Skip to comments.Stock market takes dip out of dining
Posted on 10/16/2008 3:18:19 PM PDT by Graybeard58
Isabel Tartaglia said her family's American Steakhouse restaurants have raised their prices only three times in the last 25 years.
But as food and other costs associated with running a restaurant continue to rise and the fallout from the financial crisis spreads, restaurant owners are bracing for the struggling economy to take another bite at their bottom lines.
It seems like everything is out of whack, said Tartaglia, the chief executive officer of the chain of restaurants in Waterbury, Norwalk, Bridgeport, West Haven and Meriden. Politics, costs, people's homes are in jeopardy. It just seems like an unrestful environment right now.
The stock market tumbled another 700 points Wednesday after the government reported retail sales for September even lower than an expected dip, underscoring consumer reluctance to spend and offering more evidence of a recession.
But the bad news is not all new. Wholesale food prices have risen 8.7 percent for the year through August on top of a 7.6 percent increase in 2007 and compared with just a .7 percent increase in 2006, according to the National Restaurant Association. Beef and veal costs have gone up about 19 percent this year. And then there's the mushrooming utility costs.
Tartaglia said her business was down by about 20 percent. Customers who used to come in two or three times a week now come in once. But she said she will target her regulars for promotional discounts, keep menu prices level and hope for the best. For now.
We think it's not the right environment to do that to our customers, Tartaglia said of a price hike. Our customers have been very loyal to us. We're just going to wait and see what happens.
Local restaurateurs have looked for other ways to control rising costs and cater to customers who might be less willing to eat out.
We sharpened our pencil on buying, said Anthony D'Elia, co-owner of Nino's Trattoria and San Marino Ristorante Italiano in Waterbury. We give our salespeople a little more work so we don't have to pass on those costs to our customers.
D'Elia said the restaurants raised the prices of pasta dishes by about 10 percent over the summer, but he sought to maintain the cost of higher-end items.
Tartaglia was able to establish some stability by negotiating a year's worth of beef and chicken prices in January, but she's not sure what to expect from the new year's market prices.
Carmen Vacalebre, the owner of the five Carmen Anthony fish and steak restaurants, raised prices about 2.5 percent earlier in the year to help make up for what he said was a single-digit percentage decrease in sales. But he said he refused to cut portions or cut corners on quality.
It's tough doing business today, Vacalebre said. At the end of the day, you can't spend more than you take in. You either have to cut costs or raise prices. We're looking to do both.
Vacalebre said he has instituted a wage freeze on his 275 employees and cut down on the overtime hours they work. But all restaurants will have to cope with a new state minimum wage, which will rise from $7.65 an hour to $8 on Jan. 1, and then to $8.25 a year later. Under the law, employers can pay bartenders 11 percent less than the minimum wage and waiters and waitresses 31 percent less if they make up the rest with tips.
That's a huge hit to the restaurant industry, Tartaglia said, noting she would have to adjust everyone's wages to accommodate the new scale. I don't think it was a great idea.
But Vacalebre, Tartaglia and D'Elia have seen a lot of economic strife in their careers and believe creativity and discipline can help them ride out a recession.
I just think that the strong operators are going to survive this, Vacalebre said. The people who have been around a long time. People who have just gotten into the business in the last year or two probably won't make it.
Mario Gugliotti prepares the stuffing for lobster raviolis in the kitchen of Nino's restaurant in Waterbury. Darlene Douty/Republican-American
If they still vote Democrat, they deserve to go out of business.
How have they gotten away with only raising prices 3 times in 25 years?! That means at certain points in their history they have been seriously over charging.
Maybe they cut wages or changed their ingredients.