.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;}
Centro and Alba restaurants have pulled expensive meats from their menus, Dos Rios Cantina and Tequila Lounge has decided to close on Mondays through the winter and Gazali’s in the Drake University neighborhood had to raise prices slightly this summer.

As food prices and delivery charges to the restaurant rise and consumer spending decreases, restaurants have been forced to take steps like these to continue to draw customers and boost profit margins. Many restaurant owners and managers say they expect a recession far worse than the last economic pullback after the Sept. 11, 2001, terrorist attacks and that adjustments are necessary to weather the storm.

“I haven’t been in a situation where every day you turn on the news or open the paper or whatever and they’re talking so much about the economy,” said George Formaro, chef and co-owner of Centro and Django. “It certainly makes me nervous every time I turn on the TV.

“We’re not ignoring and pretending like nothing’s going on.”

A lose-lose situation

Restaurants tend to be among the first businesses to be affected by a recession, said Iowa State University Extension economist Meghan O’Brien, because people consider dining out to be a luxury and cut back on it during harder times.

According to Iowa Department of Revenue figures, growth in sales at restaurants, taverns and bars in the past five years peaked at 6.81 percent in fiscal year 2006 (ended March 31, 2006), then started to decline, parallel to the housing boom and bust, O’Brien said. When adjusted for inflation, though, she said the growth in this sector is actually slower and that sales could even be shrinking.

Restaurants that cater to families will likely be hurt worst in this recession, she predicts, while limited-service establishments such as Panera Bread and Panchero’s Mexican Grill could fare better because of their lower prices. Higher-end local restaurants could also be better positioned, because they tend to attract a wealthier clientele, offer a unique menu and have more flexibility to raise prices if needed.

“There are a lot of similar-type restaurants in the middle-of-the-road category – Applebee’s, Chili’s, TGI Friday’s – a lot of restaurants selling a very similar product that aren’t highly differentiated from one another,” O’Brien said. “So they will struggle a little more, and I do think you’ll see some forced to evolve and change.”

Many local restaurant owners and operators are reporting a slight decrease in sales. Dos Rios’ sales are down 5 to 6 percent for the year, said General Manager Jeff Duncan. Trostel’s Greenbriar Restaurant & Bar and Trostel’s Dish have experienced about an 8 percent decline in the past two months compared with the year-ago period, said Suzanne Summy, director of operations.

“We’re just starting to see the beginning of something that’s going to last awhile,” said Jason Simon, chef/owner of Alba, who has seen a drop in sales at his restaurant as well.

Restaurant owners and managers say the problem is not that customers are deciding not to dine out, but that they’re steering away from pricier options and regular customers are cutting back on visits.

“They’re coming out and having dinner but not really enjoying themselves,” Simon said. “They’re staying way from big purchases like wine. I think people are still going out, but I don’t think they’re going out as much as they’d like to be going out.”

Mario Gazali, owner of Gazali’s near Drake, said that sales at his restaurant declined this summer as the cost of gas skyrocketed. “I noticed that when people used to come, a lot of regulars would order a platter meal,” he said, “and now they come and they order a sandwich with a glass of water.”

On the other end, the cost of ingredients has risen significantly. Formaro said he was shocked to see the price of flour triple this year, which caused his bakery to start losing money on bread. Even the cost of cornmeal, an item once accessible to all demographics, has gone through the roof, he said.

“I haven’t seen anything not touched yet,” Formaro said. “Everything is up considerably.”

Gazali also was surprised to see the cost of ingredients, such as vegetable oil, go up, which made him have to raise prices slightly.

In addition, Alba’s Simon said many vendors tacked on fuel surcharges for deliveries this summer, which haven’t gone away as the cost of gasoline has gone back down. These changes have forced him to look at other vendors.

Adapting to the market

Many local restaurateurs are getting creative in finding ways to attract customers and keep profits up while still avoiding price increases.

Formaro said that management decided to remove the expensive 26-ounce ribeye steak from Django’s menu in favor of smaller, flavorful cuts that can sell for a lower price. Simon has cut back on buying expensive meats in favor of pork and other items that sell as entrees for under $20. Trostel’s Greenbriar is trying to draw attention to its bar menu, which offers smaller portions of food, and sister restaurant Dish has introduced cheaper drinks, along with new martini and wine flights. Dos Rios has changed its menu to offer more complete meals, which tend to be a better value than its a la carte items.

Many restaurants have started offering prix fixe menus or three-course meal options, which O’Brien said tends to attract consumers in uncertain economic times because they have a better idea of the total cost of the meal ahead of time. Centro and Django offer three-course meals for $25 to $30. Greenbriar has a Friday night Italian prix fixe meal for $16 and Dos Rios is hosting tequila dinners for $65, which includes alcohol, food and a lesson on tequilas. About 30 people attended the first Dos Rios dinner two weeks ago, which Duncan said was about what he expected.

Some restaurants are rolling out special offers as well. This holiday season, Greenbriar, Dish and Chip’s Restaurant (all under the same ownership) will offer a special, where someone who spends $100 on gift cards will receive an extra $20 gift card. Dos Rios is offering more drink and food specials and has started bringing in live entertainment on weekends. Django now waives its corkage fee for patrons who bring in a bottle of wine.

“We’re definitely thinking of ways to try to stretch your dollar the best we can,” Formaro said.

For the month of November, West Glen Town Center also put together a lunch promotion, featuring discounted lunches and $5 gift cards. It is common for management to put together group promotions, said Karen Hallagin, chief operating officer of the shopping center, and the purpose of this campaign was to draw attention to West Glen’s growing lunch options, which more than doubled recently.

But, she added, “it’s much easier in economic times like this, if there’s something free or at a reduced cost. It makes much more sense to try something new.” As of press time, about 200 coupons had been printed from its Web site.

A glimmer of hope

Opening a new restaurant in tough economic times might seem risky, but Mario Gazali went with his gut. By opening Adonis Mediterranean Bistro in West Glen Town Center with his cousin, Tony Rehayel, two weeks ago, he is hoping to fill a void in the area by introducing Mediterranean and Middle Eastern dishes inspired by his mother’s cooking. Adonis has received strong interest in the two weeks it has been open, he said, with part of the drive to open the place coming from Gazali’s customers requesting foods that required more time to prepare and a bigger kitchen.

“The big motivation is there’s nothing like this in Des Moines,” said Rehayel. “You see Mediterranean restaurants are booming in big cities like California, New York. … There’s a market for it in Des Moines.”

Formaro believes his places will fare well because of their strategy of offering a mixed-price menu that includes higher-end entrees as well as pizzas, sandwiches and salads. Summy said she is booking about the same number of holiday parties as last year at her restaurants, though people are choosing less expensive liquor and food.

Meanwhile, sales at Court Avenue Restaurant and Brewing Co. have stayed in line with last year’s figures, said Mike Utley, general manager, which could partially be from an effort to update the restaurant’s look and menu that began before the recession.

“I don’t know if that means we’re fortunate compared to some other people right now,” Utley said. “It just seems like to me Des Moines isn’t being hit as bad as some other places.”