It would seem that many New York City eateries don't have the stomach for the bad economy. Persistently weak sales, combined with high rents and operating costs, and insurance rates that are among the highest in the country have proven to be a bitter brew. They are sending some of the city's best-known restaurants into bankruptcy protection as they try to unload heavy debts, square things out with the taxman, and retool their menus to attract new customers. Those are the lucky ones. Other restaurants have been forced to close outright.
Andrew Rigie, director of operations for the New York State Restaurant Association, says people are still eating out, "however, those patrons are now spending less."
There are signs that the worse is over, but recovery may still be a long, winding and painful road of hope and despair that could still see more attritions. While consumer confidence appeared on the rebound in the spring of this year, the latest news from the Consumer Conference Board has proven disappointing. Its monthly survey of 5,000 households shows that consumer confidence has suddenly dropped again in July. Evidence points to a job market that remains depressed, with people confirming that jobs are still "hard to get."
Protect and Serve
Among the economy's latest victims is the Meatpacking District's swanky Le 55, formerly Merkato 55, which recently filed for Chapter 11 protection. It changed its name and menu after hitting hard time, with stakeholder and "Brazil's Next Top Model" host Fernanda Motta assuming a more visible role in an effort to bring the crowd back.
Debts estimated as high as $1 million also sent SoHo restaurant Zoë into bankruptcy protection. Known for its more than 300 domestic wines, Zoë remodeled its kitchen, brought in a new chef, and developed a "green market" menu in an effort to lure back customer traffic.
"It's a difficult time for everyone," says owner Stephen Loffredo. "Restaurants are hurting across the board, but we're expecting to see signs of recovery in the third or fourth quarter. August is typically a heavy tourist month, when Europeans visit the city, and so far our lunches are filling up."
In April, Madison Avenue's Madison restaurant, which serves French fare, filed for Chapter 11 protection in order to avoid eviction. In addition to owing hundreds of thousands of dollars in taxes, it is also carrying thousands more in outstanding debt to vendors.
"Restaurants need to continue to watch their food costs, reduce waste, analyze expenditures and possibly revamp areas of their restaurant's overall concept," advises Rigie. "Creative menus, innovative dishes, friendly service, cleanliness and promotions can help ensure that patrons are fully satisfied and keep on coming back."
For some restaurants, however, it's too late. The Chicken Bar on 52nd Street and Lexington avenues recently succumbed to the economic slowdown and shut its doors, as did Luca at 690 Madison Avenue. Montparnasse, a French restaurant in the Pod Hotel at 230 East 51st Street, also closed. The landlord repossessed the Cub Room on the corner of Sullivan Street and Prince Street and evicted Tribecca bar Deca. Payard Patisserie & Bistro on the Upper East Side, facing a doubling of its rent at the end of August, has threatened to close and lay off its employees.
Greener Pastures
The hard times faced by area eateries, and the reluctance of restaurant owners to take on new obligations in the current economy, is reflected in the present situation with famed Tavern on the Green. With its lease up at the end of the year, the Department of Parks and Recreation issued an RFP for new bids back in February. Many top contenders who had first expressed interest in the landmark property withdrew their names from consideration as the dining industry went into a tailspin.
For current proprietor Jennifer LeRoy, whose family has held the lease since 1974, it's not about the business, it's about family pride. In a recent posting on the Huffington Post, she expressed hope that her bid wins out. "There may be other bidders for the Tavern lease who have experience, expertise and success in the restaurant business, but we believe that no other restaurateur can equal what we have to offer," she writes.
Despite the odds, some restaurants report that business is still good for them. Compass on the Upper West Side says revenues are up 12% since June. The Boat-house in Central Park reports a 22% increase in sales. Aureole says the place has been packed since it reopened June 29 at a new location on West 42nd Street, with 30% more business than it expected.
Rigie notes, "New York is an authentic 'foodie' city where people love to dine out, take-out and order in. New restaurants continue to open everyday and the city will continue to be a tourist destination for people around the world. New York City has the right recipe for a quick recovery."
Alexander A. Picken, who owns and operates Picken Real Estate, Inc., and Nightlife Brokerage, Inc., in Manhattan, agrees. "In the past month, we've noticed a substantial increase in the number of inquiries regarding new ventures, especially by those national restaurant chains that have branded concepts," he says. "Savvy restaurateurs and organizations nationwide recognize that the New York City market has the best possibility and the best advantages for recovery."