Business
More eatery operators are trimming down
11:42 PM CDT on Sunday, August 3, 2008
When Plano-based Bennigan's Grill & Tavern and Steak & Ale headed for bankruptcy court last week, the chains' parent company joined a bounty of other restaurant operators locking the doors on their weakest concepts.
The filing was the largest restaurant bankruptcy since 1997, according to BankruptcyData.com, a Boston-based Web site that tracks financial information on publicly traded and large private companies.
It was one of four major restaurant bankruptcies during the first seven months of this year – compared with only two during all of 2007.
"In periods of stress in the industry before, we typically have not seen more than six bankruptcies in a year," said Ron Paul, president of Technomic Inc., a Chicago-based market research firm. "And we already have four.
"We're well on our way to the most we've seen in a single year" since the 1980s, he said, when the economy was roiled by tumbling real estate values and the S&L crisis.
So far this year, Dallas diners have said goodbye to such well-known eateries as BLT Steak in North Dallas and Italian spots Bice Ristorante, in the Hotel Crescent Court, and Grotto on McKinney Avenue.
Experts caution against laying all the blame for this year's closures at the feet of the nation's sagging economy.
Even in a banner year, restaurants come and go as leases expire, neighborhoods change and restaurateurs retire.
And while the economic downturn may be rocking all restaurants, it's the weakest operators – burdened by debt or clichéd concepts – that are most likely to capsize.
"This is a case where the marginal concepts [or locations] get weeded out and the strong survive," says Kevin Higar, a Dallas-based senior manager with Technomic.
Officials with Bennigan's parent company, the Metromedia Restaurant Group, mentioned the economy in June as they conceded that the company was trying to "restructure its indebtedness."
But even company insiders were shocked when the Metromedia subsidiary that operated Bennigan's and Steak & Ale filed for Chapter 7 bankruptcy Tuesday in the Eastern District Court, essentially liquidating the company.
Metromedia has declined to comment.
Rather than file for bankruptcy, many operators simply lock up and leave. Experts said they expect to see more store closings, but not necessarily bankruptcies.
The economy is "a major impact to me," restaurateur Patrick Colombo said. Mr. Colombo is chief executive of Dallas-based Restaurant Works Inc., which owns several concepts, including the Ferré restaurant in Fort Worth and Victory Tavern in Dallas.
Mr. Colombo sold his Ferré outlet in Dallas' West Village earlier this year and used the money to open three locations of the company's restaurant /wine bar, Crú, in Allen, Austin and Denver. He said the economy was not behind the decision to close the Ferré.
However, he said he can see the economy's impact when he looks at restaurants where, in years past, diners faced a long wait for a table.
"Now, a lot of times you can go and get seated right away," he said of one of his favorite haunts on Preston Road in University Park.
"That's how I benchmark what's going on," he said. "We're all slowing down."
The Greater Dallas Restaurant Association last week released figures showing Dallas-area restaurant sales still growing, but at a slower pace. (Sales were measured by the commonly used benchmark of alcohol sales reported to the state.)
Of the nine North Texas counties studied between April 2005 and March 2008, six saw sales growth slow.
In Dallas County, for instance, growth slipped from an 8 percent rate in 2005-06 to 5.7 percent for the 12 months ending in March.
Still, six of the nine counties maintained double-digit growth rates.
Jamee Green, the association's executive director, along with others noted that Dallas' diversified job base, as well as a variety of restaurants, helps keep the region afloat during economic storms.
"The Dallas market is doing a lot better than a lot of other markets in the U.S.," said Baine Brooks, president-elect of the local restaurant association.
Mr. Brooks, also a restaurateur, said it was a "strategic decision" to close the Greenville Avenue location of his Two Rows Classic Grill chain three months ago and was not hastened by the sluggish economy.
However, he stressed that now is a great time to go out to eat.
If you do go out, he said, restaurant operators will be very pleased to see you.
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