Many Top Bistros Are in a Stew : Fine Dining Business in Southern California Fell 5.4% Last Year
Southern California, an area as famous for its white-tablecloth restaurants as its white stretch limousines, has dozens of upscale eateries teetering on the brink of collapse, pushed to the edge by recession and modified lifestyles.
Sales at upscale restaurants here dropped 5.4% in 1991 compared to 1990, according to a study by the Los Angeles accounting firm Coopers & Lybrand. Meanwhile, casual dining restaurants and coffee shops saw their sales increase a scant 2%.
The study of more than 300 California restaurants quantifies what owners of fine dining establishments have recognized for several years: Business is crumbling. Owners of some of the area’s toniest restaurants admit privately that their business has plunged up to 40% since 1990.
Over the past two years, some of the most familiar names in fine dining--including the ritzy L’Ermitage in Los Angeles and the posh Rex in Newport Beach--have closed. The Magic Island theater-restaurant on Balboa Peninsula has also closed, though its owners said they will reopen elsewhere in Orange County later this year.
Even some meat-and-potatoes landmarks, such as Gorky’s Cafe & Russian Brewery in Hollywood, have thrown in the towel.
As a result, restaurateurs are scrambling to change with the leaner times. After business plummeted at the posh DC3 restaurant at the Santa Monica airport, management lowered prices 10%, revamped the menu and spent the last 10 weeks retraining the staff to provide better customer service, General Manager Gerhard Tratter said.
“My peers say it’s going to be another very tough year,” he said.
Trees, in Corona del Mar, introduced eight entrees for less than $10 in 1990, and has not increased its prices since. And the Bistro 201 in Irvine added a “Recession Relief” category to its takeout lunch menu, which includes gourmet sandwiches for $4.95.
With annual sales of $23.8 billion in 1991, restaurants ranked as the second-largest retail sales category statewide. That total is just above the $23.3 billion recorded in 1990, Coopers & Lybrand said. But because there are more restaurants, sales on a restaurant-by-restaurant basis are down.
Most restaurateurs blame their problems on the recession. Some point to tighter lids on corporate expense accounts. But several say that basic lifestyle changes--and even changing values of consumers--are affecting eating habits in the ‘90s. Most restaurant owners admit that they weren’t prepared for it.
“Restaurants are like supertankers,” said Michael McCarty, owner of Michael’s restaurants in Santa Monica and New York. “You can’t just stop and turn them around.”
But changes are being made. Many restaurants have lowered prices. Some have cut back on service. And some have tried both.
“Fine dining will never again be at the level of what it was in the mid-’80s,” said Bob Patterson, director of hospitality consulting services at Coopers & Lybrand.
Restaurants in Northern California fared slightly better than their counterparts in Southern California, according to the Coopers & Lybrand study. Restaurants surveyed in Northern California actually saw a 0.3% sales increase in 1991 compared to 1990.
But fine dining did poorly everywhere. Statewide, upscale restaurants suffered a 5.5% sales decline in 1991 compared to the year before, the survey said.
Restaurant owners tell the same sad story to Alberta Hultman, assistant executive vice president of the Los Angeles-based California Restaurant Assn. “They tell me they have never seen anything like it. Nobody is raising prices this year.”
In fact, owners of several of Southern California’s finest restaurants say they have cut prices considerably to slow the business decline.
“I kept hearing people say, ‘Your food is great, but it’s too expensive,’ ” said McCarty, owner of Michael’s. Just before opening his New York bistro two years ago, he lowered prices in Santa Monica about 30% and mirrored the prices in his New York eatery. Dinner checks that averaged $65 per person are now about $45, he said.
Although his restaurants filed for Chapter 11 protection under the federal bankruptcy code last year, McCarty said the problem was because of the collapse of a hotel project he had invested heavily in. Sales at Michael’s in Santa Monica were flat last year at $2.5 million.
Similarly, sales were flat at the Grill in Beverly Hills. Typically, they jump between 5% and 7% annually, said Bob Spivak, managing partner. While the Grill usually raises menu prices annually, it has not raised prices for 2 1/2 years--although the costs of the food and ingredients it purchases have risen about 7% during that period.
But life isn’t so bad at the local coffee shop. Family-style restaurants in California enjoyed some growth in 1991. Among them, Denny’s saw revenue rise 1.6% compared to the year before.
