June 23, 2008

Restaurants Implement Survival Techniques As Business Slows

By Robison, Jennifer

Stumbling home sales and slipping resort earnings grab all the headlines these days, but the housing and hotel sectors aren't the only industries suffering from faltering consumer spending.

Restaurants are enticing fewer customers as well.

Industry members credit the restaurant slump to slower spending among three segments: Local consumers struggling with falling home equity and higher fuel prices; executives reining in corporate expense accounts for hurting businesses; and a 6.6 percent decline year over year in March in the number of local visits from conventioneers, who typically spend lavishly on meals out while in town.

State numbers on taxable sales reveal the dip in food-and- beverage spending.

Taxable sales among restaurants in Clark County have fallen three of the past 12 months, including a 10.3 percent drop in February year over year, according to the Nevada Department of Taxation. From the start of the fiscal year on July 1 through February, the latest month with available statistics, taxable sales inside the county's 3,000 restaurants decreased 1.6 percent, from $4 billion a year earlier to $3.95 billion.

Throw in a pending minimum-wage adjustment, higher enemy expenses and big gains in food costs, and restaurateurs must make major adjustments to keep their doors open.

They're surviving with a multifront battle that includes tactics ranging from recipe and menu modifications to e-mail marketing, with help from aggressive negotiating on vendor services and accommodating employees willing to tweak schedules.

Take the new recipes, for example.

Some chefs are slimming down on pricey garnishes and toppings, scaling back slightly on ingredients but still giving diners the meals they've always enjoyed.

"It's still the same-quality product," said Paul Hartgen, president and chief executive officer of the Nevada Restaurant Association. "Maybe the chunk of pine nuts on a plate of pasta is a little different, but the consumer probably isn't going to say, 'Oh, I didn't get my pine nuts.' "

They're also updating menu options, grouping items for complete sale, Hartgen said. Consumers could choose one dish each from a list of appetizers, entrees and desserts, and pay a set price. The arrangement can allow for smaller portions.

Bruce Burdsall, owner of the Egg and I on West Sahara Avenue and the Eggworks on West Flamingo Road, said offering more portion sizes could help his restaurants hang on to regular customers. Burdsall, whose sales have flattened in the last three months, said providing a half sized order at a lower price could mean more diners would still be able to afford breakfast out.

"These are things we want to do to help consumers," Burdsall said.

More restaurateurs are also tapping their core of regulars with marketing and promotions, Hartgen said.

Some operators are focusing on e-mail marketing, developing electronic-contact lists of frequent patrons and sending them notices on special offers and events. They're also selling discounted gift cards online.

At the Pasta Shop & Ristorante on East Tropicana Avenue, getting the word out about the business has buffeted the eatery against dwindling sales.

The Pasta Shop appears in the Zagat Survey of Las Vegas restaurants, as well as the city's first Michelin Guide to eateries. The writeups have drawn in international tourists staying three miles west on the Strip, said Pasta Shop owner David Alenik. And the visitors business has offset lost dollars from local business, helping push the Pasta Shop's sales 8 percent ahead of revenue a year ago.

Grappling with rising food costs isn't easy when consumers are cutting discretionary spending. Higher menu prices could frighten away even more diners, Alenik said, so he's turning instead to the vendors who supply his seafood, meats, vegetables and other kitchen staples. Alenik no longer uses one supplier, but shops around among purveyors and aggressively compares them for the best prices.

"Their costs are going up, too, but they've got to learn to work with me," Alenik said.

Other operators are eyeing nonfood expenses, looking to cut budgetary fat from basic business costs. With the office market softening and rents on buildings dropping, some restaurateurs find their landlords, leery of losing tenants, are more willing to renegotiate lease terms, Hartgen said.

Employees are more obliging these days as well. Staffers inside the Pasta Shop take on fewer hours when necessary, and if business slows noticeably, they'll punch out early.

"Our employees are terrific and very flexible," Alenik said. "We're all just going to ride it out, knowing that good things are in the near future (post-recovery)."

Employees are also the vanguard of perhaps the most important survival strategy of all: boosting the quality of customer service and food.

It's tempting in a downturn to pare expenses through staff and product cutbacks, but it's the wrong direction to take out of a sales falloff, Alenik said.

"People want to hunker down and go into a shell, but we look at it in a different respect," Alenik said. "If we can give that extra smile, or give someone recognition by name when they walk in the door, then we distinguish ourselves from the competition. We can be more superior than we thought we already were."

Copyright Las Vegas Business Press May 26, 2008

(c) 2008 Las Vegas Business Press. Provided by ProQuest Information and Learning. All rights Reserved.