Twin Cities restaurants cling to holiday sales as a last chance to buoy tough year

David Fhima runs three Twin Cities restaurants and is about to launch a fourth, but he wonders if customers will turn out this holiday season, piling onto an already difficult year.

People are still eating out but cutting back, he said. They may cut back from two to three meals out a week to one, or skip the appetizer or share a dessert.

With people still feeling pinched from inflation and worried about the economy, 47% of Hospitality Minnesota members recently predicted that restaurant traffic will be lower this year than in 2024.

Consumer sentiment as a whole is lower this year. Many surveys found customers’ overall holiday spending, from gifts to decor and entertaining, will be down. The National Retail Federation predicts spending will grow, but by less than last year.

For restaurant owners, it’s a double hit. They also are facing higher food costs. Most reported wholesale prices up 3% or more, yet nearly one-quarter of Hospitality Minnesota’s association members have absorbed those increases instead of raising prices, said CEO Angie Whitcomb.

“The unease is real. We feel it,” said Fhima, who is one of the restaurateurs absorbing many cost increases.

Fhima said he’s losing money at his namesake restaurant in downtown Minneapolis. Sales are flat at his Maison Margaux in the North Loop. Only his 10-month old Vagabondo spot in Excelsior is enjoying a sales boost as the holiday season unfolds.

In the past few months, Minneapolis hot spots Keys Cafe, Zen Box Izakaya, Soberfish, El Sazon Cocina, Cocina del Barrio and Petit León have all closed.

Now he fears “restaurants that don’t have well-established relationships [with both suppliers and customers] are going to struggle this holiday season,” he said. “It makes me sad.”

Clint Roberts, founder of the bar and restaurant marketing agency One Simple Plan, said he has found that as the winter season hits, all hospitality venues are struggling with “everyday challenges that aren’t going anywhere.”

The cost of romaine lettuce, for example, has gone up 200% in a year. Ribeye steak is up almost 60%, he said. Most, like Fhima, feel they can’t pass on the cost and keep customer volume.

Roberts said he also fears more restaurants are financially “on the ropes.”

Minnesota bars, restaurants and hotels generated $3.5 billion in food and beverage sales last year, with a good slice stemming during the holidays.

On top of higher food costs, restaurants also are wrestling with higher wage costs. The state’s new family medical leave law, with its corresponding payroll tax that kicks in on Jan. 1, is yet another cost, said Hospitality Minnesota’s Whitcomb.

Even with all the negatives, restaurant operators remain “genuinely, cautiously optimistic,” Whitcomb said. Since the pandemic, they have had to be “resilient and creative,” and that continues.

Many outfits are chopping costs, switching to cheaper food ingredients or buying produce in bigger quantities as a way to make menus more efficient.

Many are still putting effort into dressing up for the holidays.

Parjito in Edina recently converted its basement storage space into a light-strewn underground jingle bar to draw crowds in December. Other restaurants like the Local on Nicollet Mall also have done the same.

Last week in Minneapolis, the employee-owned Hell’s Kitchen had set designers and theater crews install $12,000 worth of theater-sized holiday decor. Think giant gingerbread men, 500 dangling ornaments, coal-filled Christmas stockings and a “naughty list” so long the scroll cascades down the staircase.

“It’s an absolute hoot,” said Hell’s Kitchen president Billy Schoenburg.

The restaurant hired a marketing firm and is spending money on social media. Private event reservations have risen. But he wonders — is it enough?

Hell’s Kitchen generates more than $5 million in annual sales, but Schoenburg predicts revenue will fall 6.5% this year, even with the end-of-year hoopla. Last year, the restaurant drew 20,500 customers.

Last week, kitchen workers were busy grinding 1,000 pounds of Spanish peanuts and blending them with brown sugar, butter, salt and honey. The jars have become so popular, with $40,000 worth of them sold last year, that Schoenburg tripled his peanut order and expects to sell even more jars online.

Every little gesture can help as more “consumers pull back,” he said.

It doesn’t help that the Minneapolis Downtown Council canceled its annual Holidazzle festival for 2025. Last year, it took place along Nicollet Mall and drew customers into Fhima, Hell’s Kitchen and lots of other venues, the restaurants said.

Even so, Schoenburg said he and his colleagues are looking forward to celebrating the season.

“I think everybody kind of needs that breather right now,” he said. “And we’re ready to be that spot.”