Restaurants Watch the Tea Leaves

Will Economic Woes Keep Crowds Away?

In its 19 years on I Street, Taberna del Alabardero has earned a loyal following among neighboring World Bank and IMF workers and Spanish-food lovers from around the area. But September was a tough month. Weekday lunches remained lively, but weekends were quiet, says Javier Velazquez, the assistant general manager. Overall, sales were down 23 percent for the month compared with last year.

September historically is slow for Washington restaurants in an election year. Congress heads home to campaign. Many locals stay in to watch the debates: On the night of Barack Obama and John McCain's first face-off, ThinkFood Group, which runs Oyamel, Cafe Atlantico, Minibar and three Jaleo restaurants, reported a 26 percent drop in business. Last week's vice presidential debate cut the number of diners at Brasserie Beck by 32 percent for the evening.

But restaurateurs fear that this year's slowdown might have less to do with the natural political rhythms than with the daily warnings of an economic meltdown and wild gyrations in the stock market that have depleted 401(k) accounts. In other words: It's the economy, stupid. "It's too soon to tell, but that doesn't mean I'm not terrified," says James Alefantis, co-owner of Buck's Fishing and Camping and Comet Ping Pong in Northwest. "The first thing people cut is going out to dinner."

Washington restaurants have a reputation for being recession resistant. Government workers know their employer isn't going out of business. With no immediate end in sight to the wars in Iraq and Afghanistan, defense contractors, a key piece of the local economy, have little fear that orders will dry up. Lobbyists always want to get their message to members of Congress, and how better to do that than over a steak?

Those conditions have helped Washington buck a national decline in dining out. The National Restaurant Association says that in August restaurants reported lower same-store sales, the eighth decrease in 10 months. Research firm NPD Group says Americans increasingly are taking brown-bag lunches to work to save money.

Washington has had its share of high-profile closures, including Restaurant K, Butterfield 9 and Viridian. But the NRA reports that overall Washington restaurant sales are expected to rise 4.6 percent, to $2.3 billion, in 2008. "Surprisingly enough, we haven't felt [a slowdown] yet, but that doesn't give me much hope," says Paul Cohn, co-founder of Capital Restaurant Concepts, which owns nine restaurants including Georgia Brown's and Paolo's. "There's going to be a trickle-down effect. We can't be this lucky forever."

Many local restaurateurs have been uncharacteristically tight-lipped about the precarious economic picture. Some who are doing well don't want to brag about -- or jinx -- their success. Those who are worried don't want to alert diners to their troubles. When asked about business, most didn't want to make predictions, saying it is impossible to analyze the impact of the financial crisis because it has been only a few weeks since the Bush administration began calling for a Wall Street bailout.

Experiences around the city have been mixed. Contrary to conventional wisdom, which says that diners worried about the economy will seek out more reasonably priced restaurants, many fine-dining establishments say business is strong. Chef Robert Wiedmaier said both his restaurants, elegant Marcel's and the more-casual Brasserie Beck, had a "phenomenal" September. On Sept. 30, the day after the Dow Jones industrial average dropped nearly 800 points, Beck served 375 meals. Marcel's 110-seat dining room was fully booked; 60 people chose the $125 tasting menu.

At Blue Duck Tavern at the Park Hyatt Hotel, food and beverage director Diego Anea said the restaurant has been breaking records. Total sales are up 18 percent over last year. Average check size is holding steady at $45. On Sept. 27, as the country waited breathlessly to see if Congress would sign off on the Wall Street bailout, the restaurant hit an all-time record, serving 250 meals. And such popular spots as Rasika, Proof and Restaurant Eve were fully booked.

"We're all waiting for this big black cloud to come over D.C.," Wiedmaier says. "Where is it?"

Some restaurants have experienced softening sales. The Washington location of barbecue restaurant Rocklands, not far from Fannie Mae, has seen business slow since the government's takeover of the mortgage giant. So has Indique Heights in Friendship Heights, though managers note that catering is an increasingly big part of their business. Northern Virginia's Neighborhood Restaurant Group, which owns spots including Rustico, Tallula and EatBar and Buzz Bakery, has had a strong 2008 but saw some slowing in the second half of September.

"We've weathered storms before," says Ashok Bajaj, who owns five Washington restaurants, including the Oval Room and Rasika. "August was the best August I've had in 20 years of doing business. September hasn't been gangbusters. But let's put it this way: This is not 9/11."

Still, restaurateurs face challenges that didn't exist seven years ago. Food costs are higher. Purveyors and distributors have tacked on fuel surcharges. Restaurants already are a low-margin business; a successful one will earn a 10 percent profit. The combination of rising costs and slower sales could force many into the red.

To counter the trends, chefs and owners will try to sell value: Capital Restaurant Concepts' Cohn says he is looking at prix-fixe menus. The three-course meals will be cheaper than ordering a la carte, and they "let diners trade down without feeling like they're trading down."

Many also say they will continue to absorb excess costs, rather than pass them on to diners. "If people do go out, you need to make them feel good about spending their money," says Buck's Alefantis. "What's the solution? Do what you're doing better.

"In theory, that will pay off," he adds. "But, then again, who knows?"