Photo by Jim Roberts
Chef Evan Liaskos of Cortlandt Colonial is offering a less expensive weeknight menu to draw customers who are watching their expenses closely in a down economy.
The restaurant business has never been one for the faint of heart.
But in a bad economy, even successful veterans of the industry face challenges that make them rethink every aspect of their operation, and watch every penny.
“Our industry is very difficult because there is not a lot of ways to save if you want to keep your food quality up,” said Dave Paganelli, owner of Travelers Rest in Ossining. “That’s the biggest danger. A lot of restaurants have gone out of business in the last six months in Westchester – Westchester is hemorrhaging restaurants – it’s really bad.”
Higher unemployment, a dead housing market, automobile lots gathering cobwebs – none of these economic trends would seem to spur on nervous consumers to go out and spend $100 for a nice meal at a restaurant.
But people still find value in getting away from home for an evening of good food and courteous service at their local restaurants. Despite the sinking economy, the National Restaurant Association expects sales to reach $566 billion in 2009, an increase of 2.5 percent over last year. That number translates into 4 percent of the entire U.S. gross domestic product in an industry that employs 9 percent of all American workers.
In Westchester County, restaurants are big business. According to figures compiled in 2006, full-service restaurants and drinking establishments employ just over 11,000 workers in the county, generating $205 million in annual payrolls for employees.
And families in the New York region, including Westchester, spent $3,200 in 2006 on food outside of the home compared to $3,800 on groceries purchased to be eaten at home.
Hard economic times force families to make choices they didn’t face in past years, and restaurant owners see the consequences of those decisions in their businesses every day.
“People are cutting back on their disposable income,” said Evan Liaskos, chef and owner of the Cortlandt Colonial restaurant. “Eating out is something that you can do less of. I’m hearing that supermarket sales are up because people still have to eat no matter what.”
Declines in attendance at restaurants in the local area vary widely, but according to Kosy Chacko, head of the Westchester/Rockland chapter of the New York State Restaurant Association, business is down about 25 percent on average.
Faced with higher costs and shrinking revenues, restaurant owners are finding ways to meet the economic challenge and survive by innovating on a daily basis.
For Vicky Zeph, the chef and co-owner with her brother of Zeph’s on Central Avenue in Peekskill, there has been a noticeable drop-off in customers.
“Obviously business is down and people are taking a longer time in between coming in,” she said. “We’re still getting new people, though, and that’s always a surprise to us.”
Zeph’s, which received a rating of excellent in The New York Times, has been in business for 19 years. Cutting prices isn’t their way of dealing with tougher times, however.
“We’ve never liked the idea of giving away things because we work too hard and pay too much for the food,” Zeph said.
Like many other experienced restaurateurs, they find the best way to keep diners happy is to offer quality but less expensive menu choices.
“We’re just more conscious of using not low end items, but more reasonable items,” Zeph said. “We won’t put really expensive things on the menu. Especially in the winter it’s worked out well because in the winter we like to do different kinds of things like stews, hearty dishes, short ribs, that kind of thing, and so we can keep the price reasonable, which is good for us and good for the customer.”
Zeph sees the entire industry starting to feel the strain of fewer people dining out. Food prices in general haven’t declined much, but the companies she deals with are laying off workers.
“I know from talking to my purveyors they’ve cut way back,” she said. “One driver told me his company has cut back on their drivers. I can tell because they are delivering earlier in the day because they are finishing earlier because people aren’t buying enough.
“Almost everyone I deal with selling things says, ‘this is bad, this is really bad,’” she added. “A wine salesman was here the other day and he said ‘how’s it going’ and we both tried to keep an upbeat attitude instead of moaning and groaning all the time, which makes it worse.”
Paganelli, operator of the family-owned Travelers Rest in Ossining, has been in business for 30 years. He’s been through past recessions and bad economies before, and he knows what lies ahead.
“It’s going to be a tough year for everybody,” Paganelli said. “This is not going to be the time when anybody is going to make money. There are no magic words you can say.”
His business is centered on the weekends when families celebrate special occasions, and he has been able to keep booking his restaurant up full despite the tough times.
“My strong suit has always also been my negative suit,” Paganelli said. “Travelers is a special occasion restaurant. If it’s your 20th anniversary or your wife’s birthday, you’re going to come here. You’re not going to come here for a bite to eat on a Wednesday. That’s the problem.
“But in a bad economy that’s our good side. We’re basically a weekend restaurant and that’s what sustains us in times like this. Seventy five percent of the people are coming for special occasions. Out of 140 Christmas parties, I only had two cancellations which I was able to fill in instantly and they were car dealerships.”
Like other restaurant owners, Paganelli faces a smaller customer base, higher food prices, and diners who want a bargain.
“Food product costs are up, the cost of goods is up but you have to be price sensitive. If it comes down to between us and another place, and we can be cost competitive, the people will come here. Everybody that calls, it’s a negotiation process,” he said.
Ten different economists will give 10 conflicting answers on when the economy will hit bottom and then start to recover. No one knows when wallets will open up again and dining out will start to pick up. But Paganelli remains confident in the future.
“There is a natural attrition and it happens and that’s how we look at it,” he said. “The last time we had a deep recession we fared pretty well. It’s unfortunate, and we don’t gloat in other people’s misfortunes, but the guys that owned construction companies and thought they could own a restaurant, nothing to it, just walk around on Saturday night, you know what, they’re not out in the parking lot plowing snow three times a day.”
Liaskos is another restaurant veteran whose family has seen many economic downturns come and go. The Cortlandt Colonial restaurant has been in business for 30 years and is finding innovative ways to keep loyal customers and reach out to new ones as well.
One approach Liaskos is taking involves trying to build up his weeknight business. He reminds customers that pizza and Chinese takeout cost the same seven days a week, but his restaurant is offering bargain prices Monday through Friday.
“The weeknight business has really taken a hit, so that’s why I started my $12.95 dinner specials, which includes a soup and salad and five entrees to choose from,” he said. “I’ve been able to make a deal with my suppliers and buy great stuff at a reasonable price. There’s no filet mignon on there, but there’s great food that’s offered at a reasonable price.”
The weeknight discounts amount to a 15 percent price reduction and includes items not normally on the menu. The special menu changes every month.
Promotions that drew crowds in the past still bring in customers, but the numbers are down.
“I also see less response if I put out an ad,” Liaskos said. “I do lobster fest in August. When I started doing those five years ago, it turned my slowest summer month into by busiest summer month. I usually expect the first week when I take the front page ad in the Pennysaver to get mobbed for the entire week. This year, we were busy, but it was very easily managed.”
The tough economy has also helped remind Liaskos how much he appreciates his regular customers and what dining out means to them.
“I’ve realized I have to be loyal to the regular customers,” he said. “I try and visit in the dining room because sometimes people just want to know that they are appreciated being here and spending money.”
The owners of Cortlandt Colonial save some of the money from the good times for renovation work or to weather the storm when the economy turns downward. They are using some of those rainy day funds to get through this slow period and will put off any major new renovations.
But Liaskos, like other restaurant owners in the area, said that cutting back on quality is not one of the choices he will be making to deal with lost revenues.
“There was one thing that I made very clear to all my staff – and unfortunately I know there are going to be other places around that are going to make this mistake – we’re not going to sacrifice the quality for the sake of money, and that’s what’s going to keep us around for another 30 years,” he said. “I’ve seen it over and over again. We have to watch where we spend our advertising dollars.”
He’s going to try a friends and family promotion in March for all his staff members, offering discount cards they can hand out to the people they know. He figures those customers will recognize that their loved ones are also hurt by the slow economy and may come through with bigger tips and more diners on slow nights.
“My volume will go up because my staff members will be out selling my place too because they want to make some more money,” Liaskos said. “I will make up in volume what I lose in profits, so I’ll have to work more for less money - but isn’t that the state of the whole economy right now?”
For Chacko, the head of the local restaurant association, the current downturn is the worst he’s seen in his 28 years in the business. He, like other owners, is finding that innovation has become critical to survival.
“Restaurants have found very innovative ways to survive,” he said. “I was afraid that so many people would go out of business during the winter. It didn’t happen. When you’re left with no option, you fight back. That’s human nature.”
One measure he’s taken at his Fair Deal Café in downtown White Plains is to carefully monitor his employees’ hours.
“When times were good, you didn’t care when they came in, and when you needed four people you had six people but you didn’t care,” he said. “Now, you count every hour of every worker.”
The workers are pitching in as well, he said. In the past, if their checks weren’t ready on Fridays, they would ask for their money right away. Now they tell him if cash flow is tight, go ahead and pay their fellow workers first and they will wait another week.
One large problem that all small businesses face is getting credit in a tight lending environment. Many smaller restaurants can’t get revolving lines of bank credit, so they turn to credit cards for cash flow.
“My credit line is my credit cards,” Chacko said. “I used them very efficiently to build up my business. Now the credit card companies are stabbing us in the back.
“Some banks are now charging 30 and 37 percent interest that used to charge 7 or 8 percent. Their excuse is they lost money in the market so they are making it up on credit cards, but that is draining my resources and that is what is happening to a lot of small businesses.”