that still offer that.
COMMENT 321672P	2012-09-18 08:32 PM
Captain Haley, my mistake, brain freeze. I mean't 27 years here for the Palace Grill. Commanders Palace is terrific but it is in the Big Easy. Sorry.
COMMENT 321673	2012-09-18 08:35 PM
The problem is the people who live here. There are two kinds of Santa Barbarans--old people convinced that they can take their Wall Street millions to the grave, and young people who can't afford to eat out.
COMMENT 321680P	2012-09-18 09:12 PM
671 - thank you; good observation. It seems as if more than a few people have had the fantasy of opening a restaurant in Santa Barbara. Often there's been more an emphasis on good looks, instead of good food. Sure we have some good food restaurants here; but we have a lot of mediocre ones too, possibly relying on the tourist market. And it seems we an overabundance of Italian and Mexican restaurants with fairly mediocre food. Sure there are a few other good ethnic restaurants. It is what it is.
COMMENT 321684	2012-09-19 06:25 AM
Simple. The popular ones are taken over by greedy people who, cashing in on the popularity, reputation, excellence and dedicated work of the previous owner, run them down to the ground. Food quality deterioates, inferior cooks ruin the dishes, and every dish begins to tates of chili peppers and garlic overload. Revolving disinterested staff complete the coup de grace.
COMMENT 321689	2012-09-19 06:49 AM
All interesting comments with bits of good wisdom thru-out. As an owner of several restaurants one being in SB and successful for 15 yrs I can tell you that its the passion that brings a lot of people into this business. Good hard working people that might start working for others with the dream of owning their own place one day. Some make it many do not. Our current cost of living is killing this business. Gas/food etc profit margins are slimmer and people are not eating out as much. Its not the fun business it once was and the whole coupon/groupon/internet specials took the profits even lower. Yelp when used honestly has been a great source of new business. All I can say is good luck and glad we are retiring.
ANDY	2012-09-19 06:54 AM
Because like me, many think due diligence is for sissies.
COMMENT 321692	2012-09-19 06:57 AM
although there are a lot of reasons restaurants fail, i think a lot of people have hit the nail on the head when they talk about things being tight financially, and when they do decide to go out to eat, getting mediocre overpriced food with bad service. i'm originally from nyc, people are really demanding there about eating out, if the service is lousy as well as the food, no matter what the price, you are not going to make it in the restaurant business.
COMMENT 321697P	2012-09-19 07:15 AM
689, I think you are on to something. I own several successful biz's in town and certainly have done much research before starting a new biz; BUT, in the end, it always comes down to passion. On paper, none of my businesses were going to make it much past initial financing. I had to really really believe in my idea and follow thru with countless hours and sleepless nights of extremely hard work. Passion carried my successes over the hump, no business plan or bean counter ever did.
FLICKA	2012-09-19 07:36 AM
If the Copper Coffee Pot opened again I think it would make it. Great place, good food. A favorite of my family for generations, from start to closing.
COMMENT 321705	2012-09-19 07:41 AM
#556 - On the other hand, it is refreshing to know people will go bankrupt before breaking the law.
MARJELK	2012-09-19 07:54 AM
Another vote for the Copper Coffee Pot. A cafeteria style place is also good for foreign tourists too because they don't need to speak or read English, they can go down the line, see what they want, and point. It is also quick not having to wait to order and have your food delivered to you, plus getting your bill. There are a lot of buses here for the lunch hour. It seems it would be good for business because of the quick turnover.
COMMENT 321713P	2012-09-19 08:06 AM
I'm surprised that nobody seems to have mentioned the general lack of parking spaces near many restaurant locations. It's hard to draw in enough customers when they can't park near your place.
COMMENT 321724	2012-09-19 08:31 AM
I am actually amazed that more restaurants in SB dont go under. Between mediocre food at fine dining prices and terrible service that wouldn't last a week in SF or NYC, most Sb places survive due to the tourist and conference traffic. And the fact that many people in SB have no clue as to what great food and service really is...
COMMENT 321729	2012-09-19 08:43 AM
we own a successful spot, open for nearly 10 years now. Sales were up 25% last year, and 20% this year. I believe we are successful because: 1) we followed our passion AFTER we got great business experience working for others; 2) we bought our own building, so we can build equity with every rent check and no one can raise rent on us; 3) our employees will be fired after 1 warning if they have their cell phones on them while working 4) one of us is there every day and 5) for the first 5 years, one of us kept a second job so we were not without income during the startup. simple.
TED	2012-09-19 08:44 AM
Supply and demand folks. We have an enormous number of restaurants for the number of people who live here year round, and the number of restaurants we have can only really be supported and make money during the summer. And Santa Barbara locals are notoriously fickle in their tastes. One restaurant will be hot for six months and then a year later be half deserted. Very very tough business. My father managed a 24 hour restaurant in the east with 75 employees - I learned just enough about the business to know never to go into it.
COMMENT 321736P	2012-09-19 09:01 AM
Well, 724, if we Santa Barbarans are such culinary barbarians, maybe you in your greatness and supreme knowledge could open a restaurant with that great food and superb service so that we may become educated.
COMMENT 321746	2012-09-19 09:11 AM
Sadly I have not been out to eat here in a couple of years. There are a couple of reasons, the primary one being financial. Like many others, finances are very tight and eating out went by the wayside. But a second reason is that it just isn't worth it as much as it used to be. While I realize food prices are high and restaurants are having to deal with that plus all related costs, it seems that even higher-end ones are turning to what could be politely termed frozen TV dinners. Take Stella Mare's. The last time I was there that's what I had. Yup, frozen, warmed in the microwave but not warmed sufficiently as the center was still distinctly cold. I paid my bill, didn't bother to talk to the manager about my unhappiness at paying $15 for a TV dinner entree (at lunch), and have never been back. Never will either. If they cannot bother to prepare fresh food then I cannot bother to patronize them. I can do much better at home.
COMMENT 321749	2012-09-19 09:16 AM
729 again. And here are the reasons why, in spite of our success, that we consider EVERY day of closing or selling the business; 1) employees. we have 6 core employees who we trust and are great, but the rest of the spots turnover constantly and it's a tremendous burden and challenge on all of us to keep those spots filled with quality people; 2) in restaurants, there is always something breaking down. We had no idea, but it's incredibly draining and expensive to maintain all the equipment you see in restaurants! 3) it's really exhausting, more than we ever imagined; 4) the profit margins are indeed small and elusive. So, if you open and all of your dreams don't come true, you might indeed find yourselves closing in a blink. It takes great fortitude and CASH to work through the hard times. And it's the regular customers and kind words from them, that ultimately make it worthwhile at the end of the day. We have made some great friends as a result of this (very exhausting) business.
FROGGY3	2012-09-19 09:19 AM
Add to the list of local favorites that's been around a long time -- Max's on Upper State St, open 28 years every day for breakfast & lunch. Clearly they are doing something right. The owner does know the names of all her regulars (of which there are many). What is challenging is trying to get the dinner crowd there for fine dining Italian when the place transforms into Max's Cucina. Business is slowly building, but it's definitely a tough nut to crack in that area & in this economy. But I believe there's hope for any place that offers good food at fair prices with excellent service.
COMMENT 321758P	2012-09-19 09:30 AM
In a drive to lower costs, many restaurants buy pre-prepped foods from Sysco, etc. Stuff from the freezer or a can never tastes all that great. Better to stick with more simple foods prepared from fresh local ingredients.
COMMENT 321759	2012-09-19 09:32 AM
Why the criticism of Maggie's? Have you eaten there? We did last week and it was fabulous! At least try the place before shouting it down.
RICHBUSYWOMAN	2012-09-19 09:49 AM
Hey, to those posters who are successful (but struggling) restaurant owners, why be secretive? Tell us who you are so we can come and help you continue to be successful!!!!!
COMMENT 321772	2012-09-19 10:06 AM
To name a couple more restaurants that have not only been in business for many years successfully, but serve delicious, healthy, local food at a very reasonable price and large portions.....The Natural and Soujourner. The two best restaurants in town for all the above reasons and the only two I will eat at in SB.
COMMENT 321778	2012-09-19 10:28 AM
Restaurant ts fail usually because the owner lacks experience. An experienced owner will do careful market research and not just open any type of food at any location. That decision will be well thought out. And the ambiance will be well thought out. The pricing will be well thought out. And they will be well funded. And they will hire great staff. And they will be hands-on with endless enthusiasm to keep it going. You need to do all that to even have a chance. The safest way to open a restaurant is to start with a hole-in-the-wall away from State Street real estate prices and, if you can successfully build a following, expand. Think Arigato and Tupelo Junction. On the subject of Maggie's, they appear to have done no market research at all. They dreamed and built in a bubble. The owners are not marketing it because they don't yet want crowds. They don't realize that the word is out and no crowds are coming. Maggie's is Couchez all over again.
COMMENT 321783	2012-09-19 10:47 AM
Richbusinesswoman: the purpose of my posts (729 & 749) was not to be secretive or to drive business but to offer some insight to the original question. On another rant (sorry,) until you've run one, it's impossible to offer quality critique. For everyone who says, "just" hire great employees and "just" offer great service, I say, YOU try it. It's not easy, in a small town like SB, to find and retain quality personnel. EVERY restaurateur (yes I looked up the spelling) that I know laments the impossibility of our labor pool as the worst part of the business. Thanks all for listening, I'm done for now! I have a business to run! ha.
COMMENT 321804	2012-09-19 11:40 AM
All good comments, but I'll also add resturant crowds are also very fickle! - Any establishment enjoying popularity and "trendy" crowds, lines, good write-ups and reviews can easily decline and turn into a ghost town within 2 months, and wonder why. Usually it's the fault of the buisness (bad management) but crowds can shun a business for no discernable reason other than "its no lonoger popular...." -I'd rather run a business based on "boring" food and good service rather than anything "trendy" and avoid the worry!
COMMENT 321838	2012-09-19 12:38 PM
Everyone wants to own a restaurant but almost no one wants to run one........because it is mostly difficult, frustrating work (which true restaurantuers LOVE Love Love...) Too much ego, not enough thought about who your customer will be, what they will enjoy......So many places spend too much just to open - some of the chairs you sit in cost over 200. each! How do you ever recover $200,000. in marble floors, wall finishes and carpets, 20,000 in chairs...Maggie's, Casablanca, Cadiz.....how many margarita's, plates of pasta and grilled halibut do you have to sell to recoup that expense..and pay your staff, buy quality food, pay your bills and on and on and on.....
COMMENT 321853	2012-09-19 12:57 PM
I read some reviews of Maggie's. Don't think I'll bother. Beet salads just don't do it for me. And one more restaurant with a reported attitude problem. Just what we need in this town, Orange County North. I hope the owners have enough friends to keep the buzz going online before it starts looking suspicious because they stumbled on yelp at the starting gate and demanded a recount.
COMMENT 321854P	2012-09-19 01:01 PM
Everyone talking about the Copper Coffe Pot...it's ironic because Aldo's, now in its spot, has been there forever and only changed hands once. I don't know the new owner, but the last one, Mark, was ALWAYS there and got to know MANY of his customers, including me, by name. And the food was good. The same was true of the Presidio Cafe, next to the Main Post Office for about ten years, until their landlord refused to renew their lease. Wonderful couple - there ALL the time; husband in the kitchen, and wife out front.
COMMENT 321870	2012-09-19 01:37 PM
Maggie's owners are not in it for the money. Think they just wanted a nice place for their daughter's wedding reception. It gave them something to do for a while. Expect it to close soon.
COMMENT 321903P	2012-09-19 03:17 PM
Have enjoyed many entrees at Stella Mare's over the years; the staff are always hospitable. Food has never been undercooked. Decent value and quiet, easy parking, will be there tomorrow.

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