Old-Style Diners Make Comeback

Just when you figured it was chi-chi to order sushi, along comes the meat loaf special.

In a sudden sway away from the natural foods and lighter fare that have long characterized the trend-setting California restaurant market, the dining pendulum appears to be swinging toward the meat and potatoes of diners with a nostalgia theme.

That is one conclusion reached by restaurant consultants from Laventhol & Horwath, the Philadelphia accounting firm, which has just completed its 1985 California restaurant study. The firm, which advises dozens of restaurant chains, views California as the state that sets trends in the restaurant industry.

Its survey of 181 California restaurants follows closely projections from the Washington-based National Restaurant Assn. that California restaurant sales will top $18.6 billion next year, making California the number one state in that category. Restaurant sales are expected to grow 7.6% in California next year, slightly ahead of the national average.

The latest California dining trends include not only the rising popularity of diners with the atmosphere of the bygone eras of the 1930s, 1940s or 1950s but also new ethnic fast-food restaurants that feature items like spicy Mexican chicken. At the same time, beverages, appetizers and desserts are all taking on new importance at California dining spots, the consultants say. But Laventhol & Horwath is particularly impressed with the growth possibilities of newly designed, old-fashioned diners that appear to be re-creating a new niche in the industry. “The old diner that we knew a number of years ago is back,” said David R. Kinkade, manager of Laventhol & Horwath’s leisure division in Costa Mesa.

Some of the establishments serve food like that sold at mom-and-pop eateries tucked in the industrial areas of Buffalo, Cleveland and Pittsburgh. But even with their waitresses dressed to match the theme, and the juke boxes spinning appropriate tunes in their foyers, these newfangled diners would never be mistaken for the originals.

Instead, they tend to have more central locations, their atmosphere is spiffier and the prices are slightly higher. Most are well-crafted restaurants that attract appetites ranging from middle class to elite. And yes, yuppies have discovered them, too, “and are ordering the blue-plate specials,” said Robert T. Patterson, managing partner of Laventhol & Horwath’s Los Angeles office.

Analysts say three California companies are among the leaders of this diner phenomenon: Los Angeles-based Collins Foods International, a majority partner in Ed Debevick’s restaurants; Ruby’s of Balboa, and Hershel’s Restaurant & Bake Shop, a deli chain based in Riverside in which Collins Foods also has a minority investment.

$100-Million Market

So new is this market niche that industry analysts do not even offer current sales estimates for the segment. Still, within just a few years, the segment could grow to have combined sales in excess of $100 million, according to some of these analysts.

“People come in once or twice for the theme, but the food and price drive the concept more than anything else,” said William Gagg, president of the Restaurant Group at Collins Foods. He would not reveal sales figures of the two Ed Debevick’s restaurants in Chicago and Phoenix that the company opened last year.

Collins plans to expand the chain nationwide. It is building two Ed Debevick’s restaurants in the Los Angeles area, one in Beverly Hills on La Cienega Boulevard and another in Torrance near Del Amo Fashion Square.

Hershel’s also plans nationwide growth. At some of its stores, the chain expects to post 1986 annual sales in excess of $2 million, said Harold Butler, who recently stepped down as chairman of Naugles Inc. to start up Hershel’s.

The six-store chain, which specializes in deli food in a diner atmosphere, expects to open six more units in 1986.

“It is the only unfilled niche left in the restaurant industry,” said Butler.

Indeed, growth for any of these chains could be very rapid. “The time it takes for a restaurant concept to bounce from the West to the East to the middle of the country used to be seven or eight years. Now it’s three or four,” said Laventhol’s Patterson.

RESTAURANT SURVEY HIGHLIGHTS

Based on 1984 data supplied by 181 food-service establishments in California.

Median food sales per seat were $5,229, while beverage sales totaled $1,707 per seat.

Median food and beverage costs per seat were $1,967 and $349, respectively.

Median check size was $9.72. For half of all restaurants surveyed, the average check was between $6.76 and $15.02.

Checks were highest at steak/seafood restaurants, with a median of $14.54.

Source: Laventhol & Horwath