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Lessons from history for this restaurant economy

by Robin Garr » Wed Mar 23, 2022 9:21 am

Lessons from history for this restaurant economy

Makizushi rolls at Dragon King’s Daughter, which opened on Bardstown Road in the summer of 2009.
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If you’ve been fretting about high gasoline prices and skyrocketing grocery costs lately, you are certainly not alone.

And if you own a restaurant or work in one, already wrestling with well-publicized supply chain and staffing issues driven by the pandemic, you’re looking down the barrel of scary times ahead as inflation and a possible economic recession join the mix.

Annual inflation reached 7.9 percent in February, reflecting the steepest rise in prices since 1982, NPR reported last week. Price increases have proven larger and more long-lasting than the Fed expected, NPR said, as businesses struggle to keep pace with surging consumer demand.

That’s why the Federal Reserve raised interest rates for the first time since 2018 last week, trying to tackle the country’s highest inflation in four decades. All this, and there’s the unknown but alarming economic impact of Russia’s invasion of Ukraine to keep us fretting.

Repeating the lessons of history

So, considering that those who fail to learn the lessons of history are condemned to repeat them, I thought I’d spend a little time this week going back over some of the free advice I gave away during our last major recession.

During the Great Recession, between December 2007 and July 2009, I reviewed about three dozen new restaurants. Only nine of them remain today. Virtually all of the rest closed within a year or two. Most of them are just about lost to memory. Do you remember Macca’s, Market Street Fish House, Macca’s, Caffe Perussa, Carly Rae’s, Zaytún, or Omar Pakistani Fast Food? Well, I do, but I wouldn’t be surprised if you don’t.

To be realistic, it’s tough to launch a new restaurant and keep it alive even under the best conditions. According to the National Restaurant Association, 30 percent of new restaurants – nearly one in three – don’t survive their first year. Profit margins are thin, staff turnover is traditionally high, and not all new owners are equipped to deal with the financial and operational challenges around starting a new business.

That rate held true even during the continuing Covid-19 pandemic, when a surprising number of new eateries braved the risks of dining-in shutdowns by state order, masking, social distancing, and, more recently, staffing and supply-chain issues. Most of them appear to have survived.

But in the Great Recession – a historically deep slowdown but without the spectre of inflation – only one-fourth of the restaurants that opened in the region survived, a startling 75 percent failure rate for those who dared to open during a troubled economy. Any restaurant owner who isn’t nervous right now probably should be. Quite a few of them are, but just as we whistle while we walk briskly past the graveyard, no one wants to talk about it much.

A few suggestions

So let’s look back to the Great Recession. Naturally I encouraged you to do what you could to support your favorite local restaurants – within your means, of course – and I had a few suggestions.

“Here’s a cheeky way to treat your sweetie to dinner at a fancy restaurant,” I wrote in February 2008 with Valentine’s Day coming up; “enjoying an expansive meal while keeping the price under control: Share dinner. Serious sharing, the kind you would only want to undertake in the company of someone close enough that you don’t object to taking food from the same plate. This approach need not be cheap or sleazy, and any good restaurateur will gladly accommodate you in your plan.”

Two diners, one plate? Sounds good to me if money is short. The restaurant might even separate the entree onto separate plates for you.

In October 2008, with the recession well entrenched, LEO Weekly put a thrifty twist on its annual Dining Guide, billing it LEO’s Recession Proof Dining Guide. In my contribution, Champagne Dining on a Beer Budget, I came up with a handy list of tips for enjoying a good meal in a nice eatery without breaking the bank.

Briefly told, they were:

• Skip the main course. We enjoyed an excellent dinner at Porcini by ordering the Crescent Hill Italian landmark’s famous fried calamari as a main course. With a Caesar salad and a couple of glasses of Chianti, we got out for cheap.

• Share plates. Enjoying dinner at Bim Deitrich’s beloved Primo, we cut the price of an entree in half by dividing it between two plates.

• Don’t go in hungry. Enjoy a light salad or cup of soup before leaving home, then arrive at your fancy restaurant hungry but not ravenous enough to call for extra appetizers and a second dessert.

• Drink smart. I love a good wine or a well-made cocktail, but you can save a lot of money at a fancy place if you skip alcohol and save the money for your entrees. Just this once!

Along with these money-saving suggestions, a strict Thou Shalt Not from 2008 that still apply in 2022:

• Thou Shalt Not Stiff the Server. No matter how broke you are, if you’re dining in a fancy place — even on the cheap — you need to take care of the server who had to hustle to make you happy. Tipping at least 20 percent is the right thing to do, and if that’s difficult for you, just remember that your server is struggling through the same recession you are.

Maybe we can escape a recession. Maybe the Fed can hold inflation in check. And maybe we’ll finally creep out from under the challenges of a pandemic that’s in its third year now. But even if we’re in for a rough ride, remember that it’s still possible to enjoy a good dinner out now and then. And when you do, please be sure to go for your friendly independent, locally owned restaurants first and always.

Read the complete article on LouisvilleHotBytes,
http://www.louisvillehotbytes.com/lesso ... nt-economy

You'll also find this review in LEO Weekly online later this week.
http://www.leoweekly.com/category/food-drink/
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Re: Lessons from history for this restaurant economy

by Nathaniel C » Wed Mar 23, 2022 7:58 pm

Good article. I agree that the cyclical nature of the restaurant biz causes a lot of churn in general, regardless of the economy. I was in the Seattle area in 2016 and tried to put together a list of restaurants and attractions for a friend. One out of three or four of the restaurants I really liked were still open. The attractions fared much better.

I've found that many entrees contain enough food for at least two "normal portioned" meals, so I try to be judicious about requesting a to-go box.

I took several vacations in the second half of 2021. I'm not normally extremely budget conscious when planning trips, and the financial hit was definitely worse than normal. I need to burn about a month of vacation time this year. I have one trip planned that will be moderately expensive, but am trying to brainstorm more reasonably priced options on any others I take. One thing I found to be a waste of time, at least on that trip, was booking a rental car via Turo. Sure, you can rent a several year old Prius that's listed for $40-ish per day, but by the time you add on Turo's various fees, I was able to get a newer and larger rental from Hertz (which should still get decent mileage) using the Autoslash website.
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Re: Lessons from history for this restaurant economy

by Robin Garr » Wed Mar 23, 2022 8:11 pm

Good info, Nathaniel. Thanks!
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Gary Guss

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Re: Lessons from history for this restaurant economy

by Gary Guss » Wed Mar 23, 2022 10:36 pm

Agree with all of this. Restaurants have a life cycle and in the case of fad type restaurants it can be pretty short... bagels, crab places, expensive artisanal BBQ, wrap places, fast food Faux Greek joints, crepes, and the list goes on and on. Apparently Mexican and Pizza places can go on forever.

GG
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Steve Eslinger

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Re: Lessons from history for this restaurant economy

by Steve Eslinger » Thu Mar 24, 2022 12:46 pm

Nathaniel C wrote: Sure, you can rent a several year old Prius that's listed for $40-ish per day, but by the time you add on Turo's various fees, I was able to get a newer and larger rental from Hertz (which should still get decent mileage) using the Autoslash website.

A total aside, but be careful with Hertz. They have a big problem with filing false stolen vehicle reports. Google "Hertz stolen cars." It even got to the point that supposedly Louisville Metro stopped taking stolen vehicle reports from them. I'm not aware of any of the other big fleets having such issues.
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Mike L

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Re: Lessons from history for this restaurant economy

by Mike L » Thu Mar 24, 2022 6:16 pm

I'm not in the restaurant industry, but it seems like restaurants will have to raise prices like everyone else. Gas goes up, so food has to go up since it's shipped in trucks running on gas. Restaurants buy that food so they have to pay for the bump. Since profit margins are reportedly so thin, they have no choice but to raise prices. Then it's up to consumers whether they can afford to pay the prices.

Since wages aren't keeping up with inflation (surprise, surprise), people's discretionary income shrinks which will hurt restaurants (and other businesses). I'm guessing that's when the Recession will get into gear. Demand plummets, restaurants (and other businesses) close, people are forced out of work. Then they have less money to spend and the cycle repeats.

Good times!
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Re: Lessons from history for this restaurant economy

by Nathaniel C » Thu Mar 24, 2022 7:54 pm

Steve Eslinger wrote:A total aside, but be careful with Hertz. They have a big problem with filing false stolen vehicle reports. Google "Hertz stolen cars." It even got to the point that supposedly Louisville Metro stopped taking stolen vehicle reports from them. I'm not aware of any of the other big fleets having such issues.

Thanks for the heads up. I've heard of this, and I think it only came to light because of their bankruptcy. I suspect there are similar errors with other car rental companies, but their records are less subject to public scrutiny due since they're not in bankruptcy.
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Re: Lessons from history for this restaurant economy

by Robin Garr » Thu Mar 24, 2022 8:19 pm

Mike L wrote:Good times!

Mike, you may not be in the restaurant industry, but to me your analysis makes complete sense. Sadly.
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Re: Lessons from history for this restaurant economy

by Carla G » Sat Mar 26, 2022 5:38 pm

What about restaurants reshaping their serving methods by utilizing counter orders or drive- thrus? Street food venues and areas seem to still be popular. Or is that just in other nations?
I think we are just going to have to face it...fine dining with a server will simply have to cost. The days of servers being there to "wait" on others for next to no money or benefits with go the way of slave labor. As it should. Those that remain in the industry will become qualified pros and be paid for it, the same as in most European cities.
"She did not so much cook as assassinate food." - Storm Jameson

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