Restaurants Adapting To Downturn
New Economy hurting foot traffic at many sit down restaurants.

A Look at The New Reality of The Dining Industry.
Orignal Article by Wall Street Journal

Since opening in July 2007, the braised short rib flautas were always one of the most popular entrees at Johnny Utah's, a mid-scale Tex Mex restaurant in New York's Rockefeller Center.


Getty ImagesBut as the economy took a dive this fall, so did the flautas. Johnny Utah's owner Bobby Werhane says demand for dishes like flautas and fajitas plummeted, while orders for burgers, ribs and smoked Texas chili rose.

"We ran out of hamburgers the other day and we have never had that happen," Mr. Werhane said.

Johnny Utah's menu, which used to be half-Mexican, half-Texan, now skews about 75% Tex and 25% Mex, with dishes like the barbecue sampler taking the place of the once hot-selling red snapper tacos.

The downturn in the economy has changed the way people eat and dine out, and restaurateurs are scrambling to accommodate it. November marked the 15th consecutive month that the restaurant industry saw a decline in growth. The annual Restaurant Industry Forecast, released Dec. 19 by the National Restaurant Association, projected that overall restaurant sales, adjusted for inflation, will decline 1% in 2009.

Many restaurateurs like Mr. Werhane are turning to comfort foods to lure diners through their doors; studies have long shown that people turn to more familiar foods during stressful times. Boston chef Michael Schlow added roasted chicken to his menu at Radius. Chef Morou Ouattara of Farrah Olivia in Alexandra, Va., now offers a chowder. Mr. Werhane has three different types of burgers on his lunch menu now.

Tips for Dining Out on a Budget.

Look for lunch, breakfast or late-night specials as an alternative to the higher-priced dinner. Many high-end restaurants are adding these meals to attract customers, and you can often find special prix fixe bargains at these times.

More locales, including Orange County, Calif., and Montclair, N.J., are hosting Restaurant Weeks, which offer dining deals for the week. The specials offered are usually a fraction of the normal cost, but the quality and service are usually near the same.

Go out Monday, Tuesday or Wednesday -- that's when business is slow and restaurant are looking to draw in diners with deals on wine, tasting menus and more.

Anyone can make a fillet mignon, but a true test of a chef's mettle is how they transform shanks, shoulders and vegetables into something sublime. These dishes, such as braised lamb shanks or slow-roasted pork shoulder, tend to be cheaper, more flavorful and come in larger portions.

"People are navigating the menu differently," says celebrity restaurateur Donatella Arpaia, noting that the fried chicken at her casual Mia Dona restaurant in New York has been selling at a record pace.

Adds Mr. Schlow: "We try to have things that are fallbacks on the menu for the customer looking for something comforting, but it certainly goes to the economic situation we are in right now."

Indeed, restaurants can save money by offering stews, pastas and burgers, which cost far less to make than truffled lobster or dry-aged rib eye steak, and many chefs are taking advantage of that to save money on their end.

Ariane Daguin, owner of D'Artagnan, the New Jersey-based supplier of specialty meats, says chefs are ordering less kobe and waygu beef and opting for cheaper meats such as duck legs, quail and rabbit.

Executives at California-based gourmet meat purveyor Niman Ranch, traditionally a go-to for prime steaks and pork chops, say they have seen an increase in chefs asking for bacon and ground beef to use in dishes like burgers, meatloaf and meatballs.

Mr. Ouattara of Farrah Olivia says he has begun buying entire animals, or large sections of them, instead of choice cuts. For instance, with a whole cod, Mr. Ouattara uses the fillets as an entrée, the bones for stock and any leftover scraps for an amuse bouche.

"If you are able to do your entire menu that way, then you can save about 3% on your food cost," he says. "You have to be a businessman at this point, not just a chef any more."

Other restaurant owners are also hoping cheaper breakfast and brunch options will entice diners, as well as boost revenue.

"Profit is better at brunch because if you think about eggs, it doesn't cost a lot," says Francois Payard, the namesake behind the Payard pastry shops and restaurants across the globe.

Mr. Payard began serving Sunday brunch at his Upper East Side restaurant in Manhattan at the start of this year to help boost the 25-30% dip in revenue he started seeing during the weekdays over the past two months. He now offers a two-course brunch that includes a non-alcoholic drink, main dish and homemade bread basket for $25. Lunch or dinner at Payard runs $30 to $50 before drinks.

Mr. Schlow, who owns six restaurants in the Boston area, has also started offering a weekend brunch at two of his locations as an avenue to utilize all the products he buys and give customers more dining options.

"Everybody is trying to generate incremental revenue," says Bob Goldin, executive vice president of restaurant analyst group Technomic. "Brunch certainly is an opportunity. At this point it is not about making money. It's about keeping the doors open."

To be sure, many restaurants these days -- high-end and low -- are offering special deals and value meals to try and boost clientele. At Palm Restaurant Group, which owns the national Palm Restaurant chain, fourth quarter losses are expected to reach the double digits, says CEO John Bettin. The group is rolling out deals such as half-price bottles of wine on Wednesdays at 10 of its 30 locations. The company will also offer monthly specials on special cuts of prime steak that it has been able to secure at bargain prices.

At Farrah Olivia, Mr. Ouattara has added more affordable options such as three- and four-course tasting meals to his menu of five- and 14-course splurges.

"When you look at the retail stores, they are doing 50-60% off. We in the restaurant business are looking to do that by giving people combos deals," Mr. Outtara said.

But with the scramble to lure customers and save costs, chefs need to be careful not to wave the white flag in a way that would dilute an eatery's image, says Danny Meyer of the Union Square Hospitality Group.

"You don't want to turn your white table cloths into paper mats to save cost," Mr. Meyer says, "because that changes the sense people have of who you are as a restaurant."