Economy Raises the Heat in the Kitchen

By Michael S. Rosenwald
Washington Post Staff Writer
Monday, June 16, 2008

Restaurant owners around the region and country are trying to contend with a double economic whammy that has hit the industry, shaking up menus and causing chefs to consider, among other things, the merits of foie gras.

Food costs are high. Try making a profit on a gourmet pizza when flour prices are up 87 percent. Diners are ordering less or staying home altogether, as their wallets feel lighter from trips to the gas station and from not seeing the for-sale signs on their block turn to sold.

Last week Carmine Marzano, the owner of District restaurant Luigino, changed out of a white chef's coat and into a suit and went to court for his first bankruptcy hearing. Not only are food costs squeezing his business, but he is also still recovering from when the 2001 terrorist attacks obliterated tourist traffic -- an important aspect of his business because he's just down the street from the convention center. He was forced into debt that has now caught up with him.

"If these conditions don't change, I don't see any light," said Marzano, whose restaurant filed for Chapter 11 bankruptcy protection. "We've got to find a way to get through this."

In this region, restaurant owners are taking creative, sometimes painful, steps to keep customers. In some restaurants, filet mignon is off the menu. It's just simply too expensive an option for owners and diners. Hostesses get sent home early. Managers seat guests and answer the phones. Marzano let his manager go and is doing some of those tasks himself.

At Equinox, a D.C. fine-dining restaurant where business is down around 5 percent, one strategy is to get as much out of a chicken as possible. That means that in addition to using the breast meat for a light chicken salad, the legs feed staff and the bones help create chicken stock.

"You just have to know how to use the whole bird," said Equinox co-owner Ellen Kassoff-Gray, who said she has accepted that she will be battling crummy economics for months to come. "We told our staff, 'Save money. We're going to have some lean times ahead.' "

And that means no foie gras on the menu, either.

The restaurant business is lean even in good times. Profit margins are typically around 4 percent, so it doesn't take a Nobel Prize-winning economist to understand that when food costs go up, restaurants are squeezed even tighter. There is little room to maneuver. The obvious option is raising menu prices, but many restaurants owners won't because they fear nobody will come.

"I see how people are these days," Marzano said. "They are saving pennies everywhere they can. I try to be good to them and hopefully they will be good to me and come back again."

Lynne Breaux, the president of the Restaurant Association of Metropolitan Washington, said restaurants are trying anything to keep menu prices from rising. "They have always been very creative animals and they are using all their creative powers not to pass on costs to consumers, and so far they are doing pretty good," she said.

Can they do enough or are the economic head winds too strong? Mintel International Group, a market research firm, said a January survey showed that 54 percent of people who dine out regularly are eating out less because of the economy. Of those cutting back, 70 percent are saving money by fewer visits overall rather than by picking more inexpensive entrees and restaurants.

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