Upscale Restaurants See Weak Sales in March, Mixed Sales for 2007

by Jamie Walden  on Monday, Jun. 2, 2008 12:00 am  

Although some upscale restaurants didn't feel the economic pain experienced by other enterprises during 2007, gasoline price increases this year may have finally caught up with them.

Of 13 upscale restaurants whose receipts were analyzed by Arkansas Business, seven experienced annual declines in revenue in 2007, some of which were as steep as 26.7 percent.

Sonny Williams Steak Room in downtown Little Rock had a virtually flat (down 0.1 percent) 2007 with food sales of $1.96 million, according to tax records of the Little Rock Advertising & Promotion Commission.

Trio's Restaurant & Catering, with a 6.3 percent increase to $1.69 million in 2007, inched its way closer to Sonny Williams. Brave New Restaurant sold $1.46 million worth of food in 2007. Several other restaurants experienced double-digit percentage growth in 2007. The A&P records do not include alcohol sales.

But (and you knew that was coming), March 2008 numbers tell a different tale. Of same 13 upscale restaurants, 11 experienced revenue declines in March 2008 compared with 2007 ranging from 11 percent to 34 percent. (See table.)

So Restaurant-Bar took the hardest hit, its revenue falling 34 percent in March 2008 compared with March 2007.

General Manager Tomas Bohm attributed some of So Restaurant's decline in sales to "an unusually long honeymoon" phase since the eatery opened in July 2006.

"A restaurant like So is basically kind of one of the first things to go off of people's budgets," he said.

Delivery charges and food costs have soared during the last year, forcing restaurateurs to eat into their profits or pass the inflation on to the consumer. Bohm estimated that grocery expenses have grown by between 10 and 15 percent.

"There's some things that are very extreme. There's some things that are not," Bohm said about higher grocery prices. Although beef hasn't really fluctuated, the price of a case of 30 dozen eggs has grown from $25 to $45, he added.

Bohm has tried to weather the storm by offering more affordable specials, but the costly ingredients of upscale dishes leave little latitude for downward pricing.

The harsh reality is that diners are just not coming as often, Bohm said. And when you can't get people in the chairs, affordability is irrelevant.

Bohm said So Restaurant sees many of its usual customers almost half as often. The diminishing frequency of large parties, however, is hurting the restaurant the most.

In the past, many pharmaceutical representatives frequently brought clients to So Restaurant. However, reps from several of those companies told Bohm that their dining budgets have been cut, in some cases by as much as 25 percent, he said.

So Restaurant isn't the only upscale restaurant experiencing vanishing customers. Aydelotte's in North Little Rock chalked up 30 percent less revenue in March 2008 than March 2007. Acadia plunged 25 percent in March, and Vermillion Water Grille dropped 23 percent. Even Brave New Restaurant, whose loyal customers followed it to its hard-to-find location in the Riverdale area of Little Rock, dropped 21 percent.

Owner Peter Brave said the restaurant's move several years ago somewhat tempered the 2001 recession. "I couldn't have planned it in a thousand years, but the newness of Brave New Restaurant coming to this current location, ... I couldn't have scripted it to be better timing because there's always an attraction of a new location."

Brave has made some belt-tightening changes to counteract this year's tumult. He quit advertising. Brave New Restaurant is closing in on two decades of operation and probably has the tenure to support such an action.

"But after 18 years I still feel like one of the strongest assets you have to have is nimbleness - the ability to make changes on the fly," Brave said. "It's great to have a plan A, but, boy, you better have a plan B."

There's always the exception to the rule; in this case there are two. Capers' revenue grew 11 percent in March 2008 compared with March 2007. Restaurant 1620 climbed 27 percent in March 2008 over the previous year.

Timothy Morton, general manager and executive chef of Restaurant 1620, said he has not done anything differently and has focused on maintaining consistent quality and service. Morton said tracking profitable dishes and ensuring that they stay on the menu while offering new dishes about every three months has helped maintain clientele.

A rise in revenue at two out of 13 upscale restaurants while the rest see sharp declines indicates that there is a demographic of diners that remains fairly, if not completely, unscathed by all the economic turbulence. That market segment just isn't large enough to support 13 restaurants.

In addition, the diners who are affected by the slowing economy are likely more conscious of value. That means the one thing that is non-negotiable in fine dining is quality, Brave said.

"If they're going to go ahead and go out and spend a few bucks on a meal, they want it to be good. And so it's even more important that you provide value for what you produce."




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