June 24, 2024

In 20 years of running restaurants, Jackson Rentschler had never experienced a surge of customers like he did with Gibs Sports Bar & Grill.

When the family-owned restaurant opened in May inside the former Cherry Creek Grill at 3104 E. 26th St., “the first two weeks were insane,” Rentschler said.

“It was crazy. It was a fun learning experience, and I was definitely proud of our team. We had our struggles, without a doubt, but we’ve turned the corner on that, and I think we’ve got everything figured out.”

The broader full-service restaurant industry likely would welcome that sort of narrative. Instead, growth has been slowed by challenges of a different sort — attempting to balance real estate costs, food and labor costs and the changing nature of diners.

Industry research firm Technomic reported in April that average sales growth for the top 10 casual-dining chains was 4 percent in 2023, though after factoring out double-digit increases at Texas Roadhouse and LongHorn Steakhouse, the increase average was 2 percent.

“Sustained chain-store development and the lingering effects of high restaurant inflation are expected to be the primary sources of nominal 2024 Top 500 sales growth,” Kevin Schimpf, director of industry research at Technomic, said in a statement.

The industry is being dragged down by Red Lobster, which is going through Chapter 11 bankruptcy that so far has spared its Sioux Falls location. Applebee’s posted a slight decline in sales nationally and a 2 percent drop in the number of locations.

Olive Garden and Buffalo Wild Wings grew new locations by about 2 percent.

Locals also slow to grow

Gibs’ opening represents one of the few new full-service restaurants to open in Sioux Falls in the past year. Others include BB’s Pub in northwest Sioux Falls at University Hills Village, The Scapegoat near Arrowhead Parkway and Six Mile Road, Session Ale Works near 12th Street and Ellis Road, and Pho Thai’s second location on 34th Street near Louise Avenue.

The Rentschler family was motivated to take on a new property because the east side lacks many full-service options, he said.

“There was a real sense of the east side needs another place to go,” he said. “And they’ve been absolutely incredible. They’ve been patient with our learning and, due to the sheer volume, keeping up with people.”

The east side also has been supportive of The Barrel House, said Mark Fonder, who also owns Krav’n in southwest Sioux Falls and said both are doing well.

“We’re fortunate, I think, where we’re located on the outskirts of town, and we’ve got a lot of very good regulars,” he said. “People that live close and support us regularly.”

Both restauranteurs say that while staffing isn’t easy, they’re sitting in a good place.

“So that’s a very crucial benefit, but we did just adjust pay,” Fonder said.

At Gibs and sister restaurant Gateway Lounge, employees who work at least 30 hours weekly are eligible for fully employer-paid health insurance.

At Gateway, the newest employee has been there two years “which in the restaurant world is crazy,” Rentschler said. “We’re far from perfect, but we are hands-on. My dad is at the Gateway every day, and I’m here every day at Gibs, and them seeing us makes a difference.”

Both local restaurants say rising food and beverage costs have been challenging to absorb, balancing a need to not outprice customers.

“Back in the day, you’d have liquor and beer and food go up once a year, and now you’re looking at two or three or more times a year,” Rentschler said. “Every day you get new challenges, but what we really look for is staff first, and that’s helped a lot in an industry where it’s not easy to retain staff.”

Future forecast

While Technomic reported that its top 500 restaurant chains collectively grew their footprint by 1.8 percent — the largest increase in seven years — much of the growth came from more limited-service restaurants.

The fastest-growing casual chain, KPOT Hot Pot & Barbecue, grew its unit count by more than 200 percent and is nearing an opening in Sioux Falls in a former Dress Barn location on Louise Avenue.

“I think it’s within the next month,” said broker Scott Blount of Lloyd Cos., who also helped KPOT moved into a former Johnny Carino’s in Fargo and is looking for a location in Lincoln, Nebraska.

“They’re very specific about where they’ll go,” he said. “They are in major growth mode.”

Other fast-growing national chains include Pinstripes, a full-service restaurant that includes bowling and bocce, and Barrio Tacos + Tequila.

Sioux Falls likely will reach a point in the not-too-distant future when top national chains such as Olive Garden or Texas Roadhouse look for a second location, commercial brokers said.

“There is legitimate interest,” said Ryan Tysdal of Van Buskirk Cos. “But they are slow-moving on it. They want to see more development, more housing. A lot of what you see on the east side will be a duplicate of what’s on the west side.”

Longhorn Steakhouse had committed to a location at Empire Place, but the deal never was finalized and hasn’t resurfaced.

“I think it’s interesting Rapid City has a Longhorn and we don’t … but there’s nothing going on here right now,” Blount said. “I can’t understand why Texas Roadhouse hasn’t already done a second location. I’m sure every broker has contacted them because the east side would be the logical location and somewhere by Dawley Farm because they are so busy.”

The Veterans Parkway corridor is the likely next location for such nationals, Tysdal agreed.

“We’re on the cusp of it,” he predicted. “I think you’re going to see an influx of restaurants coming, specifically to Veterans Parkway … because you have so much more population.”

Other new full-service restaurants coming to the market include The Steel District restaurants — three from Twin Cities restaurateur Josh Thoma, including Big Sioux Burger, Bandera Tequila Bar and Ironwood, a steak and seafood concept. Italian restaurant Cascata is opening inside the adjacent Canopy by Hilton. Boston’s Pizza at Ramada Waterpark and downtown’s BibiSol are opening next month, Big Lost Meadery is coming to Lake Lorraine, and Tavern Grill is still under construction in the former Spezia at 57th Street and Louise Avenue.

Fonder, who once considered another full-service restaurant in southwest Sioux Falls, isn’t sure what it would take — if anything — to encourage him to open another new one.

“The labor cost has went way up, food costs have went through the roof, so it’s definitely gotten a lot harder for the bottom line ever since COVID,” he said.

And that doesn’t count the increased cost of construction for a new restaurant plus a liquor license to operate it.

“It just adds to the cost of everything,” he said.

The Rentschler family, though, is about to do it again. The plan is to break ground next month on a new restaurant in Tea called Pal’s Pub.

Rentschler lives in Tea and sees a need for a place for families to dine before and after high school games as well as at night.

The growth there “is unbelievable,” he said. “And it just continues. In between Sioux Falls and Tea, every day you see a new project coming, which is exciting.”