Why are so many Sac restaurants shutting down?
On the surface, the scene looks like an idyllic snapshot of brunch time in downtown Sacramento.
It’s a recent Saturday morning at Jim-Denny’s Diner, where servers carry Frisbee-sized pancakes to its sunny and crowded patio. Inside, the 10-seat counter remains packed and chatty while onions and burgers sizzle on a tiny grill. The line snakes out the door and down 12th Street.
But it all goes down bittersweet. Jim-Denny’s Diner is in its final days, with plans to close for good on Feb. 2 after 85 years in business. What smarts even more is how much scenes like this are being replicated these days in Sacramento.
Danielle McCune, co-owner of Jim-Denny’s, sometimes holds back tears as the restaurant’s final closure inches near. She and her family took over the landmark eatery about a decade ago, the fifth family to carry on this iconic Sacramento brand that was founded when Franklin D. Roosevelt was president.
“I’m trying not to cry,” McCune said by phone after a recent lunch rush. “All my kids grew up there and I’m trying to tell them what to do now. Our whole life was Jim-Denny’s. We never saw this coming until December.”
Starting in the final weeks of 2019, Sacramento has witnessed a dramatic wave of restaurants closing or announcing their impending shutdown. At one point, headlines blared “bloodbath” as the toll hit 10 restaurants in less than two weeks. The list includes such beloved legacy spots such as Jim-Denny’s Diner, Original Perry’s and Café Marika. New-school restaurants weren’t spared either, including Hot Italian, The Press Bistro and Mother, the Michelin-honored vegetarian restaurant.
Local restaurateurs are spooked, wondering if Sacramento’s food bubble has burst. Customers wonder what’s becoming of Sacramento as the industry in “America’s Farm-To-Fork Capital” seems to be going fallow.
Or maybe restaurants have been drenched in a perfect storm of business challenges, as costs continue to increase from a higher minimum wage, rent and food—all while trying to survive on razor-thin profit margins.
McCune said the property owner was planning to double their rent. The nearby Sacramento Convention Center is closed for renovations until November, which cut the diner’s tourist business.
Jim-Denny’s Diner was done.
“All I can say is thanks for the love and support, and keeping us there as long as we were,” McCune said.
Remember a decade ago, when a Golden Age of restaurants and culinary culture emerged across the country? Sacramento was no exception.
Local chefs became celebrities, while a rush of new places catered to just about every taste. Whether it was sushi, vegan dishes, high-end tweezer food or a gigantic burger, Sacramento had it covered.
Rodney Blackwell remembers those salad days, when food bloggers scurried to the latest openings and new foodie events were born.
In 2012, on the heels of his successful “Burger Junkies” blog, Blackwell founded the Sacramento Burger Battle. This all-you-can-grub event for charity now draws upwards of 1,000 people each year.
“For me, it was exciting because it was all new to me,” he said about the early 2010s. “I had just discovered an app called Foodspotting. That’s where I found all the restaurants downtown and saw where people were eating. They were different than the usual upscale places. They were diverse and cool and it was fun to see it all grow.”
Then, it all seemed to change in the final weeks of the decade.
Fat City Bar & Café in Old Sacramento closed in November after 43 years of business. Original Perry’s, the beloved South Sacramento diner, announced its closure in December after a half century, citing slowing business and rising rents. Hot Italian, the Midtown pizza staple, closed on Dec. 29 following ownership disputes.
New Year’s Eve was especially grim. As 2020 approached, Mother, Sail Inn Grotto & Bar in West Sacramento and The Press Bistro all served their final customers and prepared to shut down for good.
The closures didn’t stop. In January, Café Marika’s owners announced they were retiring after serving Hungarian food for three decades. Jim Denny’s-Diner and Café Rolle, the French sandwich shop in East Sacramento, announced their own closures. By the end of the month, Gogi’s Korean BBQ near the State Capitol was also done.
Local restaurant owners such as Simon DeVere White had worried about a downturn like this. Along with his brother, Henry DeVere White, the family oversees De Vere’s Irish Pub locations in downtown Sacramento and Davis, along with The Snug bar at 15th and R streets.
They’ve seen the times get tighter all around Sacramento’s restaurant industry, neighborhood diners and white-tablecloth eateries alike.
“I think this is the tip of the iceberg,” Simon DeVere White said. “We’re going to see a lot more restaurants close this year. It’s not just one thing. Minimum wage is not the reason restaurants are closing. It’s part of it. But it’s part of a larger issue and problem. It’s really hard right now with the costs of doing business being so high and every year going higher and higher.”
But like all industries, there will be good times and big downturns. The Great Recession of 2008 also led to a wave of local restaurant closures.
The opening of the Golden 1 Center in 2016 was supposed to be a boon for downtown restaurants. Several new eateries opened in anticipation. But it’s proven to be an especially tricky area to do business, said Brenda Miller, a TRI Commercial vice president who specializes in leasing restaurant space. The cost of leases, tough competition and light traffic on non-event nights are a triple-whammy for restaurant owners.
“There was new development on K Street in front of the entrance that still is not totally complete, and because of cost of construction and the excitement, the rates were very high,” Miller said.
The bottom line
The truth is most restaurants are lucky to make it in the long haul. Restaurants tend to run on the slimmest of profit margins, often between 3% and 5%. So even the slightest of overhead increases can do significant damage to a restaurant’s bottom line.
DeVere White says the minimum wage increase to $13 an hour as of Jan. 1 means “thousands of dollars” of increased costs. When wages rise, so do workers’ compensation and payroll taxes. And that’s on top of spiking food costs and rents.
“Every year, everything goes up,” DeVere White said. “Whether you own a restaurant or not, you go to the grocery store and realize that carton of milk used to be $2.99 and now it’s $4.99. It’s no different for us.”
“A lot of restaurants are trying to do more with less,” he added. “You might not have a hostess or food runner like you used to. Do you just keep one server on the floor? We all know how quickly that can backfire.”
Or owners opt to shut down.
The uptick in restaurant closures isn’t limited to Sacramento. According to SFGate, which crunched numbers from Yelp and other sources, more than 400 restaurants closed in San Francisco during 2019. Restaurateurs took their complaints to City Hall in September, raising such issues as high rents, labor costs and other factors they said were crippling the local industry.
The California Restaurant Association has kept a close watch. Based in downtown Sacramento, just a few blocks from Jim-Denny’s Diner, the association advocates for the state’s nearly $82 billion restaurant industry.
“If policymakers don’t find a solution that helps both workers and small businesses thrive, more family-owned restaurants will close and more working people will lose a shot at a first job,” an association spokesperson said in a statement to SN&R.
Like San Francisco, the issue of spiking rents remains a key concern for Sacramento restaurants. According to TRI Commercial, a property management company that collects real estate data in Sacramento and other cities, retail leases have in Midtown and downtown more than doubled over the past decade, from $1.39 per square foot in 2009 to $2.26 in 2019.
Want to open a restaurant in Downtown Commons or near the Golden 1 Center? Those leases can jump to $3.50 to $4 per square foot.
These figures also don’t account for “triple net,” a typical agreement where tenants pay all property expenses—such as maintenance, real estate taxes and building insurance—on top of their leases.
And leasing costs almost always go up; the industry standard is 3% each year. A restaurant that in 2010 was paying $10,000 per month in rent is now at a rate closer to $15,000 a month.
“For us, the main thing was the rent,” McCune said about her restaurant’s closure. “The property was being sold by the owner and it was going to double the rent we pay. It’s been crazy.”
One last bite
So is the line back at Jim-Denny’s Diner.
Gloria Patton-Ross of Sacramento endures a nearly two-hour wait to receive her burger order. But it’s now or never. She savors the memories, as do so many others in line. They take cell phone pics and ask for mementos. A copy of the menu, a business card, even the smallest of souvenirs will do.
“I worked across the street and used to come here all the time, for breakfast and lunch,” said Patton-Ross, with a whisper of defeat in her voice. “This was one of my favorite spots. It’s such a shame, but it is what it is.”
The soul of Sacramento can be found in homespun places such as Jim-Denny’s. You can also find it in a plate of goulash from Café Marika, or a hot duck pâté sandwich from Café Rolle, or a dish of steaming loco moco from June’s Café, the Japantown favorite that’s been shuttered since July.
When legacy restaurants like these go away, so do slices of Sacramento history. Their dishes speak to the city’s diversity, the character of its neighborhoods and the loyalty of its customers.
“The neighborhood joints, you’re not just meeting your neighbors there, you’re getting to know the chefs, the cooks,” said Blackwell, the food blogger. “When you become a regular at a place like that, people know your name, like a Cheers kind of thing. It sucks to lose places where you have the familiarity, and you can only hope other places will come in to fill those needs.”
Ultimately, Sacramento’s restaurant industry may be undergoing its latest changing of the guard, one where the strongest will survive—and thrive—in this age of rising costs. After the Great Recession, other restaurants filled vacated spaces as well.
“Things are always going to be evolving,” said Christina Snyder of TRI Commercial. “Even though we’re having this kind of fallout from restaurant tenants, we’re already getting calls from other [restaurant owners] that aren’t even in this market.”
So Sacramento restaurant owners press on, through the grim headlines and financial challenges.
Some glimmers of good news have emerged during the spate of closures. Though Mother closed its K Street spot, some of its signature dishes can still be found at Empress Tavern. Part of Mother’s founding team is also on the verge of opening Jim’s Good Food, a diner at 16th and O streets.
It was also announced this week that Nash & Proper, the popular food truck that peddles Nashville-style hot chicken sandwiches, will open a brick-and-mortar location at the former Mother spot.
The long-vacated Saddle Rock space near 18th and L streets recently reopened as Saigon Alley. Opa! Opa! is relocating to Midtown after originally announcing in November that it was shutting down in East Sac. Localis is moving to East Sacramento and turning its 21st and S location into a tapas bar.
Even in these turbulent times, the hunger for Sacramento cuisine is still there.
“It’s always sad to see a landmark restaurant close,” DeVere White said. “But I’m very optimistic and I’m very passionate about what we do. As the city goes through its growing pains, so do the restaurants.”