Colorado restaurants have faced immense challenges since the start of the pandemic and have yet to bounce back. Credit: Denver Post

Months before the global pandemic, the restaurant business in Denver and Colorado as a whole was an extremely thriving one. Suffice to say that the food industry in Denver and across Colorado was battered over the past five years — and it’s showing no signs of recovering.

Generally across the country and not particular to Denver alone, high operating costs have been exacerbated by the more commonly known culprits, like inflation, which has pushed up the price of not just food, but also construction, insurance, utilities and property taxes. Labor shortages have fueled rising wages and new worker benefits, like the state’s paid-leave program.

But there seems to be something in particular with Denver, especially as the downtown part of the city has struggled to recover to its pre-pandemic vibe. Ongoing construction that ripped up 16th Street Mall hasn’t helped. While Mayor Mike Johnston’s pledge to put an end to homelessness has reduced the number of tents pitched along sidewalks, the reputation has been difficult to shake off. For some of the biggest names in Denver dining, it feels like the city just isn’t paying attention.

According to the Colorado Restaurant Association, restaurants, the industry lost more than $4 billion in revenue and 97,000 jobs, more than 200 restaurants closed statewide in 2024 and Denver alone has accounted for 82% of those losses. In the past three years, the city has lost 22% of its restaurants. Some of the most recent closures include long standing institutions like Fruition, Lao Wang Noodle House and Melita’s.

Labor is another problem. Restaurant owners and operators say it’s difficult to find the workers they need. When they do, government-mandated minimum wage hikes and social programs have pushed their costs of doing business even higher, owners and operators say.

Compounding the problem of higher costs, whether for food, wages or other expenses: restaurants walk a fine line on what they charge and can’t just hike menu prices without the risk of alienating customers. According to industry operators, they have New York-like expenses, but we can’t charge New York-like prices.

When it comes to labor costs, restaurants that were required by the state to pay a minimum wage of $8 an hour 10 years ago paid $14.42 an hour this year for non-tipped employees and will pay $14.81 in 2025, according to the Colorado Department of Labor and Employment. Denver’s required minimum wage will edge up to $18.81 next year, while Boulder’s will rise to $15.57; Colorado Springs has no mandated minimum wage.

Businesses are also now mandated to pay into new social programs, which adds more costs for employees, employers and third-party vendors. Truth be told, some of these are great programs that have tangible benefits. They help protect jobs and ensure that if one is sick and needs medical attention, that person can get help. The downside to it is that a lot of these costs tend to fall onto family-owned businesses.

For example, the voter-approved Colorado Family and Medical Leave Insurance (FAMLI) program that took effect in early 2024 allows eligible employees up to 12 weeks of paid leave every year to care for themselves or family members during significant events like illness or childbirth.

Businesses with 10 or more employees must contribute 0.9% of a worker’s gross paycheck toward the program every quarter; businesses with fewer than 10 employees must contribute 0.45% of wages. Businesses of any size can choose to deduct up to 0.45% from their employees’ paychecks to contribute to the quarterly payment.

That ends up being a cost that business owners have to pass onto their employees, on top of (their) increased grocery costs and rent, for a program they might not use. And it’s another cost the payroll company passes to the business owners because now they have to track it. If payroll isn’t handling it, then the business owner will have to register for the program, submit required reports, and if the reports don’t get submitted on time, they get fined. It’s basically a simple process that can really snowball in costs and requirements.

More notice to employers about new state-required programs and more leeway for businesses, especially restaurant owners to offer those programs could help ease some of the added workload.

The restaurant business is no picnic even with the fame and foodie fandom that can come with it. Profits are notoriously minuscule, like living from paycheck to paycheck.

Inflation also hit the Denver area earlier than other U.S. cities. The metro area recorded a 9.1% increase in consumer prices in March 2022, several months ahead of the nation. And while Denver’s inflation has slowed — it fell to 2.6% in June — it hasn’t stopped. It’s an open secret that once raised, prices rarely go down.

In addition to everything highlighted above, there are now delays with building permits, inspections, reviews and business licenses. Before the COVID pandemic, the city provided a time estimate on how long it would take for approvals. Now, it seems like it’s timeless. It used to be 90 days at most. Now, it could be eight to ten months, which has made a lot of restaurant owners lose their contractors.

City officials acknowledge that things got backed up during COVID. But commercial building permits, in particular, have been a priority of Denver’s mayor. Early this year Johnston pledged to reduce building-permit wait times by 30%. As of the end of July 2024, the average wait time for intermediate commercial projects had been cut by 14% to 30 days. The goal is to get to 20 days by the end of 2025, city spokesperson Genna Morton said. Current plan review times are posted on the city’s interactive dashboard.

The city also revamped its food licensing program by moving everything online so applicants no longer needed to show up in person. When the new system launched two years ago, the average wait was 71 days. Now, it’s five, said a spokesperson for the city’s Excise and Licenses department.

According to city licensing data, the number of retail food establishments has increased in Denver since 2021, but it declined 4.4% to 3,947 businesses in 2024. Statewide, the Department of Revenues’ sales tax data shows that the number of active food services and drinking establishments in Colorado is higher than it was before the pandemic.

Restaurants and other small businesses aren’t alone, however, a director of the city of Colorado Springs’ Economic Development Division said.

The Pikes Peak Small Business Development Center, the Exponential Impact business development support group, Better Business Bureau of Southern Colorado, the Colorado Springs Chamber of Commerce & EDC and other local chambers and the city’s own Economic Development Division and its Small Business Development administrator are among resources that restaurants can turn to for help.

Even as restaurant industry members lament today’s financial and operational challenges, the actual number of restaurants statewide continues to grow — though those figures include large restaurant chains that have advantages over the independents and family run ones.

Likewise, for as many obstacles as restaurants face, there still are positive signs for owners and operators in Denver and Colorado. The city’s population continues to grow, and a city like Colorado Springs remains a very attractive tourist destination that will always bring in a lot of foot traffic.

One thing should be made clear though, even restaurants that survived the pandemic are struggling currently and no one can say for certain where or when the silver lining will surface. As it stands the restaurant and hospitality business in Colorado is 70% doom and gloom.