East Village’s Cafe Chloe closing amid declining traffic, rising labor costs

Cafe Chloe in East Village is closing following a 14-year run, unable to turn a profit amid rising labor costs, increased competition and a costly opening last year of a sister restaurant.
(K.C. Alfred / San Diego Union-Tribune)

Cafe Chloe, a beloved East Village bistro that opened the same year as Petco Park, is closing amid declining patronage, increased labor costs and growing competition.

Faced with continuing losses even as a nearby sister restaurant opened last October, co-owner Alison McGrath said she and her husband had no choice but to close the 14-year-old Cafe Chloe.

The last day of business will be Sunday, with lunch and dinner planned throughout the weekend, starting Friday, although McGrath suggests checking social media for any change in plans.

While the 40-seat restaurant has been deluged with patrons and requests for reservations since news spread of the impending closure, the increased business came too late to save the neighborhood eatery, long a destination for special occasions and first dates.

“The last three years we have most definitely not made a profit and we’ve kept it open for the community and staff,” said McGrath, whose daughter Chloe inspired the name. “We were putting in money every month because we love it so much.”

While there have been a number of East Village restaurants that have closed in the last year, she insists that Cafe Chloe’s location was not a factor contributing to its demise. In fact, the restaurant flourished in the early years and even earned an unexpected mention in the New York Times’ 2006 travel piece, “36 Hours in Downtown San Diego.”

It was instead a confluence of issues that have bedeviled the neighborhood eatery as the ownership grappled with a series of increases in the minimum wage; rapid-fire openings of hip restaurants in dining hot spots from Little Italy and North Park to Liberty Station; and unanticipated cost overruns for the opening of their Minou creperie and event space located a block west of Cafe Chloe.

The creperie is now closed, although it is still being used for private events, and plans are in the works for reinventing it as part of a possible redevelopment of the building it occupies, McGrath said.

McGrath and husband John Clute, also a co-owner, are certainly not the only San Diego restaurateurs wrestling with rising labor costs, but McGrath acknowledges they never made financial adjustments like others have, be it raising their prices, cutting costs or adding a surcharge on diners’ bills.

The city of San Diego’s last hike in the minimum wage was January of last year, when it jumped to $11.50 an hour. Although many restaurateurs pay their non-tipped staff well over the minimum wage, they say that with each mandated increase they feel obliged to raise overall pay a like amount.

“No, we didn’t want to raise our prices. No, we didn’t want to do a surcharge,” McGrath said. “We just couldn’t land on something that felt acceptable. So we ate it for three years.We just couldn’t stomach compromising on anything.”

Three years ago, they brought in new financial partners — Jerry and Chrissy Reynolds — to replace a departing partner. As part of the Cafe Chloe closure, McGrath said she and her husband recently bought out the Reynolds couple.

Adding to Cafe Chloe’s financial woes was the $500,000 cost to create Minou, housed in a century-old building, which had its own set of construction challenges.

The 1,400-square-foot space was conceived as a place for mostly to-go food, but when city regulations limited the size of the walk-up window, the owners decided they needed to turn it into a full-service cafe, which added to their labor costs.

Just a few months ago, the owners debuted a modest facelift and new menu to resuscitate Cafe Chloe, but that, too, was not enough to boost traffic amid continued restaurant openings.

“I can’t tell you how many people have been coming in, apologizing, saying we should have supported you,” said McGrath, who has been reminiscing with customers about special Cafe Chloe moments. A friend recently told her the restaurant was the site of his last date with his ex-wife and the first date with his current wife.

“We never really shared our struggles with people, maybe had we they would have come more the whole time but it’s your job to make other people happy and not make it about you.”

McGrath said she and her husband are still at work on new plans for the Minou space, which would involve bringing on a partner.

She could not disclose any details for that space, nor was she prepared to provide a timeline for years-long plans for a Liberty Station project called Chloe at Scout that would envisions a garden cafe and event space. It, too, will involve an outside partner, McGrath said.


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Twitter: @loriweisberg