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Restaurateurs Get Creative In Recession

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by D. Ashley Furness – February 9, 2009
Business Journal Staff Reporter

Tourism bureau hosts annual meeting; Michael Chiarello opens eatery.

North Bay restaurateurs confirmed last week the definitive arrival of the recession in hospitality, and though some have joined the ever-lengthening list of eateries looking to sell, others are doing what they can do to embrace the change.

“In the past six months we have definitely really been suffering with the economy. We are down about 50 percent year over year, and we knew we’d have to make a change or sell the restaurant,” said Sara Langley, co-owner of Langley’s on the Green in Windsor with chef and husband Fred Langley.

But instead of closing their doors, the pair decided to shift the focus of the establishment from fine dining to more of a lounge with small plates, a la carte options and entree specials. Mr. Langley, who travels often as a restaurant consultant, also recently transformed another local bistro from an ailing fine dining Italian restaurant to a now-popular family pizza kitchen called Pizzaria DePaoli.

“You just have to learn to adjust when times change,” Ms. Langley said last week at the debut of Langley’s renovated space.

For the same reason, Santa Rosa fine dining Kabob & Curry House owner Anil Bembey said he resolved to shift his business model and will debut the new brand, the Maharaja Lounge, sometime in the next few weeks.

“We are changing from fine dining into a more casual lounge. … It’s completely economy-driven. There’s just not enough subscription for fine dining,” he said.

“It’s been an awful struggle since about October of last year, and for us it’s out of necessity.”

Redwood Empire Small Business Development Center restaurant specialist Betsey Fischer said nationally fine dining is expected to decline by about 15 percent to 20 percent this year. “There is no question we are in for a bumpy ride in 2009. I don’t think anyone is immune to it,” she said.

A study released by the National Restaurant Association on Jan. 30 reported that industry activity hit record low numbers in December, slumping to a 96.4 performance index, down from an average of more than 100 between 2003 and July 2007.

The small business center, which provides no-cost consulting for restaurant owners and other small businesses, has experienced more than double its normal traffic in recent months. Ms. Fischer said the most common problem is teaching food lovers to become just as savvy and vigilant with their businesses’ numbers.

“The restaurant industry operates on such a slim profit margin anyways, and many of the owners here are small, independent, they are having the toughest time toughing it out,” she said.

Corte Madera-based Restaurant Realty Co. owner and former restaurateur Steve Zimmerman said he has experienced a flood of new businesses on the market in the past six months, but for those with financing it’s a buyer’s market.

“Prices are really low right now, and for those with financing, now can be a great time to get into the industry. … Forget the high-end – deli, breakfast and lunch places are still doing well,” he said.

Also because many owners are desperate to sell, the industry has seen a renewed frequency of lease terms offered by the seller, which often is negotiated at better terms than if the loan was from a bank. This was the case for novice owners Genny and Josè Barrios, who opened their first restaurant called Rancho Viejo in Sonoma this year, and so far “business has been good.”

“We opened about a month ago. We did notice some other restaurants were struggling and that was a little scary, but this was our opportunity to purchase something, so in a way it helped us. We couldn’t have afforded anything before,” Ms. Barrios said.

Santa Rosa Realty owner Tom Barnett agreed that restaurant sales have flooded the brokerage in recent months, but he thinks it’s more of a psychological panic than real restaurant declines.

“It’s a trigger for a lot of restaurants. When the economy is tough, business is down a little bit, and those who’ve owned a restaurant for many years are saying now might be the time to retire while we still can,” he said.

Other veteran restaurants, including 30-year Railroad Square staple La Gare and 17-year veteran Cafe Europe, have floated on an established customer base. Cafe Europe owner Herbert Zacher said his revenues actually increased in December and January.

“We have lasted this long because we have really established ourselves as part of the community. People come here to celebrate,” said Jacqueline Bazely, La Gare front-of-house manager and daughter of La Gare’s late founder Gladys Praplan.

In other restaurant news, former Roberto’s Italian restaurant owner Roberto Catania bought back the business recently after a year in retirement, renaming the establishment Trattoria Lupo, which has a pared-down, more casual menu.

In Yountville, celebrated chef, vintner, television personality and retail proprietor Michael Chiarello opened his highly anticipated Bottegga restaurant in January.

Settled in the historic V Marketplace a stone’s throw from his newest flagship NapaStyle retail store, Mr. Chiarello said business is booming. The menu features surprisingly modestly priced plates, between $11 and $25, with the chef’s signature Italian flavors and house-made ingredients.

Wines are primarily local, small-production vintages and a few Italian bottles at relatively minimal mark-ups. The Tra Vigne owner described the 90-seat restaurant, designed by his wife Eileen Gordon, as rustic and refined with rich colors and antique furnishings. The building includes two indoor dining rooms, a private wine room and bar and a covered patio with a fireplace and lounge seating.

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About The Author
Steven Zimmerman, CBI, M&AMI, CBB, FIBBA

Steve is the Founder, Principal Broker and Chief Executive Officer of Restaurant Realty Company. Steve has personally sold/leased over 1000 restaurant, bar or club businesses, sold many commercial buildings and completed over 4,000 restaurant valuations since 1996. His real estate experience also includes sales, acquisitions, management and ownership of numerous properties throughout California including restaurants, hotels, apartment buildings, single family houses, an office building and a multi-use retail building. Steve is also the author of Restaurant Dealmaker – An Insider’s Trade Secrets for Buying a Restaurant, Bar or Club available on Amazon. Prior to starting Restaurant Realty Company Steve had over 20 years of restaurant experience and was President and Chief Executive officer of Zim’s Restaurants, which was one of the largest privately owned restaurant chains in the San Francisco Bay Area. READ FULL BIO | HIRE EXPERT WITNESS - LEARN MORE