The Restaurant Industry Is Broken. Can It Be Fixed?
The Daily
...
Key takeaways
- Brett Anderson reports that 42% of restaurant owners were not profitable in 2025 according to the National Restaurant Association.
- Minneapolis restaurateur Dylan Alverson removed prices from his menu at Modern Times as a protest against a "fascist economy," which initially boosted donations but created operational and neighborhood tensions.
- Labor costs have risen 41% compared to pre-pandemic levels, while food costs are up 35%, severely squeezing already thin margins.
- Credit card swipe fees (2-4%) now rank as the third-highest expense for restaurants, alongside labor and product costs.
- Celebrity chef Tom Colicchio closed his flagship New York restaurant due to unsustainable real estate costs in major urban centers.
Main topics
- Restaurant industry economics
- Pandemic impact on dining
- Rising labor and food costs
Notable quotes
"I don't believe that in America, restaurants are capable of achieving a profit anymore."
Conclusion
The episode underscores a fundamental shift in the restaurant business from creative expression to financial survival,
Transcript preview
Speaker 5 (0:00) I'm John Caramonica, a critic at The New York Times. And I'm Joe Cascarelli, a culture reporter at The Times. Speaker 3 (0:05) Together we host PopCast, a weekly pop culture chat show where we speak to the biggest musicians, actors, internet celebrities, and more. Speaker 5 (0:12) We've had Bad Bunny, Olivia Rodrigo, and Anne Hathaway. We've also hosted live performances with Andre 3000 and Erykah Badu. Plus, we end every conversation with a snack. Catch new episodes of PopCast every week on YouTube. And anywhere you get your podcasts. Speaker 7 (0:29) Brett, tell me about this restaurant that started you thinking about the larger state of the restaurant industry. Speaker 6 (0:37) Well, there's this restaurant in Minneapolis called Modern Times. It's really a diner-style place. It's a neighborhood restaurant. Hey. Two, two. Speaker 7 (0:47) Two? Awesome. Take a spot right there. Thank Speaker 6 (0:49) you. Open for breakfast and lunch, but is really kind of known for its breakfasts. You know what you want to get? Speaker 5 (0:54) Bacon, eggs, toast. I'm happy. Really Speaker 6 (0:57) good pancakes. bacon and eggs, that kind of thing. Speaker 2 (1:00) I'll take a coffee. Speaker 6 (1:02) The thing that distinguishes this place compared to all the rest in Minneapolis, there are a lot like it, is that when I visited in the spring, there were no prices on the menu. Hmm. And so how do you know what to pay? And how do you know what things cost? Well, like at any restaurant, you receive at the end of the meal something that looks like a check. And what it is, is really a solicitation to pay what you can, pay what you decide that you can afford. Wow. And on the day that I visited, I'd say half the people that were in the restaurant, according to its owner, couldn't afford to pay and didn't. Huh. This is deeply un-restaurant-like. It is un-restaurant-like. It would seem antithetical to making money. And in some ways, the move was made as a reaction to how hard it is to make money in restaurants. Speaker 7 (1:54) From The New York Times, I'm Michael Barbaro. This is The Daily on Sunday. There are a couple of key things to understand about the American restaurant industry right now, and they can seem contradictory. Menu prices are higher than ever, yet restaurant owners are barely scraping by. And that's because the business of dining out is in crisis. Today, my colleague, Brett Anderson, One of the journalists behind the Times' annual best restaurant list explains where this crisis comes from and all the creative ways that restauranteurs are trying to fix it. It's Sunday, October 4th. Speaker 7 (2:46) Brett Anderson, welcome to the Sunday Daily. Thank you very Speaker 6 (2:50) much for having me, Michael. Speaker 7 (2:51) My pleasure. So you spend a lot of time in restaurants. You're a member of this SEAL Team 6 that drops into entire regions of the United States, and you quietly, stealthily scout for the best restaurants, and then you publish them as this coveted list. Coveted if you're on it, painful if you're not. Speaker 6 (3:13) Yes. Traveled to 19 states for more locations. I honestly lost count. Wow. You know, looking for restaurants to write about for the times and also just like looking for stories too to write for Speaker 7 (3:25) the times. Right, because beyond drawing up lists, you cover the entire industry, which is what we really want to talk with you about here. So how did you end up hearing about this restaurant in Minneapolis that's breaking so many basic rules of the economics of the industry? Speaker 6 (3:43) Well, I'd known about the restaurant for years for the simple reason that I'm from the Twin Cities. I get there to visit family as well as for work. And I was in the Twin Cities doing some reporting on the ICE operation in the area that a lot of the listeners will recall made a lot of news. People in the area felt it was akin to something like an occupation. And Dylan Alverson, who owns Modern Times, had... decided in the aftermath of the killing of Alex Preddy, which is when I was there, that he was going to remove prices from his menu. He said it was a protest against what he called a fascist economy. Speaker 4 (4:21) I Speaker 5 (4:21) wanted to stop. while we had fairly armed troops acting aggressively towards our citizens, I wanted to stop contributing to it financially. Speaker 6 (4:32) He was doing something that a lot of people in the Twin Cities were doing at that time, which was using what he had to try to do what he could. Speaker 2 (4:39) We Speaker 5 (4:39) started this out of a protest, and we're seeing that it evolves into these different ideas. And in Speaker 6 (4:48) that conversation, he Speaker 5 (4:50) told Speaker 6 (4:50) me that Speaker 5 (4:51) he Speaker 6 (4:52) had been struggling. to make a profit at his restaurant for many years now. Speaker 5 (4:56) I have been poring over these numbers since the pandemic. And that even Speaker 6 (5:03) though he was busy all the time, even though he was generating what seemed to be quite a bit of revenue, he was simply not able to pay his bills and simply not able to pay himself very much. Speaker 5 (5:14) And Speaker 6 (5:14) I... Speaker 5 (5:16) Don't believe that in America, restaurants are capable of achieving a profit anymore. Speaker 6 (5:22) What he was explaining to me is something I've heard from restaurateurs across the country in recent years, again and again and again, which is that the business model isn't working. We're struggling to stay alive. And in fact, we don't know if we can. And Speaker 5 (5:36) so this is like a reset. This is saying, like, how do we... How do we stop monetizing our staff? And how do we stop monetizing our customers and have interactions that are based on, I mean, it's true hospitality. And Speaker 6 (5:53) what had looked on paper to be a pretty radical thing, as he explained it to me, it sounded less radical. Speaker 7 (6:03) Hmm. So he was kind of throwing up his hands and saying, as a restaurant that can't make this math work anymore, I'm going to try something new. I'm just going to take prices off the menu. Exactly. Speaker 5 (6:12) That's why I wanted to open a restaurant in this neighborhood, was to provide a community space that people could use that lived in this neighborhood. And the economy has been making it near impossible to continue doing that. And Speaker 6 (6:28) what was further interesting there is that in doing that, by not charging, his business started to do better than it ever had, or Speaker 7 (6:37) better than it has in recent years. Huh. He was doing better financially by letting people pay what they want by not charging. Speaker 6 (6:45) By not charging, he had told me 50 % of his clientele was not paying for food. And he was still doing better than before. He had attracted so many donations that he was effectively more profitable than he had been when he was charging for food. That is truly counterintuitive. It struck me as a very illustrative commentary on... how little money restaurants are actually making in this economy in the United States. Speaker 6 (7:16) I've covered restaurants for over 30 years now. And I've talked to a lot of restauranteurs. You hear a lot of complaints when you're a reporter, as you know. Yes. But it has never been as pervasive. The economic reality has become the dominant narrative in an industry and a culture that I've covered where, for decades, the dominant narrative was creative expression, was hospitality, was sense of place. Speaker 6 (7:49) Now I believe that that has flipped. And while it might not be apparent to diners so much, it is very much to me in the perspective I have as a reporter. These restaurants are struggling to survive. And in fact, many of the people I talk to fear that they might not be Speaker 7 (8:07) able to. Well, Brett, we want to talk about what happened to bring restaurants in the U.S. to this pretty dire place. And now, very much in search of a new business model. And we're going to do that right after the break. We'll be right back. Speaker 2 (8:37) The Athletic has something we need to turn you on to. The Athletic Live, hosted by me, Charles McDonald, Max Brown, Kofi Yeboah, and The Athletic's Zach Harper, and my guy here, Daniel Popper. We're Speaker 3 (8:49) taking your questions, asking you to weigh in, Speaker 2 (8:52) and hitting you back in the group chat. Plus, every week, we're doing live watch-alongs of the biggest games in the NFL, NBA, and more. We'll be running live polls, arguing in the chat. and highlighting your best reactions in real time. Speaker 7 (9:28) Restaurants have always been a pretty low-margin business. So let's talk about how the last few years really exposed not just how low-margin they are, but basically how broken the restaurant industry has become and led to all these efforts to reinvent it. Speaker 6 (9:50) Well, this chicken little narrative, as someone in the industry described it to me recently, really dates to the COVID-19 pandemic. But its roots go back decades further and really to the beginning of what many would call the American restaurant revolution. Hmm. Okay. Tell us that story. Well,