- Associated Press - Monday, February 20, 2017

SIOUX FALLS, S.D. (AP) - Shonna Haugen likes to say she’s creating the “anti-kitchen.”

Haugen opened Old Soul Café in July, away from downtown, in a small storefront in the middle of a Minnesota Avenue strip mall in a place where there is no pedestrian traffic.

She serves breakfast and lunch - no dinner - which means there are fewer hours she needs to be open. Her staff is trained to cover both front- and back-of-the-house, they divvy up tips evenly, and Haugen calls them family.

“I’m trying to bring everything I enjoyed into this kitchen, and I think if you do that, you’re going to have employees who stay,” Haugen said. “The longer people stay, the more well-run a business is, so that’s my ultimate goal.

The Argus Leader (https://argusne.ws/2kDd50I ) reports that signs indicate an end to a vibrant era of restaurants in the United States, but restaurant owners in Sioux Falls are keeping the faith despite growing costs and a surging shortage of workers. Their trick: hard work, efficiency and embracing outside-the-box business models.

A story published late December by Thrillist pointed to an unraveling of the restaurant industry in larger markets, reporting a 3 percent drop in independent restaurants nationwide last year. In many cases, businesses closed under the weight of increasing costs for food, space and staff.

In Sioux Falls, Lone Star Steakhouse and Rookie’s at the District went out of business last week.

New openings in the market continue to outweigh closings, however. The increased competition has caused a hiring challenge, especially for cooks and servers.

But local owners find hope in a flourishing downtown and a growing interest in independently owned restaurants, even in a city that has long favored chains.

After training in San Francisco and working in restaurants in Germany and the Twin Cities, Tina Kuehn returned home, only to find a scene that didn’t fit.

“There were places that were independently owned, but not a whole lot of places cooked from scratch,” Kuehn said. “There was always a heavy usage of cans or frozen.”

So, she opened Kristina’s Cafe and Bakery in 1993, in the heart of downtown. From her spot on the corner of Phillips and 12th avenues, Kuehn watched as the city’s food scene began to evolve.

Sanchez Taquitos opened up next door, and then came Touch of Europe across the street.

Even still, Kuehn was wayward. She sold her space in 2001, bought it back a year later under the name of Café 334, and then sold it again in 2008.

Her internal dilemma was rooted in philosophy and cost. Her old restaurants, located in the heart of downtown, were bigger and needed more workers to operate.

“I wanted to get back to that small size of the restaurant, where I was doing a little bit more of the cooking,” Kuehn said. “I foresaw that staffing was an issue for me, and managing all that wait staff.”

She employed about two dozen people at Cafe 334. Her staff is about half that size at K Restaurant, which continues to operate at 8th & Railroad Center.

The number of dining options available to Sioux Falls consumers exploded, thanks in part to Kuehn and a few former employees who branched out on their own.

“It’s just amazing coming off of Phillips Avenue,” Kuehn said. “All the places that have opened up. It’s just wonderful.”

Sioux Falls’ blossoming restaurant industry appeared to hit a ceiling in 2015. That was the first time in years city health inspectors noted a decrease in the number of food service facilities.

Even though the count ticked up again in 2016, a number of establishments hit hard times. Last year was no cake walk for local restaurants. Little Coalinga closed its doors to diners after 35 years of serving downtown’s east bank.

Fiero Pizza and Fiero Fire Chicken shuttered their 41st Street location. Macho Nacho Mexican Grill closed on the east side. And both Khorasan Kabob House and Zesty’s Pizza remain only as memories, despite relocation rumors.

News of Tre Lounge closing broke just days into 2017. It was the second property jettisoned by local firm Pinnacle Hospitality in a matter of months. Pinnacle sold Foley’s Fish Chop and Steak House to Vanguard Hospitality, which re-opened the location as Morrie’s Steakhouse.

Early last year, Pinnacle also ended management of Elements on 8th, the restaurant once located in the Hilton Garden Inn downtown.

Mounting costs of health care and hourly wages have added pressure for all local restaurants, said Randy Derheim, a former vice president of Pinnacle, who retired in May.

His decision to retire was “a direct result of reduced revenue,” Derheim said. Owning a restaurant in this city means being involved directly in the day-to-day operations, and Derheim saw more potential in Pinnacle’s hired workforce than he saw in himself.

It was either stay on and replace a skilled manager, or step down, Derheim said.

“These are tough decisions for business owners to make,” he said.

If there is one sign of trouble ahead for the Sioux Falls food scene, it’s the absence of workforce.

Sioux Falls’ city leaders boast about the jobless rate, which hovers well under 3 percent, but there’s a downside to a rate that low, Haugen points out.

“It’s not just restaurants,” she said. “Everyone’s hiring.”

The workforce shortage is a gaping wound in the side of an otherwise healthy industry. The number of food-service job openings in the four-county metro area has skyrocketed, according to the state’s listing service, quintupling in the years since the recession.

Meanwhile, the average pay for cooks, chefs, servers and almost any position available has steadily increased. The hourly wage for a person in South Dakota’s food service industry climbed to $10.16 in 2015, a two-dollar jump from what it was before the recession.

Then, there’s health care. At its peak Pinnacle operated four restaurants in Sioux Falls and employed 150 people, Derheim said, which means it was required to provide health insurance under the tenets of President Barack Obama’s health care law.

“I think on a national level, what you see, is you see companies that you think would never close restaurants closing restaurants,” Derheim said.

Michael Haskett sees something else when he looks through the window of his downtown restaurant, even facing the old storefront of Taqueria San Francisco, another eatery that closed last year.

Haskett came up in the industry by working in kitchens, starting with a job in high school making pizza at Gigglebees.

He’s found enough success with M.B. Haskett Delicatessen to shrug off the workforce shortage, but he’s not ignorant to persistent problems in the industry.

It’s always been rough, he said. Margins are razor thin, debt is persistent, and workers rarely pull in a living wage. Brutal as recent times may seem, brutality is nothing new for commercial kitchens.

“This historically has been an abusive industry,” Haskett said. “It doesn’t (expletive) pay enough.”

Look no further than local history. Derheim has lived in the community for more than 30 years.

“And all the restaurants that I enjoyed in my earlier years in Sioux Falls with the exception of one, which would be Minervas, no longer exist,” Derheim said.

Now, in a market riding high on a growing hunger for well-prepared food, the number of restaurants is creating greater competition for the same consumers, and for the same pool of capable workers.

“There’s always another job,” Kuehn said. “There’s always another place opening up.”

Instead of an abandoned storefront, what Haskett sees is potential when he looks out from M.B. Haskett’s front window onto Phillips.

Downtown is thriving, he said. Restaurant owners might be riding an economic bubble, but he thinks the bubble here will continue to grow, and that’s not necessarily a bad thing, as long as it comes with lessons.

“I think the restaurant industry and those with passion for the industry need to educate the consumer,” Haskett said.

Haskett and the other owners driving the current restaurant revolution seem to know what they’re getting into, and are willing to experiment with business models that are more efficient and have less overhead.

Haskett opened his restaurant in the dead of winter, limiting his menu to what equipment was immediately available: some crockpots and a crepe maker. It wasn’t until after his following picked up, in 2014, that he remodeled, putting in new kitchen gear that would allow him to increase his offerings.

“It was a long, hard slog,” Haskett said. “People came here because we were playing loud punk music and serving good food.”

Haugen incorporated catering into her business model because it gives her an opportunity to earn more revenue in a short period of time. Old Soul only serves food in the breakfast and lunch hours, but Haugen opens the doors later for special events. Hosting parties helps with word-of-mouth, she said.

Kuehn only serves dinner on Friday and Saturdays. She also caters and offers cooking classes during the week. She hosts special events such as the pop-up dinner she organized Monday to drive interest.

It’s a more predictable model.

“You know who’s coming,” Kuehn said. “You know who’s serving.”

The industry needs newcomers such as Haugen to succeed, Derheim said. Tried and true establishments are necessary for a robust food scene, but so is reinvention. That’s what inspired Pinnacle executives to put Tre up for sale this month - it was time for someone else to breathe new life into the space, Derheim said.

But quality is also key.

“You better come out of the gate with a strong product, and you better come with a commitment to excellence,” Derheim said.

Investors who dabble in dining because they have money and think owning a restaurant is romantic are often doomed to fail. Instead, the industry rides on the shoulders of “truly dedicated fools” like him, Haskett said.

But mostly it rides on Sioux Falls - on the guy with a fork in his hand.

“The market will decide what works,” Haskett said. “It won’t be the restaurant owners.”

___

Information from: Argus Leader, https://www.argusleader.com

Copyright © 2018 The Washington Times, LLC.

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