Terra American Bistro, a familiar San Diego dining spot for the past 26 years, will be serving its last restaurant meal on Friday following a decision to close and focus instead on its longtime catering business.

The 3,000-square-foot restaurant on El Cajon Boulevard just outside of La Mesa has been operating there since 2011 after relocating from its location in Hillcrest where it opened in 1998. The rebranding of the restaurant from upscale dining to a more casual, neighborhood eatery worked, but as labor costs soared in the past few years and his catering business swelled, co-owner Jeff Rossman realized he needed much more kitchen space.

“For the restaurant specifically, it’s been a little bit of a struggle because labor costs have skyrocketed, that’s no secret, and there’s a lot more competition in the marketplace,” said Rossman, who co-owns the restaurant with his parents. “The main reason for closing the restaurant is we needed a larger facility for catering because right now we’re doing contract catering working out of two kitchens, and it’s not efficient so we’re losing money.”

One of those kitchens is off-site and is leased month to month. Working in Rossman’s favor is that his family owns the real estate where the restaurant itself is housed.

The added stress of rising labor costs for a sit-down restaurant, Rossman said, made it a bit easier to make the final decision to close.

“It’s hard because we’ve been a restaurant for 26 years and we will lose some of our employees, although some we will repurpose,” he added. “We still have the labor costs with catering but it’s a little easier to suck up those costs in catering because people are willing to pay pretty much whatever catering costs because you’re also having to bring a lot of things to the location you’re catering.”

Before making the final decision to close, Rossman said he had scoured the San Diego area for a convenient catering kitchen location but the only place he could find was too costly and it would have taken 10 months to build out.

Fans of Terra American Bistro, though, won’t have to hire Rossman for catering to enjoy his signature dishes. He’s made the decision to still offer takeout, although he hasn’t firmed up how frequently that will be. It may start out as weekends only and then possibly expand for certain kinds of promotions like Taco Tuesdays or Chicken Fridays, not unlike what the restaurant did to keep revenue flowing during the early months of the pandemic.

The plan will be to publish changing menus early in the week to give the customers and Terra time to place and fill takeout orders for pickup on the weekends. The menu won’t be as robust as the current restaurant offerings, but there will be a decent selection of appetizers, salads, soups, sandwiches and entrees, Rossman said. No start date for takeout has been set yet, although Rossman is hopeful it will start by July 1.

The nearby Jazz Lounge, which has relied on Terra for preparing and delivering the food for its dinner concerts, will continue to have that relationship, although the menu choices will be fewer given the closing of the restaurant.

In the meantime, Terra’s owners will be reimagining the restaurant to create more space for its catering operation. About 400 square feet of the dining room will be converted to a walk-in cooler, and the bar area will be transformed into kitchen prep space, Rossman explained.

“Being a restaurant for 26 years has to say something, so it feels good to last that long and beat the odds,” Rossman said of the imminent closing. “But I think it’s just time for us to move in a different direction for the company so I’m super sad for all the customers who will miss out, but we still have the takeout and catering options.

“It’s not like we’re going to disappear off the face of the earth.”