Restaurateurs feel the economic pinch
Michael S. Rosenwald | Washington Post
Posted: Monday, June 16, 2008
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WASHINGTON — Restaurant owners around the country are trying to contend with a double economic whammy that has hit the industry, shaking up menus and causing chefs to consider, among other things, the merits of foie gras.

Food costs are high. Try making a profit on a gourmet pizza when flour prices are up 87 percent. Diners are ordering less or staying home altogether, as their wallets feel lighter from trips to the gas station and from not seeing the for-sale signs on their block turn to sold.

Last week Carmine Marzano, owner of Luigino in Washington, changed out of a white chef's coat and into a suit and went to court for his first bankruptcy hearing. Not only are food costs squeezing his business, he is also still recovering from when the 2001 terrorist attacks obliterated tourist traffic — an important aspect of his business because he's near the convention center. He was forced into debt that has now caught up with him.

"If these conditions don't change, I don't see any light," said Marzano, whose restaurant filed for Chapter 11 bankruptcy protection. "We've got to find a way to get through this."

Some restaurant owners are taking creative, sometimes painful, steps to keep customers. Filet mignon is off some menus: It's simply too expensive an option for owners and diners. Hostesses are sent home early; managers seat guests and answer the phones.

At Equinox, a fine-dining restaurant where business is down around 5 percent, one strategy is to get as much out of a chicken as possible. In addition to using the breast meat for a light chicken salad, the legs feed staff and the bones help create chicken stock.

"You just have to know how to use the whole bird," said Equinox co-owner Ellen Kassoff-Gray, who expects to battle crummy economics for months. "We told our staff, 'Save money. We're going to have some lean times ahead.' "

And that means no foie gras on the menu, either.

Even in good times, restaurant profit margins are typically around 4 percent, so there is little room to maneuver. The obvious option is raising menu prices, but many owners won't because they fear nobody will come.

"I see how people are these days," Marzano said. "They are saving pennies everywhere they can. I try to be good to them and hopefully they will be good to me and come back again."

Lynne Breaux, the president of the Restaurant Association of Metropolitan Washington, said restaurants are trying anything to keep menu prices from rising. "They have always been very creative animals and they are using all their creative powers not to pass on costs to consumers, and so far they are doing pretty good," she said.

Can they do enough or are the economic head winds too strong? Mintel International Group, a market research firm, said a January survey showed that 54 percent of people who dine out regularly are eating out less because of the economy. Of those, 70 percent are saving money by fewer visits overall rather than by picking more inexpensive entrees and restaurants.

Marzano stopped buying many food supplies through vendors because they were adding steep fuel surcharges. He goes to restaurant stores and wholesalers himself.

Jeff Black, who owns four restaurants in Maryland, pays his vendors within seven days of accepting an order — a rarity in an industry that often pays up to 180 days later — so he can use that as leverage to keep his food costs down.

"We are a good customer to our vendors, so they try to look out for us," Black said.

Café Deluxe, with three locations in the region, is adding more seafood dishes because those prices haven't risen as beef and chicken have. Fishermen use fuel to fish, but fish don't eat grains like cows and chickens do, and grains are more expensive because corn is being used to make ethanol.

At Equinox, Kassoff-Gray is doing more catering and focusing on inexpensive items on the restaurant menu to help offset the $2 or $3 added to some entrées. To avoid cheapening the experience of fine dining, side items are described as "for the table": Waiters encourage guests to order a couple of for-the-table selections as a meal. One popular selection is macaroni and cheese with black truffle, for $9.

"It is such a great recession dish," Kassoff-Gray said. "It's filling and it has truffle in it. It's luxurious and it's cheap."

But creative side dishes are only a stopgap measure.

"It is going to take us all adjusting for a while," she said. "We've gotten through this before and we will again."

For Marzano, this is a rough patch he never quite expected. The Italian immigrant came here 19 years ago with $200 in his pocket and the desire to learn English, become a chef and open a restaurant.

"People still like my food, they like coming in here to eat," he said. "I like to cook and make people happy. When bad things happen, you say, 'Why me?' This can be scary. It is scary. But I'm going to let this play out. I'm going to be smiling on the other side of this."






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