Economic Headwinds Force Hospitality Entrepreneur to Rethink Business Strategy
Michael Salvatore, founder of Chicago’s Heritage Hospitality Group, finds himself navigating economic challenges that he says rival the uncertainty of the COVID-19 pandemic. The 44-year-old entrepreneur, who operates multiple bars and coffee shops including Froth, Heritage Outpost, and Heritage Bikes & Coffee, has implemented a hiring freeze, reduced staff, and begun strategic price increases in response to tariff pressures and broader economic uncertainty.
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“COVID was one of the hardest points in my life operating a business,” Salvatore noted. “Now, it feels like everything’s uncertain, but no one’s giving it the attention it needs. The current moment with inflation and policy uncertainty is starting to rival running a business during COVID.”
The Tariff Impact on Daily Operations
Salvatore’s businesses face pressure from multiple directions. “Any bicycle parts, anything coming from overseas, that’s getting hit, whether it’s tariffs or lack of inventory at this point,” he explained. Coffee bean prices have significantly increased, particularly due to tariffs on South American imports, with Brazil bearing much of the burden.
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The challenges extend beyond imported goods. “Even things like cups, paper goods, anything that we rely on — essentially, nothing’s manufactured in the States,” Salvatore said. “It’s a global economy, so everything gets hit.” This comprehensive supply chain pressure comes amid broader industry developments affecting businesses nationwide.
Strategic Price Adjustments Implemented Gradually
Facing thinning margins across all expense categories, Heritage Hospitality Group has begun implementing calculated price increases. “We’re raising prices in stages, starting with coffee,” Salvatore detailed. “Next, we’re looking at pastries, packaged drinks, and eventually our food menu.”
The specific changes include raising a cappuccino from $4.50 to $4.75 at Froth, while a cortado increased from $4.25 to $4.50 at Heritage Bikes & Coffee. Most adjustments fell in the 5% range, carefully rounded up. “We’re reviewing item by item over the next two months and adjusting where the margin hit is greatest,” Salvatore explained. “We’re not taking a blanket approach — it’s strategic and staged.”
These operational adjustments coincide with significant recent technology advancements that could help businesses streamline their operations in challenging economic environments.
Staffing and Operational Changes
In September, the company made difficult staffing decisions. “We cut staff due to tariffs, but also to streamline operations in response to thinning margins,” Salvatore said. The company eliminated overlapping shifts, reduced prep cook hours, and cut middle-management roles including kitchen manager and social media positions.
“I’d love to be able to have someone on social media and marketing,” Salvatore acknowledged. “It would help business, but I don’t think it would help it enough to make up for their salary at this point.” The hiring freeze implemented in late September remains in effect, with the company being “extremely selective” about any new hires.
These workforce optimization strategies reflect how businesses are leveraging related innovations to maintain operations with reduced staffing.
Navigating the Uncertainty
The biggest challenge, according to Salvatore, is the pervasive uncertainty. “You can’t operate a business with uncertainty,” he emphasized. “Every day is a win or a loss, and you can’t really run a business that way. This uncertainty creates this temperature where I’m going to hold off on any major decisions because I don’t know how that’s going to affect my bottom line tomorrow.”
Sources of uncertainty include tariffs, political factors, immigration policies, and labor challenges — compounded by the approaching slow season for hospitality businesses. “I’m frozen for at least six months,” Salvatore stated.
As businesses navigate these complex challenges, many are looking to market trends in technology and automation to improve efficiency and reduce costs.
Financial Management in Turbulent Times
Heritage Hospitality Group maintains rigorous financial oversight. “As a group, as a management, we talk about finances weekly,” Salvatore shared. The team is planning for slower months, ensuring realistic staffing hours and operational capabilities.
“We’re trying to run a skeleton operation until we understand where the other side of this is,” he explained. Despite the challenges, Salvatore remains committed to operating within revenues rather than taking loans. “As long as we can do that week to week, we keep track of what’s going on week to week, we make sure we’re running cost of goods, labor within line of a certain formula, we’ll be OK. But it’s going to get thin for sure.”
This careful financial approach aligns with broader industry developments in strategic planning and resource management during economic uncertainty.
Customer Response and Future Outlook
Surprisingly, customer reaction to the price increases has been muted. “Most people haven’t noticed or haven’t said anything,” Salvatore observed. When regulars do inquire about changes, explanations about tariff and cost pressures typically satisfy their curiosity. “I think people generally understand that everything is getting more expensive.”
Despite the necessary business adjustments, Salvatore remains passionate about the hospitality industry. “It’s always been about the people, it’s always been about the hospitality, and that keeps me going,” he reflected. Even as he implements difficult changes, his commitment to providing accessible hospitality experiences remains central to his business philosophy.
As Heritage Hospitality Group navigates these challenging economic conditions, Salvatore’s experience offers valuable insights for other small business owners facing similar pressures in today’s uncertain market environment.
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