October 22, 2008
Across the Country, Restaurants Feel the Pinch
THE party’s been over for months and months in South Florida and Southern California, but restaurants there are just now starting to feel the hangover.
In Miami, where the housing bubble bloated most freely and burst most quickly, the effects of the downturn have emerged slowly and unevenly.
“It’s just the last couple of months,” Michelle Bernstein, one of the best-known chefs in Miami Beach said last week as she stood near a few empty seats at the bar of her restaurant, Michy’s. “It’s been scary.”
Even restaurants that say they’re doing fine, in Miami and elsewhere in the country, can no longer afford to play hard to get.
They’ve started taking reservations and adding value menus with phrases that evoke the Depression. And many restaurants say more customers are sharing appetizers, buying cheaper wine, ordering less wine and fewer courses, or just not showing up as much.
Where the economy has struggled longest, restaurants have been hit hardest.
In southern California, restaurateurs interviewed over the past week said business had dropped by as much as 20 percent from the same time last year.
Javier Gonzalez, who opened Costa Brava, a Spanish restaurant in suburban San Diego, seven years ago, said business had been growing by 20 percent a year, but is down 10 percent this year.
“I think what’s been the most affected by the economy is the festive atmosphere in the restaurant,” he said. “Besides people ordering two glasses of wine instead of a bottle, there just isn’t the same buzz.”
“Birthdays and other parties don’t seem as exuberant,” he added. “In the long run, it’s very scary to think what will happen after Christmas and the New Year.”
Bernard Guillas, executive chef at the Marine Room Restaurant in the wealthy San Diego enclave of La Jolla, said he’s still doing a roaring trade, echoing what other high-end restaurants have reported. But he has also begun to offer a $40 prix fixe menu and the 67-year-old restaurant’s first happy hour.
“You just need to be flexible and to realize that people are on more of a budget,” he said. “You have to keep up your attention to detail because a tired restaurant will drive customers away, especially now.”
That sort of flexibility has so far helped independent restaurants avoid the problems of full-service chains, some of which have gone bankrupt and most of which have seen sales fall. (Fast food restaurants like Burger King, and fast casual restaurants like Chipotle have done better.)
Bob Goldin, executive vice president of Technomic, an industry consulting group, said independents are better able to adapt.
“They can change their menus more quickly, add specials,” he said. “Can you imagine what it takes for a chain like Applebee’s to introduce a new item?”
But John Owens, senior equity analyst specializing in restaurants for Morningstar, said that in many cities, big chains may eventually win out. They can afford to advertise more than small restaurants and negotiate better deals with suppliers and get better locations.
“Independents can be nimble and know their clientele,” Mr. Owens said. “Some will be able to compete and do well, but not all of them.
“We’re going to see a lot of independent restaurants shut their doors.”
New York restaurants have avoided the hard times so far, but may be feeling the effects soon.
“New York has probably been the last bastion of stability,” Mr. Goldin said, “but I’m expecting it will change pretty rapidly.” Following are reports on the restaurant scene around the country.
LOS ANGELES
In a city where nipping and tucking is usually done by plastic surgeons, restaurants are coping with a brutal downturn, suffering the effects of both a recession in the regional economy and a strike by screenwriters that brought movie and television production to a halt.
Restaurants that formerly banned customers from modifying menu items are playing a bit nicer and creating specials: the “Hard Times Happy Hour” just arrived at Lola’s in West Hollywood.
“Everyone is trying much harder to make sure the customers they do have are happy,” said Wes Idol, an owner of Pacific Dining Car, an 87-year-old restaurant known for its dry-aged steaks. “But there’s no doubt about it, we don’t really see daylight right now.”
In Southern California, that’s a powerful statement, but perhaps not an exaggeration. Almost every restaurateur questioned reported having about 10 percent fewer customers in the last few months.
Amy Knoll Fraser, an owner of the upscale Grace and the more casual BLD, both popular with the Hollywood crowd, said she has scrambled to change. “California has been in an economic crisis for some time and it has us doing all we can to keep our heads above water and not panic,” she said.
Grace, with its menu of wild boar tenderloin and herb-crusted tofu, is more insulated, she said, because the restaurant features a well-known chef (her husband, Neal Fraser), and has a large events and catering arm. But BLD needed emergency action. Among other changes, the two-year-old restaurant started taking reservations for the first time to better manage labor costs and edited its menu so diners would order main courses, not just small plates. The changes have limited the decline in sales to about 10 percent, Ms. Knoll Fraser said.
The most expensive restaurants, insulated until recently, are also running into the economy’s buzz saw. At Providence, where the per-person dining average is about $150, business over the last month has dropped by nearly 20 percent, according to Donato Poto, an owner. The restaurant has started to cut back on employees’ hours.
“If special-occasion restaurants are now feeling the weakness,” Mr. Poto said, “it’s very worrisome.”
MIAMI
Restaurateurs here say that in the past few weeks, conversations have turned from beaches to budgets.
Ms. Bernstein, 38, the chef and a partner at Michy’s, said her business is down about 20 percent from the same time last year.
Diners, she said, now buy one bottle of wine instead of two, and often order fewer items from her menu, which includes full and half portions. Rising prices have added to the squeeze.
“Flour is up 85 to 100 percent,” she said. “We can’t raise our prices because we can’t lose you.”
On Lincoln Road, the main restaurant row of South Beach, owners and managers described wild swings from night to night.
“Some days we’re off by $100,” said Vinny Cartiglia, a manager at Balans, where the most popular item is the sea bass ($22.95). “Some days it’s by $2,000 or $3,000.”
Restaurants with predictable food at decent prices seem to be doing better. Bars with football fare (burgers, wings, quesadillas) report that business has stayed roughly even since last year, as do the South American cafeterias that dot most Miami neighborhoods.
Some restaurants with more sophisticated offerings have tried to adjust.
Icebox Cafe in Miami Beach, which offers New American fare with a focus on seafood, wine and layer cakes, now offers a “recession cruncher” menu that includes a stuffed red pepper with a beef and rice filling for $12. The owners have also had some success with new, affordable family take-out: a loaf pan of meatloaf, with nine servings, goes for $18.
But perhaps no one understands the city’s stomachs — and wallets — better than Myles Chefetz. He owns four restaurants here.
In an interview at the sleek steakhouse Prime One Twelve, he rattled off his sales numbers. The Big Pink diner was flat. Nemo, an American bistro that has been open for 14 years: down 10 percent. Shoji Sushi: down 13 percent.
And Prime One Twelve, where the average check is $105? Up 6 percent over last year.
To explain why, Mr. Chefetz walked into the restaurant’s softly lighted, crowded dining room. He pointed to a powerful developer who could still afford expensive wine. Mr. Chefetz walked outside. A $200,000 Bentley was parked near the curb. He said he planned to open a high-end Italian restaurant across the street later this year.
“The people here with a lot of money,” he said. “They’re still going out.”
CHICAGO
The economy here has not taken as hard a hit as that of Miami, but as with many places, the convention and tourist trade are off.
Also, restaurant owners and chefs said that diners are choosing less expensive items on menus and wine lists.
And they are asking for separate checks more often, no matter how large the party, said Emmanuel Nony, who opened Sepia, in the West Loop, one of the city’s premier dining zones, 15 months ago.
“It’s never been like that,” he said.
Some say business goes up or down depending on how Wall Street is doing.
“I’ve never seen the restaurant business so concerned about the stock market,” said Arthur Greenan, general manager of One SixtyBlue, a contemporary French restaurant where dinner and drinks come to about $85 per person. “We follow it as much as food prices.”
Mr. Greenan said many diners are skipping desserts, and fewer people come in for a light dinner at the bar. Overall, sales are off by 10 to 15 percent.
But One SixtyBlue is counting on a new chef and some tweaks to its pricing to end the year on a better note.
“The new menu is reflective of where the economy is going and sensitive to people’s spending needs,” Mr. Greenan said. “Chicago, like New York, is looking for what’s new and exciting. For us, this will be significant. We want people to think of us as more affordable on a regular basis.”
Terry Alexander, who owns several upscale and casual restaurants and lounges around Chicago, found comfort in the fact that people are still dining out, no matter what they order.
“I’d say before, our wines at our trattorias would be anywhere between $45 and $50,” Mr. Alexander said. “Now it’s slipped to $38 to $45. We still see people coming out and our total number of guests isn’t going down, but the check average is.”
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