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VOL. 125 | NO. 1 | Monday, January 4, 2010

Restaurants Embrace New Normal

By FREDRIC KOEPPEL | Special to The Memphis News

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LOOKING UP?: Jeff Dunham, chef and owner of The Grove Grill in the Laurelwood Shopping Center, is hopeful for business in 2010. -- PHOTO BY BOB BAYNE

“For 2010, I’d like to see a 20 percent increase in revenue,” said Jeff Dunham, owner and chef at the popular Grove Grill in East Memphis.

For Dunham, that goal might be attainable, but for many others, a rough 2009 has carried into the New Year.

From September 2008 through September 2009, the restaurant industry in America suffered one of its most intense downturns since the late 1980s.

Yet as much as the economic recession brought major banks to their knees and hurt the country’s dining-out segment, this dismal period appears to be the culmination of a steady decline in the public’s interest in eating out at every price level and style of cuisine.

Where bread is buttered

Over the past five years, the percentage of lunches and dinners eaten away from home declined from 53 percent to 45 percent, according to a report released in December by The NPD Group, a marketing research company in Port Washington, N.Y. Traffic for such ubiquitous national chain restaurants as Chili’s fell for 21 consecutive quarters.

The Current Situation Index, part of the Restaurant Performance Index issued by the National Restaurant Association, has registered below 100 for two years, indicating a contraction in business activity. It stands right now at 96.

Will the situation improve in 2010?

“I think we can go into 2010 with optimism tempered by a sense of reality,” said Mike Miller, owner of Patrick’s Steak & Spirits on Park Avenue and president of the Memphis Restaurant Association. “Coming from the end of 2008, when the economic situation started to get bad, and into 2009, it was a tough year. But everything I’m hearing for the last four to six months sounds better in every price range, from burgers and family restaurants to fine dining. From a pure business standpoint, we have a little momentum.”

Karen Carrier’s optimism is tempered.     

“January is going to be really bad,” said Carrier, owner of Do Sushi, the Beauty Shop Restaurant and Lounge, Mollie Fontaine Lounge and the catering company Another Roadside Attraction.

“By the beginning of 2009, things fell apart,” she said, “and 2010 may still be a little rough. I don’t think things will start to ease up until the summer,” an assessment that agrees with The NPD Group’s report, which estimates the restaurant industry “will remain weak, at least through the first half of 2010.”

“First, I think the days of $28 to $32 entrees in this town are over, except for very special occasions,” Carrier said. “Second, your waiters represent the restaurant, and they can’t be rude or pretentious or argumentative. You can’t act like a celebrity, either in the kitchen or the dining room. The customers pay us, not the other way around. I’ll do whatever I have to do to make them happy.”

A strategy Dunham uses at Grove Grill is the “small plate” concept, in which a dish is more generous than an appetizer but smaller than a main course.

“We introduced this in September, and it’s done very well,” Dunham said. “The concept offers a great opportunity for customers to spend less and to eat less.”

The point, said Dunham – and this includes good-quality wines at lower prices – “is not to cut staff or reduce service at any level, but to make things as affordable as possible for the customer.”

He cited the difficulty independent restaurants have in competing with chains: “They have money to put into marketing that we just don’t have. We rely on word-of-mouth and reputation.”

Still, Dunham said, “barring the other shoe dropping, I don’t see why the circumstances won’t get better sometime next year.”

‘Open to change’

The latter months of 2009 saw several surprise local restaurant closings, primarily Jose Gutierrez’ Encore in Peabody Place, which folded in September and, just before Christmas, the closing of the long-running Jarrett’s, owned by Rick and Barbara Farmer.

Then, just last week, The Kitchen on West Brookhaven Circle closed after being open since April. It had replaced Caspian, a Persian restaurant that lasted a couple of years.

Angie Kirkpatrick, who talked to The Memphis News a week before closing The Kitchen, seemed optimistic at the time, but did express frustration.

"We're affordable. The menu doesn't break the bank," she said. "But it hasn't turned out as I expected; it's much harder."

After a hiatus of more than a decade before launching The Kitchen, Kirkpatrick worked as manager of The Half-Shell during the 1990s, owned Maxwell's and In Limbo, in Cooper-Young, and Ithaca in the Holiday Inn Select at Union Avenue and Second Street.

"I've never been in a situation that was so unpredictable," she said.

What seems to be predictable is the restaurant industry, which, despite how society idealizes its sybaritic qualities and prestige at some levels, is, after all, a consumer product business. It's affected by not only economic factors, but cultural and social influences.

Nationally, the rate of personal savings is slowly rising – from 2.8 percent in August to 3.3 percent in September, according to the Bureau of Economic Analysis – meaning Americans are more reluctant to spend money during a recession that's not over yet.

“Restaurants have to be accountable,” said Carrier. “They have to keep the doors open to change.”

PROPERTY SALES 85 205 21,165
MORTGAGES 76 206 24,338
BUILDING PERMITS 183 321 43,755
BANKRUPTCIES 48 92 13,560