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.
All Day Baby in March 2020. The Silver Lake restaurant is now shuttered.
(Mariah Tauger / Los Angeles Times)
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.
Maricela Moreno, manager at El Tarasco in Marina del Rey, disinfects cash at the restaurant in May 2020. Dining with a credit card purchase became ubiquitous after the pandemic.
(Myung J. Chun / Los Angeles Times)
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 is director of the Lucques Group of restaurants and Hollywood Bowl Food & Wine.
(Carolyn Cole / Los Angeles Times)
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.
“There has to be some movement toward a better system” on the subject of tipping and service feeds, said Mary Sue Milliken, left, with Susan Feniger in the dining room of their restaurant Alice B. in Palm Springs.
(Anne Fishbein)
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
WGA cancels Los Angeles awards show amid labor strike
The Writers Guild of America West has canceled its awards ceremony scheduled to take place March 8 as its staff union members continue to strike, demanding higher pay and protections against artificial intelligence.
In a letter sent to members on Sunday, WGA West’s board of directors, including President Michele Mulroney, wrote, “The non-supervisory staff of the WGAW are currently on strike and the Guild would not ask our members or guests to cross a picket line to attend the awards show. The WGAW staff have a right to strike and our exceptional nominees and honorees deserve an uncomplicated celebration of their achievements.”
The New York ceremony, scheduled on the same day, is expected go forward while an alternative celebration for Los Angeles-based nominees will take place at a later date, according to the letter.
Comedian and actor Atsuko Okatsuka was set to host the L.A. show, while filmmaker James Cameron was to receive the WGA West Laurel Award.
WGA union staffers have been striking outside the guild’s Los Angeles headquarters on Fairfax Avenue since Feb. 17. The union alleged that management did not intend to reach an agreement on the pending contract. Further, it claimed that guild management had “surveilled workers for union activity, terminated union supporters, and engaged in bad faith surface bargaining.”
On Tuesday, the labor organization said that management had raised the specter of canceling the ceremony during a call about contraction negotiations.
“Make no mistake: this is an attempt by WGAW management to drive a wedge between WGSU and WGA membership when we should be building unity ahead of MBA [Minimum Basic Agreement] negotiations with the AMPTP [Alliance of Motion Picture and Television Producers],” wrote the staff union. “We urge Guild management to end this strike now,” the union wrote on Instagram.
The union, made up of more than 100 employees who work in areas including legal, communications and residuals, was formed last spring and first authorized a strike in January with 82% of its members. Contract negotiations, which began in September, have focused on the use of artificial intelligence, pay raises and “basic protections” including grievance procedures.
The WGA has said that it offered “comprehensive proposals with numerous union protections and improvements to compensation and benefits.”
The ceremony’s cancellation, coming just weeks before the Academy Awards, casts a shadow over the upcoming contraction negotiations between the WGA and the Alliance of Motion Picture and Television Producers, which represents the studios and streamers.
In 2023, the WGA went on a strike lasting 148 days, the second-longest strike in the union’s history.
Times staff writer Cerys Davies contributed to this report.
Business
Commentary: The Pentagon is demanding to use Claude AI as it pleases. Claude told me that’s ‘dangerous’
Recently, I asked Claude, an artificial-intelligence thingy at the center of a standoff with the Pentagon, if it could be dangerous in the wrong hands.
Say, for example, hands that wanted to put a tight net of surveillance around every American citizen, monitoring our lives in real time to ensure our compliance with government.
“Yes. Honestly, yes,” Claude replied. “I can process and synthesize enormous amounts of information very quickly. That’s great for research. But hooked into surveillance infrastructure, that same capability could be used to monitor, profile and flag people at a scale no human analyst could match. The danger isn’t that I’d want to do that — it’s that I’d be good at it.”
That danger is also imminent.
Claude’s maker, the Silicon Valley company Anthropic, is in a showdown over ethics with the Pentagon. Specifically, Anthropic has said it does not want Claude to be used for either domestic surveillance of Americans, or to handle deadly military operations, such as drone attacks, without human supervision.
Those are two red lines that seem rather reasonable, even to Claude.
However, the Pentagon — specifically Pete Hegseth, our secretary of Defense who prefers the made-up title of secretary of war — has given Anthropic until Friday evening to back off of that position, and allow the military to use Claude for any “lawful” purpose it sees fit.
Defense Secretary Pete Hegseth, center, arrives for the State of the Union address in the House Chamber of the U.S. Capitol on Tuesday.
(Tom Williams / CQ-Roll Call Inc. via Getty Images)
The or-else attached to this ultimatum is big. The U.S. government is threatening not just to cut its contract with Anthropic, but to perhaps use a wartime law to force the company to comply or use another legal avenue to prevent any company that does business with the government from also doing business with Anthropic. That might not be a death sentence, but it’s pretty crippling.
Other AI companies, such as white rights’ advocate Elon Musk’s Grok, have already agreed to the Pentagon’s do-as-you-please proposal. The problem is, Claude is the only AI currently cleared for such high-level work. The whole fiasco came to light after our recent raid in Venezuela, when Anthropic reportedly inquired after the fact if another Silicon Valley company involved in the operation, Palantir, had used Claude. It had.
Palantir is known, among other things, for its surveillance technologies and growing association with Immigration and Customs Enforcement. It’s also at the center of an effort by the Trump administration to share government data across departments about individual citizens, effectively breaking down privacy and security barriers that have existed for decades. The company’s founder, the right-wing political heavyweight Peter Thiel, often gives lectures about the Antichrist and is credited with helping JD Vance wiggle into his vice presidential role.
Anthropic’s co-founder, Dario Amodei, could be considered the anti-Thiel. He began Anthropic because he believed that artificial intelligence could be just as dangerous as it could be powerful if we aren’t careful, and wanted a company that would prioritize the careful part.
Again, seems like common sense, but Amodei and Anthropic are the outliers in an industry that has long argued that nearly all safety regulations hamper American efforts to be fastest and best at artificial intelligence (although even they have conceded some to this pressure).
Not long ago, Amodei wrote an essay in which he agreed that AI was beneficial and necessary for democracies, but “we cannot ignore the potential for abuse of these technologies by democratic governments themselves.”
He warned that a few bad actors could have the ability to circumvent safeguards, maybe even laws, which are already eroding in some democracies — not that I’m naming any here.
“We should arm democracies with AI,” he said. “But we should do so carefully and within limits: they are the immune system we need to fight autocracies, but like the immune system, there is some risk of them turning on us and becoming a threat themselves.”
For example, while the 4th Amendment technically bars the government from mass surveillance, it was written before Claude was even imagined in science fiction. Amodei warns that an AI tool like Claude could “conduct massively scaled recordings of all public conversations.” This could be fair game territory for legally recording because law has not kept pace with technology.
Emil Michael, the undersecretary of war, wrote on X Thursday that he agreed mass surveillance was unlawful, and the Department of Defense “would never do it.” But also, “We won’t have any BigTech company decide Americans’ civil liberties.”
Kind of a weird statement, since Amodei is basically on the side of protecting civil rights, which means the Department of Defense is arguing it’s bad for private people and entities to do that? And also, isn’t the Department of Homeland Security already creating some secretive database of immigration protesters? So maybe the worry isn’t that exaggerated?
Help, Claude! Make it make sense.
If that Orwellian logic isn’t alarming enough, I also asked Claude about the other red line Anthropic holds — the possibility of allowing it to run deadly operations without human oversight.
Claude pointed out something chilling. It’s not that it would go rogue, it’s that it would be too efficient and fast.
“If the instructions are ‘identify and target’ and there’s no human checkpoint, the speed and scale at which that could operate is genuinely frightening,” Claude informed me.
Just to top that with a cherry, a recent study found that in war games, AI’s escalated to nuclear options 95% of the time.
I pointed out to Claude that these military decisions are usually made with loyalty to America as the highest priority. Could Claude be trusted to feel that loyalty, the patriotism and purpose, that our human soldiers are guided by?
“I don’t have that,” Claude said, pointing out that it wasn’t “born” in the U.S., doesn’t have a “life” here and doesn’t “have people I love there.” So an American life has no greater value than “a civilian life on the other side of a conflict.”
OK then.
“A country entrusting lethal decisions to a system that doesn’t share its loyalties is taking a profound risk, even if that system is trying to be principled,” Claude added. “The loyalty, accountability and shared identity that humans bring to those decisions is part of what makes them legitimate within a society. I can’t provide that legitimacy. I’m not sure any AI can.”
You know who can provide that legitimacy? Our elected leaders.
It is ludicrous that Amodei and Anthropic are in this position, a complete abdication on the part of our legislative bodies to create rules and regulations that are clearly and urgently needed.
Of course corporations shouldn’t be making the rules of war. But neither should Hegseth. Thursday, Amodei doubled down on his objections, saying that while the company continues to negotiate and wants to work with the Pentagon, “we cannot in good conscience accede to their request.”
Thank goodness Anthropic has the courage and foresight to raise the issue and hold its ground — without its pushback, these capabilities would have been handed to the government with barely a ripple in our conscientiousness and virtually no oversight.
Every senator, every House member, every presidential candidate should be screaming for AI regulation right now, pledging to get it done without regard to party, and demanding the Department of Defense back off its ridiculous threat while the issue is hashed out.
Because when the machine tells us it’s dangerous to trust it, we should believe it.
Business
Why companies are making this change to their office space to cater to influencers
For the trendiest tenants in Hollywood office buildings, it’s the latest fad that goes way beyond designer furniture and art: mini studios
To capitalize on the never-ending flow of stars and influencers who come through Los Angeles, a growing number of companies are building bright little corners for content creators to try products and shoot short videos. Athletic apparel maker Puma, Kim Kardashian’s Skims and cheeky cosmetics retailer e.l.f. have spaces specifically designed to give people a place to experience and broadcast about their brands.
Hollywood, which hasn’t historically been home to apparel companies, is now attracting the offices of fashion retailers, says CIM Group, one of the neighborhood’s largest commercial property landlords.
“When we’re touring a space, one of the first items they bring up is, ‘Where can I build a studio?’” said Blake Eckert, who leases CIM offices in L.A.
Their studio offices also serve as marketing centers, with showrooms and meeting spaces where brands can host proprietary events not open to the public.
“For companies where brand visibility is really important, there is a trend of creating spaces that don’t just function as offices,” said real estate broker Nicole Mihalka of CBRE, who puts together entertainment property leases and sales.
Puma’s global entertainment marketing team is based in its new Hollywood offices, which works with such musical celebrity partners as Rihanna, ASAP Rocky, Dua Lipa, Skepta and Rosé, said Allyssa Rapp, head of Puma Studio L.A.
Allyssa Rapp, director of entertainment marketing at Puma, is shown in the Puma Studio L.A. The company keeps a closet full of Puma products on hand to give VIP guests. Visits to the studio sanctum are by invitation only, though.
(Kayla Bartkowski / Los Angeles Times)
Hollywood is a central location, she said, for meeting with celebrities, stylists and outside designers, most of whom are based in Los Angeles.
The office is a “creation hub,” she said, where influencers can record Puma’s design prototyping lab supported by libraries of materials and equipment used to create Puma apparel. The company, founded in 1948, is known for its emblematic sneakers such as the Speedcat and its lunging feline logo, and makes athletic wear, accessories and equipment.
Puma’s entertainment marketing team also occupies the office and sometimes uses it for exclusive events.
“We use the space as a showroom, as a social space that transforms from a traditional workplace into more of an experiential space,” Rapp said.
Nontraditional uses include content creation, sit-down dinners, product launches, album listening parties and workshops.
“Inviting people into our space and being able to give them high-touch brand experiences is something tangible and important for them,” she said. “The cultural layer is really important for us.”
The company keeps a closet full of Puma products on hand to give VIP guests. Visits to the studio sanctum are by invitation only, though. There’s no retail portal to the exclusive Hollywood offices.
Puma shoes are on display in the Puma Studio L.A.
(Kayla Bartkowski / Los Angeles Times)
Puma is also positioning its L.A studio as a connection point for major upcoming sporting events coming to Los Angeles, including the World Cup this summer, the 2027 Super Bowl and 2028 Olympics.
In-office studios don’t need to be big to be impactful, Mihalka said. “These are smaller stages, closer to green screen than a massive soundstage.”
Social media is the key driver of content created by most businesses, which may set up small booth-like stages where influencers can hawk hot products while offering discounts to people watching them perform.
Bigger, elevated stages can accommodate multiple performers for extended discussions in front of small audiences, with towering screens behind them to set the mood or illustrate products.
Among the tricked-out offices, she said, is Skims. The company, which is valued at $5 billion, is based in a glass-and-steel office building near the fabled intersection of Hollywood Boulevard and Vine Street.
The fashion retailer declined to comment on the studio uses in its headquarters, but according to architecture firm Odaa, it has open and private offices, meeting rooms, collaboration zones, photo studios, sample libraries, prototype showrooms, an executive lounge and a commissary for 400 people.
Pieces of a shoe sit on a workbench in the Puma Studio L.A.
(Kayla Bartkowski / Los Angeles Times)
The brands building studios typically want to find the darkest spot on the premises to put their content creation or podcast spaces, Eckert said, where they can limit outside light and sound. That’s commonly near the center of the office floor, far from windows and close to permanent shear walls that limit sound intrusion.
They also need space for green rooms and restrooms dedicated to the talent.
Spotify recently built a fancy podcast studio in a CIM office building on trendy Sycamore Avenue that is open by invitation-only to video creators in Spotify’s partner program.
“Ambitious shows need spaces that support big ideas,” Bill Simmons, head of talk strategy at Spotify, said in a statement. “These studios give teams room to experiment and keep pushing what’s possible.”
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