Business
These are the top 7 issues facing the struggling restaurant industry in 2025
Operating a restaurant in Southern California continues to be a difficult endeavor, with many establishments still struggling from pandemic losses.
Food and labor costs increased in 2024, remaining by far the largest expenses of running a restaurant, according to the Independent Restaurant Coalition. And the minimum wage is set to increase again in California starting in the new year — to $16.50 an hour.
Locally, several Los Angeles restaurateurs report that they have yet to recover from entertainment industry strikes last year, which severely affected the service industry. Paired with low patronage and pandemic-era loans and rent payments that came due, several acclaimed restaurants are struggling or have shuttered across the country, particularly in L.A.
Most recently, the well-regarded All Day Baby in Silver Lake closed on Dec. 15. Owner Lien Ta told The Times that the restaurant simply didn’t make enough money on a day-to-day basis to sustain operations.
It’s unclear what 2025 has in store for restaurants, but the needs of restaurants and bars are complex and numerous. Here are the top seven challenges restaurants are likely to face in the coming year.
Labor costs
Labor has long been a top expense for restaurants. In California, a larger percentage of the bottom line is spent on labor compared to other states. This doesn’t just mean the dollars for paying staff but includes other costs, such as payroll tax and workers compensation insurance.
It used to be that a good goal for a restaurant was for labor costs to be about 30% of gross sales. But many restaurants are spending much more. At some establishments, labor can account for 50% to 60% of the bottom line.
Ross Pangilinan, chef-owner of Terrace by Mix Mix restaurant at South Coast Plaza in Costa Mesa, said he spends the most on staff, which can account for up to 34% of his bottom line. The higher the labor, the more payroll tax and workers comp, he noted.
“Labor is going to be the No. 1 challenge” for 2025, said Pangilinan, who operates small, independent restaurants, including Populaire, also in South Coast Plaza.
Larger restaurants regularly poach his staff, he said.
“The restaurants can pay higher wages. They are paying their cooks over $20 an hour and smaller restaurants are trying to compete with that,” Pangilinan said. “We’re a tiny restaurant at Terrace — 70 seats or so. We’re not backed by a big corporation or big investors.”
To stay competitive he’s raised wages for his back-of-house staff, who also benefit from tip sharing, he said. “They deserve as much as the servers do. They are working more hours and they are working as hard and, sometimes harder, than the front of house.”
Food prices
Food prices are up 28% since 2019, according to the Consumer Price Index.
Higher production costs, labor and fuel costs are a few reasons that food is so much more expensive now than before the pandemic. Severe weather and disease have affected several essential crops and livestock. Also, global events such as the war in Ukraine have led to supply chain disruptions.
While the rate of growth has slowed, food costs are expected to still increase in the coming year.
Egg prices already are going up due to the accelerating spread of H5N1, a highly transmissible and fatal strain of avian influenza. The virus is to blame for below-normal levels of egg production that can’t keep up with consumer demand, which leads to higher prices.
Luis Perez, executive chef at Chapter One in Santa Ana, said he’s already paying about $114 for a case of 180 organic eggs. A few months ago, he was paying less than $100.
He’s bracing himself for what the cost will be in the coming weeks. “On any given week, we go through four to five cases of eggs,” Perez said.
In response, he’s had to pivot more often than in the past. For instance, instead of serving airline chicken, he’s dishing up less expensive chicken leg meat since a few months ago. Instead of filet mignon, he’s serving hanger steaks.
He stopped buying mixed greens months ago from local farmers markets because it was just too costly. Perez said he currently charges about $15 for a salad but would need to charge upward of $23 to justify the cost of farmers market greens.
Health insurance
Federal law requires employers with 50 or more full-time or equivalent employees to provide health insurance benefits with minimum essential coverage.
At the same time, the average cost of health insurance has increased for nearly every American. It’s no different for restaurant operators offering plans to employees. The average cost of single coverage health insurance was $8,951 in 2024, up 6% from the previous year, according to the National Restaurant Assn. For smaller outfits, the price was an average of $9,131.
Kerstin Kansteiner, owner of Alder & Sage in Long Beach, has a small staff and isn’t obligated to offer health insurance. Still, she decided to offer coverage to her six full-time employees. Three of them took her up on it. She also provides free dental insurance and a 401(k) plan.
“I promised myself, I can’t have health insurance myself and not offer it to my team,” she said. “We felt like we wanted to do the right thing.”
But that commitment comes at a price. Not long ago, Kansteiner said she got word from her health insurance provider that rates were increasing 17% to 19% in the coming year. She could switch to a lower-tier health insurance plan, but she said she doesn’t think it’s right.
“I ask my team to do the impossible every day,” she said.
She said she doesn’t quite know where she’ll find the money to pay her portion of the increase but doesn’t think she can pass it on to diners. Some already complain about prices on the menu, she said.
“I think we have to have a conversation with the public about what food really costs,” Kansteiner said.
Credit card fees
As use of cash in everyday transactions fades, credit cards have become the de facto way to pay for meals, and that means card transaction fees have become a growing monthly expense for restaurant operators.
The fees are particularly a burden on smaller independent restaurants, which already operate on the slimmest of profit margins.
Delilah Snell, who operates Alta Baja Market, a restaurant and market in Santa Ana, said card swipe fees take at least 3% of her bottom line.
“Three percent means everything over the course of a year,” said Snell, who sells an assortment of products and prepared foods sourced from Mexico, California and the U.S. Southwest. “If a business makes $500,000 a year and it’s a 3% fee just for credit cards? That’s a lot.”
Visa and MasterCard dominate the credit card market, controlling around 80% of transactions in the U.S.
“With little competition in the industry, these companies set the terms, leaving independent businesses with few options to reduce their processing costs,” according to a statement from the Independent Restaurant Coalition. “The lack of competition stifles innovation and prevents smaller restaurants from negotiating better rates or leveraging alternative payment systems.”
Child care
Affordable child care continues to be a major challenge for restaurant workers. Nearly 3.5 million parents work in the restaurant industry and more than 1 million of those are single mothers, 40% of whom live in poverty, according to a 2016 report by the National Women’s Law Center and the Restaurant Opportunities Center.
The rising cost of child care and the lack of flexible options put both parents and businesses under pressure, said the Independent Restaurant Coalition. Dan Jacobs, a “Top Chef” star and chef-owner of Dan Dan restaurant in Milwaukee, said that as his team expands, more of his staff are starting families.
“The rising cost of child care across the country presents a tough dilemma: Parents are forced to choose between remaining in the workforce or staying home with their children,” he said in a statement. “It’s disheartening that in a country as advanced as ours, basic parental leave and childcare support remain out of reach for so many. It’s time for a change.”
Delivery app fees
Meal delivery apps became ubiquitous during the pandemic, and the demand for food delivery continues to expand. The delivery app market — dominated by DoorDash, UberEats and Grubhub — seems to be a blessing and a curse for restaurant operators.
The apps helped restaurants survive during the COVID-19 pandemic, when everyone was hunkered down at home. But that convenience comes at a cost to restaurants.
The commission rates can be as high as 30% per order, according to the Independent Restaurant Coalition.
“For small and mid-sized restaurants, the costs and constraints imposed by third-party apps are unsustainable,” the IRC said. “High commission fees, coupled with marketing expenses, drastically reduce profitability.”
Caroline Styne, a restaurateur who is co-owner and wine director of the Lucques Group of restaurants, said her restaurant relies on third-party delivery apps because she’d rather get a sale than not get one.
“It’s a little like you’re damned if you do and damned if you don’t,” Styne said of delivery apps. “They have us in a stranglehold. And because of that they are able to continue and even increase their price as time goes on.”
Styne said she encourages diners who want food delivery to do so directly on the restaurant’s website, instead of going through a third party; that makes the fees slightly lower for restaurant operators.
Service charges and tipping
Service charges and junk fees came to the forefront this year after California prohibited “junk fees,” hidden online ticket sale fees and fees tacked onto hotels, restaurants, bars and delivery apps.
At the last minute in June, the state Senate passed an emergency bill to exempt restaurants from the service-fee ban.
Regardless of the 11th-hour reversal, the practice of service fees has been called into question and sparked lawsuits against restaurant operators over its use.
At the same time, the practice of adding service charges to restaurant checks has grown in Southern California and across the nation in recent years, giving rise to a debate about how the fees should be treated by customers and workers.
Several restaurant operators and industry advocates favor a service-charge model. Advocates say such a model can provide more equitable compensation to all staff so that pay is not reliant on factors such as customer satisfaction or implicit biases that may affect tipping behavior.
Mary Sue Milliken, chef and co-founder of Mundo Hospitality Group, whose restaurants include Socalo, Border Grill and Alice B, said she hopes the entire restaurant industry will one day turn to a service-charge model and get away from tipping, which she said can lead to “bad behavior” and an inequitable system where front-of-house workers get paid exponentially better than back-of-house employees.
But, she said, doing away with tipping would have to be done universally. Milliken compared it to how Beverly Hills in 1987 became the first city in California to ban smoking in restaurants — and most public places — while nearby cities continued to allow it.
“Beverly Hills had no smoking and all their restaurants were dead,” she said. “It has to be all in the state of California or the county of L.A. All have to do it to make it fair. There has to be some movement toward a better system.”
Business
TikTok and Government Clash in Last Round of Supreme Court Briefs
The two sides in the momentous clash at the Supreme Court over a measure that could shut down TikTok made their closing written arguments on Friday, sharply disputing China’s influence over the site and the role the First Amendment should play in evaluating the law.
Their briefs, filed on an exceptionally abbreviated schedule set last month by the justices, were part of a high-stakes showdown over the government’s insistence that ByteDance, TikTok’s parent company, sell the app’s operations in the United States or shut it down. The Supreme Court, in an effort to resolve the case before the law’s Jan. 19 deadline, will hear arguments at a special session next Friday.
The court’s ruling, which could come this month, will decide the fate of a powerful and pervasive cultural phenomenon that uses a sophisticated algorithm to feed a personalized array of short videos to users. TikTok has become, particularly for younger generations, a leading source of information and entertainment.
“Rarely if ever has the court confronted a free-speech case that matters to so many people,” a brief filed Friday on behalf of a group of TikTok users said. “170 million Americans use TikTok on a regular basis to communicate, entertain themselves, and follow news and current events. If the government prevails here, users in America will lose access to the platform’s billions of videos.”
The briefs made only glancing or indirect references to President-elect Donald J. Trump’s unusual request last week that the Supreme Court temporarily block the law so that he can address the matter once he takes office.
The deadline set by the law for TikTok to be sold or shut down is Jan. 19, the day before Mr. Trump’s inauguration.
“This unfortunate timing,” his brief said, “interferes with President Trump’s ability to manage the United States’ foreign policy and to pursue a resolution to both protect national security and save a social-media platform that provides a popular vehicle for 170 million Americans to exercise their core First Amendment rights.”
The law allows the president to extend the deadline for 90 days in limited circumstances. But that provision does not appear to apply, as it requires the president to certify to Congress that there has been significant progress toward a sale backed by “relevant binding legal agreements.”
TikTok’s brief stressed that the First Amendment protects Americans’ access to the speech of foreign adversaries even if it is propaganda. The alternative to outright censorship, they wrote, is a legal requirement that the source of the speech be disclosed.
“Disclosure is the time-tested, least-restrictive alternative to address a concern the public is being misled about the source or nature of speech received — including in the foreign-affairs and national-security contexts,” TikTok’s brief said.
The users’ brief echoed the point. “The most our customs and case law permit,” it said, “is a requirement to disclose foreign influence, so the people have full information to decide what to believe.”
The government said that approach would not work. “Such a generic, standing disclosure would be patently ineffective,” Elizabeth B. Prelogar, the U.S. solicitor general, wrote on Friday.
In a brief filed last week in the case, TikTok v. Garland, No. 24-656, the government said foreign propaganda may be addressed without violating the Constitution.
“The First Amendment would not have required our nation to tolerate Soviet ownership and control of American radio stations (or other channels of communication and critical infrastructure) during the Cold War,” the brief said, “and it likewise does not require us to tolerate ownership and control of TikTok by a foreign adversary today.”
The users’ brief disputed that statement. “In fact,” the brief said, “the United States tolerated the publication of Pravda — the prototypical tool of Soviet propaganda — in this country at the height of the Cold War.”
TikTok itself said the government was wrong to fault it for its failure to “squarely deny” an assertion that “ByteDance has engaged in censorship or manipulated content on its platforms at the direction of” the Chinese government.
Censorship is “a loaded term,” TikTok’s brief said. In any event, the brief added, “petitioners do squarely deny that TikTok has ever removed or restricted content in other countries at China’s request.”
Business
When it comes to arriving on time, these are the best (and worst) airlines
In the cutthroat airline industry, few things can boost a company’s reputation more than getting passengers to their destinations on time.
Now, Mexico’s largest airline, Aeromexico, can boast that last year it was the best in the world when it comes to timeliness, according to the results of an annual study by aviation analytics firm Cirium. Among domestic U.S. carriers, Delta Air Lines took the top prize.
Cirium’s annual report tracked millions of flights and evaluated airlines’ and airports’ operational efficiency and rates of on-time arrivals and departures. The report named Saudi Arabia’s Riyadh King Khalid International Airport the most on-time hub of the year and awarded Delta first place for overall operational excellence.
Cirium’s rankings are based on data from more than 600 sources of real-time flight information, according to the report.
“In 2024, the aviation industry demonstrated incredible resilience and adaptability, overcoming challenges ranging from cybersecurity disruptions to weather anomalies,” said Cirium Chief Executive Jeremy Bowen in a statement. “Despite these hurdles, airlines and airports continued to prioritize operational excellence.”
More than 86% of Aeromexico flights arrived on time last year, which is defined as an arrival within 15 minutes of the scheduled time. Eighty-seven percent of Aeromexico flights departed on time. Saudia, formerly Saudi Arabia Airlines, placed second behind Aeromexico among international carriers.
Among U.S. airlines, United took second place behind Delta for on-time arrivals and Alaska Airlines took third. Around 83% of Delta flights arrived on time, while United and Alaska had on-time arrival rates of 80% and 79% respectively.
The list of the top 10 most on-time global airlines was dominated by carriers outside of the U.S., including Qatar Airways and Spanish airline Iberia. North American airlines faced challenges in 2024 stemming from a shortage of air-traffic controllers, according to aviation consultant Scott McCartney. The Federal Aviation Administration was down about 3,000 controllers nationwide and cut flight schedules throughout the year, he said in Cirium’s report.
U.S. airlines still posted an overall on-time arrival rate of 76% in 2024, up from 74% in 2023. American, Southwest and Spirit were also among the most on-time North American carriers.
JetBlue Airways took seventh place among U.S. airlines with just over 74% of flights arriving on time, but was recently fined by the Department of Transportation for chronically delayed flights and unrealistic scheduling. In the first-of-its-kind fine, JetBlue will have to pay $2 million, half of which will go to customers affected by delays.
The Department of Transportation said it is conducting investigations into other airlines with misleading schedules that do not reflect realistic departure and arrival times. According to the department, a flight is chronically delayed if it is flown at least 10 times a month and arrives more than 30 minutes late more than 50% of the time. Frontier Airlines, Air Canada and WestJet all had lower on-time arrival rates than JetBlue, according to Cirium.
Four American airports made the top-10 list of most on-time hubs, including Salt Lake City International Airport and Washington Dulles International Airport. Cirium has been tracking the timeliness of airports and airlines for 16 years.
Business
Religious Leaders Experiment with A.I. in Sermons
To members of his synagogue, the voice that played over the speakers of Congregation Emanu El in Houston sounded just like Rabbi Josh Fixler’s.
In the same steady rhythm his congregation had grown used to, the voice delivered a sermon about what it meant to be a neighbor in the age of artificial intelligence. Then, Rabbi Fixler took to the bimah himself.
“The audio you heard a moment ago may have sounded like my words,” he said. “But they weren’t.”
The recording was created by what Rabbi Fixler called “Rabbi Bot,” an A.I. chatbot trained on his old sermons. The chatbot, created with the help of a data scientist, wrote the sermon, even delivering it in an A.I. version of his voice. During the rest of the service, Rabbi Fixler intermittently asked Rabbi Bot questions aloud, which it would promptly answer.
Rabbi Fixler is among a growing number of religious leaders experimenting with A.I. in their work, spurring an industry of faith-based tech companies that offer A.I. tools, from assistants that can do theological research to chatbots that can help write sermons.
For centuries, new technologies have changed the ways people worship, from the radio in the 1920s to television sets in the 1950s and the internet in the 1990s. Some proponents of A.I. in religious spaces have gone back even further, comparing A.I.’s potential — and fears of it — to the invention of the printing press in the 15th century.
Religious leaders have used A.I. to translate their livestreamed sermons into different languages in real time, blasting them out to international audiences. Others have compared chatbots trained on tens of thousands of pages of Scripture to a fleet of newly trained seminary students, able to pull excerpts about certain topics nearly instantaneously.
But the ethical questions around using generative A.I. for religious tasks have become more complicated as the technology has improved, religious leaders say. While most agree that using A.I. for tasks like research or marketing is acceptable, other uses for the technology, like sermon writing, are seen by some as a step too far.
Jay Cooper, a pastor in Austin, Texas, used OpenAI’s ChatGPT to generate an entire service for his church as an experiment in 2023. He marketed it using posters of robots, and the service drew in some curious new attendees — “gamer types,” Mr. Cooper said — who had never before been to his congregation.
The thematic prompt he gave ChatGPT to generate various parts of the service was: “How can we recognize truth in a world where A.I. blurs the truth?” ChatGPT came up with a welcome message, a sermon, a children’s program and even a four-verse song, which was the biggest hit of the bunch, Mr. Cooper said. The song went:
As algorithms spin webs of lies
We lift our gaze to the endless skies
Where Christ’s teachings illuminate our way
Dispelling falsehoods with the light of day
Mr. Cooper has not since used the technology to help write sermons, preferring to draw instead from his own experiences. But the presence of A.I. in faith-based spaces, he said, poses a larger question: Can God speak through A.I.?
“That’s a question a lot of Christians online do not like at all because it brings up some fear,” Mr. Cooper said. “It may be for good reason. But I think it’s a worthy question.”
The impact of A.I. on religion and ethics has been a touch point for Pope Francis on several occasions, though he has not directly addressed using A.I. to help write sermons.
Our humanity “enables us to look at things with God’s eyes, to see connections, situations, events and to uncover their real meaning,” the pope said in a message early last year. “Without this kind of wisdom, life becomes bland.”
He added, “Such wisdom cannot be sought from machines.”
Phil EuBank, a pastor at Menlo Church in Menlo Park, Calif., compared A.I. to a “bionic arm” that could supercharge his work. But when it comes to sermon writing, “there’s that Uncanny Valley territory,” he said, “where it may get you really close, but really close can be really weird.”
Rabbi Fixler agreed. He recalled being taken aback when Rabbi Bot asked him to include in his A.I. sermon, a one-time experiment, a line about itself.
“Just as the Torah instructs us to love our neighbors as ourselves,” Rabbi Bot said, “can we also extend this love and empathy to the A.I. entities we create?”
Rabbis have historically been early adopters of new technologies, especially for printed books in the 15th century. But the divinity of those books was in the spiritual relationship that their readers had with God, said Rabbi Oren Hayon, who is also a part of Congregation Emanu El.
To assist his research, Rabbi Hayon regularly uses a custom chatbot trained on 20 years of his own writings. But he has never used A.I. to write portions of sermons.
“Our job is not just to put pretty sentences together,” Rabbi Hayon said. “It’s to hopefully write something that’s lyrical and moving and articulate, but also responds to the uniquely human hungers and pains and losses that we’re aware of because we are in human communities with other people.” He added, “It can’t be automated.”
Kenny Jahng, a tech entrepreneur, believes that fears about ministers’ using generative A.I. are overblown, and that leaning into the technology may even be necessary to appeal to a new generation of young, tech-savvy churchgoers when church attendance across the country is in decline.
Mr. Jahng, the editor in chief of a faith- and tech-focused media company and founder of an A.I. education platform, has traveled the country in the last year to speak at conferences and promote faith-based A.I. products. He also runs a Facebook group for tech-curious church leaders with over 6,000 members.
“We are looking at data that the spiritually curious in Gen Alpha, Gen Z are much higher than boomers and Gen X-ers that have left the church since Covid,” Mr. Jahng said. “It’s this perfect storm.”
As of now, a majority of faith-based A.I. companies cater to Christians and Jews, but custom chatbots for Muslims and Buddhists exist as well.
Some churches have already started to subtly infuse their services and websites with A.I.
The chatbot on the website of the Father’s House, a church in Leesburg, Fla., for instance, appears to offer standard customer service. Among its recommended questions: “What time are your services?”
The next suggestion is more complex.
“Why are my prayers not answered?”
The chatbot was created by Pastors.ai, a start-up founded by Joe Suh, a tech entrepreneur and attendee of Mr. EuBank’s church in Silicon Valley.
After one of Mr. Suh’s longtime pastors left his church, he had the idea of uploading recordings of that pastor’s sermons to ChatGPT. Mr. Suh would then ask the chatbot intimate questions about his faith. He turned the concept into a business.
Mr. Suh’s chatbots are trained on archives of a church’s sermons and information from its website. But around 95 percent of the people who use the chatbots ask them questions about things like service times rather than probing deep into their spirituality, Mr. Suh said.
“I think that will eventually change, but for now, that concept might be a little bit ahead of its time,” he added.
Critics of A.I. use by religious leaders have pointed to the issue of hallucinations — times when chatbots make stuff up. While harmless in certain situations, faith-based A.I. tools that fabricate religious scripture present a serious problem. In Rabbi Bot’s sermon, for instance, the A.I. invented a quote from the Jewish philosopher Maimonides that would have passed as authentic to the casual listener.
For other religious leaders, the issue of A.I. is a simpler one: How can sermon writers hone their craft without doing it entirely themselves?
“I worry for pastors, in some ways, that it won’t help them stretch their sermon writing muscles, which is where I think so much of our great theology and great sermons come from, years and years of preaching,” said Thomas Costello, a pastor at New Hope Hawaii Kai in Honolulu.
On a recent afternoon at his synagogue, Rabbi Hayon recalled taking a picture of his bookshelf and asking his A.I. assistant which of the books he had not quoted in his recent sermons. Before A.I., he would have pulled down the titles themselves, taking the time to read through their indexes, carefully checking them against his own work.
“I was a little sad to miss that part of the process that is so fruitful and so joyful and rich and enlightening, that gives fuel to the life of the Spirit,” Rabbi Hayon said. “Using A.I. does get you to an answer quicker, but you’ve certainly lost something along the way.”
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