The realist behind the kitchen door: What Iron Hill’s bankruptcy reveals about the pressures facing Delaware restaurants

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When Iron Hill Brewery and Restaurant — a Delaware-born chain once celebrated for its craft beers and community feel — filed for bankruptcy this year, many were shocked. But within that state’s restaurant community, the reaction went beyond surprise. For some, it felt more like a warning.

“Restaurants add so much luster to our daily lives across Delaware and every neighborhood and every corner of our community,” said Carrie Leishman, president and CEO of the Delaware Restaurant Association. “So when I hear of any restaurant closing, whether it’s a small restaurant or a big restaurant, it really doesn’t matter … there’s a loss to not only the people they employed, but also to the people that they served.”

Iron Hill was far from the only restaurant facing serious challenges, Leishman said, pointing to the closure of Galluccio’s Restaurant in Wilmington along with the plethora of Starbucks closing across the country.

The true cost of running a restaurant

Running a restaurant may appear easy from the outside — bustling tables, full dining rooms and a long wait time. However, behind the scenes, most owners are fighting a quiet financial battle.

“It’s tough because it isn’t a typical small business with a couple people inside,” Leishman said. “Imagine we’re manufacturing in the back, we’re service in the front. It’s a very labor-intensive industry and the profit margins are razor thin.”

She explained that the average restaurant operates on margins of just 3 to 5% even in good years. The cost of food, labor and utilities has soared since the pandemic while consumer spending has softened.

“If the consumer’s eggs at the grocery store has gone up three times, imagine what that does to a restaurant,” she said. “You may walk into a restaurant and say, ‘Oh, it’s busy.’ But that doesn’t mean the profit is there.”

A small restaurant’s perspective

For Berenice Lara Pulido, owner of Los Mayas Mexican Restaurant in Millsboro, Delaware, Iron Hill’s bankruptcy served as a wake-up call — a reminder of just how fragile the restaurant industry can be for smaller, independent businesses.

“Mi reacción al escuchar que cerrarían fue más que nada como un recordatorio tanto como para mí, tanto como a los que están en la industria que todo puede suceder”, Lara Pulido dijo. “La clave es saber administrarlo … no tener un mal manejo de dinero, descuidar la calidad de la comida, ni la atención al cliente”.

“My reaction upon hearing they were closing was more than anything a reminder, both for myself and for those in the industry, that anything can happen,” Lara Pulido said. “The key is knowing how to manage it … not mismanage money, neglecting the quality of the food, [or] customer service.”

She understands the kind of pressures that can lead a restaurant to shut its doors. Among the most difficult are the rising costs of supplies and ingredients.

“Las carnes están muy caras ahorita, demasiado cara la carne. Las carnes, el alcohol es demasiado caro también, antes no estaba tanto así”, ella dijo. “La verdad los los cambios los precios y los cambios que se ven en las compras son muy altas a lo a lo que es normal a lo que era antes”.

“Meat is very expensive right now, too expensive. Meat and alcohol are too expensive; it wasn’t that expensive before,” she said. “The truth is, the changes in prices and the changes we see in purchases are much higher than what was normal before.”

But what surprises her most is not the cost of ingredients — it’s the cost of labor. Running a team of nearly 20 employees, from servers and cooks to dishwashers and prep staff, comes with mounting payroll expenses that eat into monthly profits.

“Yo te puedo decir que para mí el mayor gasto tremendo que hay en mi negocio aparte de la comida, aparte del licor, aparte de la renta, aparte de los biles que incluye luz, incluye gas, incluye agua”, ella explica. “El mayor gasto que recibe mi negocio es el payroll. Es tremendamente sorprendente el payroll”.

“I can tell you that for me, the biggest expense in my business, aside from food, liquor, rent, and bills, which includes electricity, gas, and water,” she explained. “The biggest expense my business takes in is payroll. The payroll is tremendously surprising.”

To keep up with those rising costs, her restaurant had to make careful adjustments to menu prices, hoping to strike a balance between staying profitable and keeping customers coming through the door.

The Delaware Restaurant Association is aware of the industry’s challenges and has aimed to support local owners through training, policy advocacy and mentorship. Just recently, the association decided to go into different communities like the Latino community to see where it can better support its businesses.

“We’re learning what’s important to this community in opening restaurants and understanding that they need support,” Leishman said. “We’re also there to help support their growth and viability.”

Despite the difficulties, both share a common belief that local support makes the difference.

“Yo les diría que apoyemos que seamos solidarios y apoyemos a nuestra gente”, Lara Pulido dijo. “Porque si yo crezco, mi familia el día de mañana puede crecer … aunque sea solo de ir a comer una probadita de un postre o un appetizer también”.

“I think it’s important to support them,” she said. “Because if they’re not there, as we’re seeing with this recent closure … we’re going to miss them,” Lishman agreed.