When the federal government seized control of mortgage giants Freddie Mac and Fannie Mae in early September, Elda Abate sensed that drastic intervention and the others following it would stir up problems in the economy. So she started stirring more red sauces at her Italian restaurant in Albany.
Anticipating fallout from what has been dubbed “Black September,” Abate gave her Elda’s on Lark an overhaul. Last fall, she revamped the Lark Street restaurant’s menu with lower-priced items. She started depending less on cream sauces and more on traditional Italian red sauces. “Comfort food,” Abate calls it.
“Now it’s fancy, but it’s traditional,” she said.
Elda’s, which opened a decade ago, last fall also rolled out a bar menu with gourmet pizza and it started taking take-out orders. By the end of the month, it will launch a meal delivery service.
“We’ve got to do something before it hits hard,” Abate said.
In the greater Capital Region, Abate is not the only restaurateur scrambling to brace her business for a rough 2009. From “Recession Buster” lunch specials at Tops Diner in Rotterdam to renovation and branding projects planned for the restaurant at the Glen Sanders Mansion in Scotia, restaurateurs are spicing up their offerings to counter another difficult year.
The National Restaurant Association last month predicted restaurant industry sales this year will rise by 2.5 percent over last year, but that figure translates into a 1 percent decline after taking inflation into account.
Technomic, a restaurant industry consulting firm in Chicago, has made an even more dire forecast for the industry. It pegged limited-service restaurant sales to decline this year by an inflation-adjusted 1.5 percent and full-service sales by an inflation-adjusted 7.2 percent.
“We’re doing some things we have to promote and doing things we have never done before,” said Walter Porath, owner of the Raindancer Steak Parlour in Amsterdam.
Raindancer on Jan. 2 launched what it is calling a “10-for-$10” early bird special, which puts a $10 fixed-price on 10 select menu items. Along with entrees such as chicken parmigiana, scrod and sliced sirloin, the special price includes a salad, warm drink and dessert.
The 10-for-$10 special runs through the end of January. The Route 30 restaurant will launch another special offering next month to mark its 30th anniversary.
Porath said 2008 was “not a big letdown” for Raindancer, though there was “some moderation” in consumer spending. Going into 2009, he was more concerned about the weather than the economy, given that back-to-back weekend snowstorms hampered business in December.
“I’m optimistic ’09 will turn around,” said Porath.
According to a Technomic report released in October, 2008 was the worst year for U.S. restaurateurs since 1980. Technomic found that 74 percent of consumers plan to visit quick- and full-service restaurants less often because of the financial markets’ meltdown. Fifty percent of consumers — and 70 percent of higher-income consumers — plan to spend less on what they order when they do visit those restaurants.
“It’s kinda like Starbucks. It used to be a daily event, but it’s become a special event,” Technomic Executive Vice President Tristano said of restaurant dining.
Through most of 2008, the combination of $4-per-gallon gasoline, slumping home values, mounting credit card debt and rising food prices severely cramped sales at restaurants. Restaurateurs received little respite when crude oil prices last autumn dipped to a 4.5-year low, because stock market volatility and rising unemployment gave consumers something else to pause over before going out to eat.
“They’ve gotten into the habit of going out less and cooking in more,” said Tristano.
Several established area restaurants have already fallen victim to the recession, which officially began in December 2007. Among the most notable independently operated restaurant departures was Garcia’s Mexican Restaurant in Colonie. The 25-year-old business closed in December after getting hit by high utility and other operating costs.
Restaurant chains also pulled the plug on several area locations, including the Weathervane Seafood Restaurant in Saratoga Springs, Salsarita’s Fresh Cantina in Clifton Park and Friendly’s and Old Country Buffet in Schenectady. Starbucks Corp.’s list of 600 underperforming coffee shops slated for closure included sites in Colonie and Schenectady.
On Jan. 4, the new year claimed its first victim: the Old Chicago restaurant in Colonie, which was the first in New York. Veteran restaurateur Donald Cepiel on that day closed the casual-dining establishment and its adjoining iPlay arcade-style game center on Wolf Road just sixteen months after they opened.
Higher-than-expect construction costs — associated with the conversion of an Arizona Fitness Factory into the dining and gaming center — compelled Cepiel’s Midon Restaurant Corp. to file in June for Chapter 11 reorganization in U.S. Bankruptcy Court. Consumers’ curtailed spending had hurt Old Chicago, but the Dec. 11 ice storm that left it without power over a crucial weekend sealed its demise.
One indicator of local restaurants’ cooling business is the shrinking size of their work force. In November, the Capital Region’s accommodations and food services sector, which includes hotels and restaurants, shrunk to 25,900 jobs, a decline of 1,200 from a year earlier, according to state Department of Labor statistics.
Restaurants have been relying more on their menus to fend off the recession. In October, the top 250 chain restaurants tracked by Technomic rolled out the largest number of limited-time-offers and new foods since 2003: 547 new menu items, up 40 percent from 2008’s monthly average.
“Obviously, these are very challenging economic times,” said Evan Christou, the owner of Tops Diner in Rotterdam.
In November, Christou added “Recession Busters” to Tops’ menu. Those specials offer diner patrons select menu items at $5.99 for lunch and $9.99 for dinner. The price includes soup or salad, an entree and starches or vegetables.
At the Restaurant Operators Cooperative, which Christou founded and heads, member restaurateurs are hoping the Albany group’s new food supplier will provide other recession busters.
The cooperative, which caters to over 80 area restaurants, last month severed its 10-year supplier relationship with the Houston-based Sysco Corp. and signed a three-year contract with Ginsberg’s Foods in Hudson.
Ginsberg’s outbid both Sysco and U.S. Foodservice for the cooperative contract, valued at $15 million. Christou said the deal should provide the cooperative with better prices, new products and food from local producers. The cooperative last week completed its conversion to Ginsberg’s.
“By partnering with companies like Ginsberg’s, we can focus more on our customers than on our purchasing department,” Christou.
At Elda’s, a cooperative member, Abate said she looked forward to receiving Ginsberg’s locally grown produce. In a National Restaurant Association survey, nine in 10 fine-dining operators said they believe demand for locally sourced items will grow in their market.
However, not all area restaurateurs are jumping on the menu-makeover and dinner-special bandwagon. Albany restaurateur John DeJohn said it is more important to serve customers consistency when it comes to menu items and pricing. He owns Justin’s restaurant, Legends sports bar and DeJohn’s Restaurant & Pub.
“Honest to God, we haven’t changed, and that’s the secret,” DeJohn said.