A chill went through the restaurant industry last week when a top New York restaurateur, Stephen Hanson, announced that he was closing several of his once-packed and highly successful restaurants in New York and Chicago. It was the latest in a string of bad news for the business. Confronting a wave of high-profile closings at top eateries, restaurants are bracing for a tough year -- and taking new steps to try to survive.
Fine dining sales, which totaled about $7 billion last year, are expected to plummet 12% to 15% in 2009, says Joe Pawlak, vice president of Technomic, a Chicago restaurant industry consultant. In New York, the Rainbow Grill above Rockefeller Center announced last week that it will stop serving dinner, and will offer only drinks and appetizers. Taurus, an Atlanta steakhouse that had earned accolades in the local press, closed two weeks earlier. In San Francisco, Rubicon, a top-rated restaurant co-owned by New York restaurateur Drew Nieporent, closed in August.
Mr. Hanson closed Fiamma, a formal Italian restaurant in New York's SoHo; Ruby Foo's Uptown, a pan-Asian restaurant on the Upper West Side; Level V, a Manhattan lounge, and Blue Water Grill in Chicago. B.R. Guest Restaurants, Mr. Hanson's restaurant company, laid off 400 of its 2,000 employees.
To avoid the fate of some of their peers, many restaurateurs have been rolling out dramatic discounts. Starting in December, Jean Georges, the high-end New York restaurant of chef Jean-Georges Vongerichten, began serving $35 dinners, complete with hors d'oeuvres, three courses and after-dinner homemade marshmallows in Nougatine, the restaurant's more casual room; in the formal dining room, the cheapest four-course menu is $98. Other eateries are now offering three-course meals for about $20 or less: David Burke Primehouse in Chicago has a $20.09 Sunday night dinner, and, until Feb. 12, London Grill in Philadelphia is serving a lobster or beef filet meal, with salad and dessert, for $18.95.
Where the Deals Are
On Monday nights, oysters cost $1 each (they're usually $2 each) and nightly there is a $40 three-course dinner option (usual dinner price: roughly $55).
Every weekday in the less-formal Tavern section of the restaurant, a soup-and-sandwich lunch is $14. Choices may include preparations such as roast beef with ramp aioli and arugula and parsnip soup.
Through Feb. 12, a three-course dinner of lobster or beef filet, salad and dessert costs $18.95. Ten dollars more gets you two glasses of wine paired with the meal.
Urbana Restaurant and Wine Bar
A two-course lunch, plus a dessert and coffee wrapped up to go, is $11.95. Usually, lunch is about $25.
For $20.09, the restaurant will pour an unlimited amount of wine from a selection of five whites and five reds, Monday through Wednesdays (excluding Mardi Gras).
A three-course lunch is $24 (usual cost is about $30).
During the city's Restaurant Week, from Feb. 21-27, diners can eat three courses from the menu at a cost of $52.80 per couple (some items have a supplementary fee).
During Los Angeles's Restaurant Week, which runs Jan. 25-30 and Feb. 1-6, Campanile will serve a three-course dinner for $34 (usual cost: $65).
On Monday nights, the restaurant serves a $16 porchetta (whole pig stuffed with sausage and spit-roasted) and Italian bean dinner, with a quarter-liter of Chianti for $6 more.
In markets where labor costs are high, discounts are less common and proprietors are trying other tactics. At San Francisco's the Fifth Floor, there is an "Honor Bar" where patrons stuff money into a box on the honor system and pour themselves wine from an unstaffed bar. Another approach is to cut operating hours: Starting this month, for an undetermined length of time, Aqua in San Francisco is closed for lunch. Other widespread strategies include adding Sunday brunches -- Payard Bistro in New York just rolled one out -- and hosting lower-cost, special-event nights, like Mondays at Poggio in Sausalito, Calif., when the restaurant serves $16 porchetta -- stuffed, roasted pork -- with Italian beans
Over the past 10 years, the total number of restaurants in the U.S. -- which is currently 570,000, according to an estimate from Technomic -- grew by 1% to 2% annually. This year, 12,000 to 18,000 restaurants are expected to close, sending the net total down by 2% to 3%, says Mr. Pawlak. The National Restaurant Association reported its lowest numbers on record for its Restaurant Performance Index, a complex formula that incorporates restaurateurs' reports of their traffic, sales, labor and investment expenditures as well as their expectations for coming months. A record 47% of all restaurateurs say the economy is their current top worry, the trade groups says.
Currently, consumers appear to be "trading down," choosing lower-priced restaurants than they used to. The National Restaurant Association projects that sales, adjusted for inflation, will decline by 2.5% in full service restaurants in 2009, while it predicts quick service will grow by 0.4%. Mr. Hanson reports a similar effect within his portfolio of restaurants, with cheaper places faring better than expensive ones.
Mr. Hanson is known in the industry as a pragmatic businessman with successful, populist concepts and fully-packed restaurants, which raises questions about how restaurateurs with far
riskier concepts will fare in the economic downturn.
His formula, since opening his first Manhattan place, Coconut Grill, in 1987, has long been trendy food served in a chic atmosphere at moderate prices. He latched onto the high-end Mexican trend with his Dos Caminos chain, pan-Asian with Ruby Foo's and, most recently, got into the big-city barbecue movement with a place in New York.
Local critics often declared the food at B.R. Guest restaurants unadventurous but fairly good. Fiamma, however, which aimed for loftier culinary goals, was highly praised.
At Fiamma, the cheapest meal was $85 for three courses. The restaurant received a Michelin star in the 2009 guide book and a 2007 three-star review in the New York Times, which described the food as rich, decadent and "the definition of luxury." After a couple years of gradually slowing sales, the restaurant "took a pounding" this winter amid turmoil in the financial district, not far from the restaurant. The party business, which normally accounted for half of December's revenue, was off by 40% in 2008, Mr. Hanson says.
His lower-priced restaurants, including four Dos Caminos units, in New York and Las Vegas and Wildwood BBQ in New York, are doing well, he says.
Big restaurants have long been key to Mr. Hanson's strategy. Of his remaining businesses, the smallest has 150 seats and the largest 488. Ruby Foo's Uptown had 363 total seats. "I'm in the volume business," making a small profit on a large number of checks, Mr. Hanson says. As traffic declined this winter, his model suffered, he says.
"Ruby Foo's had lost the electricity that it had when it was overwhelmingly crowded, so in the last year, it was one of those big places that if it's not full, it feels semi-empty," says Tim Zagat, co-founder of Zagat Survey.
Mr. Hanson says he opted to close Ruby Foo's Uptown in New York and Blue Water Grill in Chicago in part because their leases were set to expire this spring. Winter months are typically slow for restaurants, and this year portends especially poorly, so Mr. Hanson decided not to limp through winter.
Mr. Nieporent, co-owner of Rubicon in San Francisco, which closed this August, is noted for launching the Nobu brand and pioneering in New York's TriBeCa neighborhood. But he says he never made a profit during the 14 years he operated Rubicon, because of a combination of factors, including high rent and the need to invest in the restaurant's wine inventory. When the cost of business became too high in 2008, he decided to close the restaurant.
Taurus, in Atlanta's Buckhead neighborhood, was lauded by local magazines as a top newcomer after its 2005 opening. Chef Gary Mennie, who had worked at Spago in Los Angeles and at Altanta's trendy Canoe, is well known in Atlanta. But the steakhouse could not survive the downturn and closed after serving New Year's Eve dinner.
In an expression of solidarity with the industry, the blog Eater.com, which covers the restaurant scene in New York, San Francisco and Los Angeles, halted its popular "Deathwatch" column, which gleefully reported on restaurants that appeared to be going out of business. In its stead, the site launched "Rally Cry," a feature that encourages readers to patronize endangered but deserving restaurants.
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