The suburbs vs. Minneapolis: Where will restaurants go?

El Sazon is known for its birria, the Mexican beef stew cooked so long its rich braising liquid becomes as prized as the fall-apart meat itself. The restaurant, which started as a counter in an Eagan gas station, has built its menu around birria, which can be savored on pizza, in tacos and in a steaming bowl of ramen.

As customers drove from across the metro for El Sazon’s takeout low-and-slow meats, many of them asked owners Karen and Cristian de Leon when El Sazon would be opening closer to them.

A year ago, the couple opened a sit-down restaurant in south Minneapolis, El Sazon Cocina & Tragos. It should have been a cause for celebration, but the de Leons were not prepared for how challenging it would be to run a restaurant within city limits. With the cost of Minneapolis permits and the difference in minimum wage, they’ve had to raise their prices.

At the gas station, the birria ramen, with noodles and consommé, meat, toppings and two taquitos, is $16.50. In Minneapolis, the same dish goes for $18.

As the couple prepares to open their third establishment, Xelas by El Sazon in Stillwater, it’s becoming clearer to them that Minneapolis is uniquely hard — and expensive — on restaurants.

“We should have done better research,” Karen de Leon said. “Unless it’s a really good deal, I wouldn’t open another place in Minneapolis.”

They’re not the only ones feeling the crunch. Disparities in wages, costs and customer expectations are pushing more restaurant owners to look beyond the city’s borders, threatening Minneapolis’ standing as dining capital of the Upper Midwest.

“The difference between operating a restaurant here in Minneapolis versus the suburbs, there’s a huge difference there, and I feel like a lot of people don’t understand that,” said Chris Ikeda, the chef and owner of Lake & Irving on Lake Street in Uptown, and Pau Hana in Savage.

The biggest sticking point among restaurateurs interviewed was wages. The Minneapolis minimum wage of $15.57 is nearly $5 more than in neighboring suburbs that abide by the state’s minimum wage of $10.85. (In St. Paul, the minimum wage is $14 for businesses with fewer than 100 employees, a category fitting many restaurants.) Minneapolis’ minimum wage will rise to $15.97 on Jan. 1.

As the owner of a medium-sized, full-service restaurant, Ikeda uses about 20,000 to 25,000 hours a year of front-of-the-house staffing. “So every year, another dollar an hour adds another $20-$25,000 burden on the business,” he said. “That’s a challenge for any restaurateur, no matter how successful they appear to be.”

The wage differences directly affect staffers, too, who may work multiple restaurants in more than one city.

Jen Boss works primarily as a server at Heather’s in south Minneapolis, where she earns $15.57 an hour, plus pooled tips. But she also takes shifts at the Heather’s location that just opened in Minnetonka, where she gets $10.85, and only the tips she brings in herself.

“I love Heather [owner Heather Asbury] and I love what she does and I was willing to come out for a shift or two knowing that it’s a little bit different, but it’s drastic,” Boss said. “I was shocked that 10-something actually still existed.”

Other essentials also are at a premium in Minneapolis. Payroll taxes. Liability insurance. The de Leons just paid the city of Minneapolis more than $3,000 to renew their restaurant’s liquor license for six months, double what they paid in Stillwater.

Other city vs. suburb discrepancies go beyond costs. The bureaucracy of bigger government offices as restaurant owners navigate permits, licenses and regulations is already tricky, and owners fear it could become more complex if Minneapolis moves forward with a contentious proposal for a Labor Standards Board. The plan under consideration would give workers, business owners and community stakeholders (such as consumer advocacy groups or labor unions) equal voice in crafting workplace regulations for many sectors, including the hospitality industry. The Minneapolis Restaurant Coalition and Hospitality Minnesota are among the business groups opposed to it, and dozens of Minneapolis restaurant owners have signed a petition against it.

Perceptions about safety in the wake of George Floyd’s murder are another factor keeping customers away, some owners say. Uptown was hit especially hard, with many restaurants caught in the destruction that unfolded. The de Leons worked in the area at that time. “We saw Uptown come to the ground, and we’re like, why aren’t they coming back?” Karen de Leon said. “People don’t feel safe going out.”

After the latest round of Uptown construction, Ikeda’s Lake Street restaurant has been in the dark, without streetlights, for the past 2 ½ months. “It’s a basic safety issue, and yet it seems like a low priority for City Council, leaving us to deal with a dimly lit, high-traffic area,” he said.

Meanwhile, some suburban cities are rolling out the red carpet. In the Savage and Prior Lake area, where Ikeda’s other restaurant is located, “there is a general sense of urgency and willingness to make things work,” he said.

Heather Asbury, the proprietor of Heather’s in south Minneapolis and now Minnetonka, says the suburban location is “so safe that I don’t lock my patio tables.”

“It feels kind of like ‘Smallville,’ this happy little area,” she added.

El Sazon, meanwhile, saw its planters stolen from the front of the restaurant on Lyndale Avenue.

In the walkable neighborhood near Minnehaha Creek, the de Leons expected foot traffic to soar compared to the car-centric corner in Eagan where the gas station sits. But many hours, the restaurant stays empty. Lunch isn’t consistently busy the way it is in Eagan, and they get few new tables after 8 p.m.

At the same time, chefs and restaurant owners are finding suburban customers more adventurous than their reputations allow. Chain locations and large, high-value portions aren’t the only games in those towns anymore.

“I honestly don’t think a concept like Pau Hana would have worked in the suburbs five or 10 years ago,” Ikeda said. “But now, areas like Savage and Prior Lake have shown a strong interest in more refined, creative concepts. People are looking for a dining experience that stands out, and they have the means and desire to support restaurants that offer something beyond the typical.”

Sandi Fleck, who heads the Prior Lake Chamber of Commerce, described a “strong local dining culture” in that area, thanks to events and support from the chamber that promotes “the quality, freshness, and unique atmospheres these establishments bring.”

Brent Frederick, founder of Jester Concepts, sees the suburban market as the future for his restaurant group, which operates Minneapolis restaurants Parlour, Borough, Butcher & the Boar and others.

“Since the pandemic, we noticed that we had our eggs all in the downtown basket, and that was scary for us,” Frederick said.

Earlier this year, Jester opened Starling in Edina, the group’s first suburban foray. Before this year is done, he plans to open another Parlour in Excelsior, with more restaurants to come. His group just acquired Rustica Cafe & Bakery, and intends to open suburban outposts starting in 2025. “There’s a major demand in the suburbs that you can’t deny,” Frederick said.

“You want to build a restaurant where people appreciate what you do, and that was always Minneapolis for us. But that’s not the case [anymore], and we’re learning that,” he added. “If there’s an opportunity in Minneapolis, we’ll look at it. But things are going to have change there on some of the policy sides, on some of the things that we are being attacked on.”

Still, Minneapolis sees its restaurant scene as one of the city’s strengths.

“Local, independently owned restaurants bring vibrancy to our neighborhoods and downtown. Opening and operating a restaurant is challenging no matter where it is located,” read a statement from the City of Minneapolis Business Development Team, provided by a city spokesperson. The city offers resources to help small businesses, including restaurants, with tasks like navigating financing tools and regulatory processes.

And Minneapolis isn’t exactly facing a dearth of new restaurants. More than a dozen high-profile names have opened in the city just this fall.

Restore Restaurant Holdings, the group behind downtown restaurants EaTo and Chloe by Vincent, has two more restaurants in the works in the Mill District. The group is committed to Minneapolis, said owner Matt Monroe. “Diversifying away from Minneapolis has definitely been a consideration, but we are so excited for this area,” he said. “It’s taken a little bit longer to come back than I would have anticipated, but I still see significant potential here.”

For the de Leons, however, starting out in the suburbs and then opening in Minneapolis was jarring.

At first, they tried to make ends meet with a 5% surcharge on guest checks. When restaurants incorporate these charges, they explain at the bottom of the bill what they cover. Usually, it’s health care costs, or to even out credit card processing fees. “We said, ‘We do it because of the high cost of Minneapolis,’” de Leon said.

After a few customer complaints, “we decided it wasn’t worth getting people upset,” she added. “We just got rid of it, but then we increased our prices.” That’s why the same bowl of birria ramen will cost you $1.50 more in Minneapolis.

Still, they aren’t giving up on the city, or the line of work that they love.

“It’s been a hard month for us, and I sit down with Cristian like, if we’re struggling with the one restaurant, how are we opening another one?” de Leon said. “But we’re not at a failure point yet. We’re struggling, but I think that we’re hopeful.”

This is one of an occasional series of stories about the challenges facing the Twin Cities restaurant industry.