Issues du jour? Climbing costs, competition for restaurateurs
by Lynn Lofton
Published: September 8,2008
Restaurants, like all businesses, are facing a plethora of issues in these tough economic times. Some of those challenges are the increasing costs of food, fuel, energy and labor along with environmental concerns such as smoking bans.
The smoking issue is taking a back seat these days to the number one issue, which is the difficulty in bringing money to the bottom line, says Mike Cashion, executive director of the Mississippi Hospitality & Restaurant Association.
“Restaurants are getting hit all around,” he said. “Consumers are strapped for cash and may not eat out as much. For restaurants, the cost of business continues to rise as the costs of food, energy and labor go up. It’s increasingly difficult to turn a profit right now.”
‘Eating their profit’
Nick Apostle, owner of Nick’s in Jackson, sees keeping ahead of rising business costs as a moving target. “When will it stop?” he wonders. “We can’t raise prices to cover all the bases. A lot of restaurants are eating their profit.”
The veteran restaurateur had only one price increase in the last three years at his restaurant; then enacted a small increase a little more than a month ago that is already falling behind rising costs.
“I don’t want to complain to customers, and if we change the menu, we change what we represent,” he added. “The summer is always slower, but it’s tougher right now. Every expense has increased but the customer base has not.”
Apostle and Jeff Good agree on the challenging restaurant scene they see evolving in the Jackson metro area. Good and his partner, Dan Blumenthal, own Broad Street, BRAVO! and Sal and Mookies New York Pizza and Ice Cream.
Demand shrinks; capacity grows
“There’s big growth of retail in the area following residential growth, especially with big, national chain restaurants,” Good said. “It’s a unique situation here because demand may be going down but capacity is going up.”
There seem to be more restaurants opening on the horizon in the three-county area of Hinds, Madison and Rankin. “Unfortunately, some have to fail for others to survive,” Apostle says. “I don’t think the market will support all of them.”
He questions whether there’s any new growth in customer base. “The pie is only so big and there are more opportunities for people to eat out,” he said. “It’s human nature to try new places as they open.”
Good sees the increasing restaurant competition, coupled with the tough economic times, as a mandate for restaurants to make sure they are on their game.
“We have to be focused on what we do and do it well, along with having a paradigm for pleasing guests,” he said. “It’s fundamental. We’re in the weight room working out. We’re seeing the overall economic climate where consumers’ disposable income is getting tight. People are making sure there’s value in their choices and choosing carefully.”
The current climate for consumers to seek value was the thinking behind Good and Blumenthal opening Sal and Mookies one year ago. They see the family-friendly eatery as offering value in an enjoyable atmosphere. It was purposely opened in Jackson’s Fondren neighborhood, rather than the suburbs, as a love letter for the city.
Like Apostle, the partners made price adjustments recently at BRAVO! and Broad Street. Labor and training concerns are not at the top of the list at this time although a good staff is always crucial.
Recognizing that fact of the restaurant business, Apostle says service is at least half and sometimes more important than what is served. “Some people don’t get it,” he said. “Training is paramount. The costs are running right up there now with labor. Everything is sensitive to increased costs.”
Cashion explains that a special promotion is coming up in October when the governor will proclaim Dine Out Mississippi Month. The first 2,500 customers returning $200 worth of receipts from participating association members will receive $20 gift certificates.
“It’s a way to say thanks to our customers,” he said.
Contact MBJ contributing writer Lynn Lofton at firstname.lastname@example.org.
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