Leo’s Italian Restaurant continues serving family recipes, a century later

OELWEIN — When you’re at Leo’s Italian Restaurant, you’re family — and for the Leo family, it’s been that way in one form or another since 1922.

The continuation of the family’s businesses, which have been serving closely guarded recipes for 101 years, started with Leo’s Grocery.

When the Leos started serving their homemade meatballs, sausages, bread and specialties to the public, first-generation immigrants Frank and Angelina Leo built their reputation on a business savvy that included kindness.

From a young age, third-generation owner Mike Leo was instilled with that ethos. Starting at age 8, his business master class more closely resembled the Golden Rule than a business administration degree.

“As soon as you could hit a countertop, they had you working,” he said. “That was the best thing that happened to me.”

Rolling 8-inch crusts earned him a nickel; 14-inch pies earned a quarter. Today, the owner clears tables and takes orders daily, giving him plenty of time to talk to customers.

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Leo won’t credit his business’ longevity to good budgeting or an astute business acumen. It’s more “good work ethic, morals and being a good person,” which apply just as well to business as they do to life, he said.

“We treat people right. My dad always told me you’re nothing without your employees,” Leo said. “I act the same way here as I do outside the business — I don’t separate the two.”

In addition to their proprietary spice blend that Leo mixes personally, this dining room experience is predicated on the personality the owner brings to the table — a familiarity that makes regulars and first-time diners feel like they’re flesh and blood through jokes, lighthearted jabbing and personal conversations the way Leo’s father, Nick, did.

A glance at the kitchen shows a sharp contrast to industry trends. A gray-haired staff with tenures of 15 to 25 years — virtually unheard of among restaurant employees — were prepping for a recent Thursday night dinner

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But noticeably absent from the family-run business are other members of the Leo family. Upstairs at the Generations Lounge, the restaurant’s companion bar, a hook missing on the wall foreshadows a problem corporate-run restaurants don’t have.

For years, the hook held a photo of the next generation to take over the family business. But neither of Leo’s two children, now in their 30s, are interested.

The way things are going for restaurants, he doesn’t want that life for them anyway. Despite seeming to do everything right, industry conditions bring growing uncertainty — even for those who keep the business in the family.

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Front-of-house

Like the recipes served inside the aging building, not a lot has changed.

Timeless golden stucco walls, first installed in the 1990s to deliver old-world charm, hold an array of family photos. At the door, the register still sits atop glass display cases used at Leo’s Grocery a century ago. Inside them, tools of the trade from the early days of making pizza sit on display.

“My dad used to remodel this place like he changed underwear,” Leo said — something that has slowed in recent years.

Homemade pizza came into the family business when his father started serving it at his bar, the Horseshoe Tap, in the 1940s. Though the classics at Leo’s have never changed, the menu at the small-town destination has grown and evolved.

Conventional knowledge with the menu is to stick to what you know, “but we know a lot,” the owner said.

Unlike other restaurants shrinking their menus or simplifying their pantries, Leo’s expanded menu — much of which involves labor-intensive recipes — continues to sell.

While the business continues to hold its own against the intensifying pressures of running a restaurant post-COVID, Leo’s isn’t immune. The profit margin has gotten even tighter than the typical 6 percent to 8 percent, and card processing fees have been added to bills. Hiring remains difficult, and operating hours have been cut.

Instead of shrinking portions, management has opted to increase prices.

“We’re making our money by pennies, not dollars,” Leo said. “We’ve got to be careful what we do, but not skimp.”

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The only problem with no firm solution is succession.

He’s considered an employee stock ownership plan (ESOP), but the turnover typical for the industry makes that a little trickier. He’s mulled potential deals with employees, but a family-owned restaurant can only be family-owned as long as the next generation is willing to take it over.

“I don’t know what I’m going to do,” said Leo, 63. “I just don’t see retirement in my future.”

How rare are family-owned restaurants?

In Iowa, family-owned restaurants are rare and continue to become even more rare, said Jessica Dunker, president and CEO of the Iowa Restaurant Association.

Concepts that have continued for 100 years are even more of a gem.

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“It’s an interesting dilemma for a restaurant owner,” Dunker said.

Without the next generation, they rarely carry on as independent concepts.

“Rarely does it continue, that’s the sad truth,” Dunker said. “If a family member isn’t willing to step into that labor of love to continue it, it’s very unusual to have an independent, family-owned business continue under the same name and menu.”

A large part of a family-owned restaurant’s success is related to the warm dining experience. Most of them embrace a classic style of food, like steakhouse or Italian, that make them more impervious to the typical restaurant life cycle of 10 to 20 years.

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“Knowing the people is part of the reason,” Dunker said. “It has everything to do with relationships and being part of the story of the restaurant.”

It’s the double-edged sword of community relations that can make it difficult for those small establishments to raise prices or make the changes they need to survive.

With increasing barriers to profitability, restaurant owners today are less likely to expect their children to continue the business. A large part of what makes family ownership work for families is the lifestyle it allows, Dunker said — something that doesn’t necessarily make a good business case on paper to outsiders.

More and more often, parents starting restaurants today are choosing franchise concepts that sell on the market more easily, should their children choose not to take up the business after them.

For other family-owned restaurants at this juncture, one solution has been finding operating partners to work side by side until the new partner is as visible as the owner.

“You can’t do that in a matter of months,” Dunker said. “You have to do that in a matter of years.”

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