Desperate restaurants try new tricks

With Americans downsizing amid the recession, eateries are offering special deals to keep patrons coming back.

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By Elizabeth Strott, MSN Money

The slumping economy has changed America's attitudes toward eating out, and that has caused the country's massive restaurant industry to adapt -- and fast.

Many Americans are now budgeting for meals at restaurants more carefully, but people still have to eat, say Nina and Tim Zagat, the founders of the popular Zagat restaurant surveys.

How are people cutting back?

Statistics from Zagat indicate that 33% of restaurant patrons across the country are paying more attention to prices and that 28% of diners are switching to cheaper restaurants. Here's a bigger blow to restaurants' bottom lines: Approximately 20% of diners polled are cutting out booze, appetizers and desserts.

Philadelphia restaurateur Stephen Starr started noticing the change in customers' habits over the holidays. "We saw people drinking less and ordering less wine," Starr said. "And they're going out more toward the end of the week."

Chefs cooking up comfort food

Still, despite Americans' worries about the economy, "consumers remain strongly desirous of continued -- and even increased -- use of restaurants," according to the National Restaurant Association's 2009 industry forecast.

Statistics from the association indicate that 45% of adults say restaurants are an essential part of their lifestyles.

"Going out to restaurants is still an important part of people's lives," Nina Zagat said, "and people are still going to go out."

Slide show: Recession deals to whet your appetite

Restaurateurs gone wild

Down but not out, restaurateurs are getting creative to keep the customers coming back.

"Restaurants need to be ready for customers who feel tired, overwhelmed and tapped out financially," said Maria Caranfa, the director of Mintel Menu Insights, which tracks restaurant menus across the country.

Tell us: Have you changed your dining habits?

"Every business move that operators make to enhance their competitive edge will matter, whether it's cutting costs, rethinking menu pricing or implementing new marketing efforts," according to the National Restaurant Association's forecast.

One of Starr's tactics: Just be nicer to the customers.

'Spit in the eye of the recession'

"Give a little bit more, and hopefully (customers) will come back more" when the economy picks up again, Starr explained.

Continued from page 1

Here's what some other restaurants have been doing:

Southern Californians can enjoy a $40 prix fixe menu at the award-winning Marine Room in La Jolla. The restaurant, which has been around since 1941, also has introduced its very first happy hour, to give customers a reason to smile during these dreary times.

Philadelphia's upscale Lacroix at the Rittenhouse has extended its Appetite Stimulus Plan -- a $24, three-course lunch -- through the end of March.

Tom Colicchio, the owner of New York City's Craft restaurant and the head judge on Bravo's "Top Chef" reality show, and Craft executive chef Damon Wise offer a Frugal Friday menu. Diners can eat anything on the menu for $10 or less.

Read more: High-end dining for less

Seven sushi restaurants in Minneapolis recently started offering two-for-one specials Mondays through Thursdays throughout the winter.

Food Network icon Mario Batali and his partner, Joe Bastianich, have reduced their nine-course grand tasting menu at Del Posto by $50. It'll still cost you $125, but to some gourmets, that's a deal.

Diners at Danny Meyer's Gramercy Tavern in New York can choose from a special menu, where items on the restaurant's regular menu are presented as a three-course deal that adds up to $35.

Readers talk: Eating out just isn't worth it

The Palm restaurant chain is offering Wine Down Wednesdays, when oenophiles can buy any bottle on the wine list for half-price. The deal is available at Palm restaurants in Atlanta, Atlantic City, Charlotte, Chicago, Dallas, Denver, Houston, Philadelphia, San Diego and Tampa.

Banks, automakers and, now, hungry Bostonians are getting a bailout: The South End's BanQ restaurant is offering the BanQ Bailout, three courses for $29 from 5:30 to 6:30 p.m. Sundays through Thursdays.

Ruth's Chris Steakhouse, owned by Ruth's Hospitality Group (RUTH, news, msgs), will offer Ruth's Classics, three-course meals for $39.95, through April.

Seattle's Boka Kitchen & Bar has a New Year Nourishment deal in which patrons can trim their waistlines while fattening their wallets. For $14, Boka offers a prix fixe lunch menu.

The name Bernard Madoff causes indigestion for some folks, but at JoeDoe restaurant in New York's East Village, it's a diner's dream: The Madoff Menu gives diners a three-course prix fixe meal for $35. (Though I think I'd replace their Banana Bread Sundae with a more apropos No-More-Bread Pudding.)

And if you just want to drink away the recession, head to The Anchor, a bar in downtown Manhattan, for Recession Thursdays. For $20, you can drink all you want from 5 to 7 p.m.

Continued from page 2

More mac and cheese, please

Other restaurants are tweaking their menus to entice diners.

"Comfort food is what people crave when they're feeling down. Expect this phenomenon to hold true in 2009 as people look for warm, familiar favorites on the menu," said Caranfa, of Mintel Menu Insights.

Restaurateurs have been paying attention. In fact, Artisanal, a bistro on Park Avenue in New York City, recently launched Comfort Food Night on Mondays and introduced a grilled-cheese bar to help bring people back to their childhood days.

"I'm a chef, not a banker, so I can't lend you money, but I can nourish you with comfort food," said Artisanal chef-proprietor Terrance Brennan.

Donatella Arpaia has adapted the menu at her Mia Dona restaurant in midtown Manhattan to include more comfort food, and it has been a hit.

"Meatballs sell out every night; the crispy chicken sells out," she said. "People want to go to a place where they can dine, but they also want their meatballs and their pasta."

And what's more American than the burger? Casual-dining chain Ruby Tuesday (RT, news, msgs) caters to burger lovers with about two dozen variations on its menu and offers a "burger guarantee" to ensure diners are satisfied with their beef (or turkey).

Who's winning -- and who's losing

Philadelphia restaurateur Starr isn't letting the recession get in the way of his expansion plans.

"We will continue to grow at a slower pace, a safer pace, but in a different way," he said.

One example of his successful strategy: Business is booming at his new steakhouse, Butcher and Singer, which opened three months ago.

Americans dole out almost 50% of their spending on food to the restaurant industry, National Restaurant Association analyst Hudson Riehle said. According to the association, restaurant sales will likely grow to approximately $566 billion this year, a 2.5% increase from 2008. On an inflation-adjusted basis, sales are projected to decline 1%, the association says.

Generally speaking, restaurateurs are worried: Nearly half of the restaurant operators surveyed by the association reported that the economy is a challenge, according to Riehle.

The credit crunch has taken its toll on two chains, Bennigan's and Steak and Ale, which have filed for Chapter 7 bankruptcy protection during the recession. But not all restaurants are struggling, according to NPD Group analyst Harry Balzer.

Continued from page 3

"Some segments of the restaurant industry are doing well. A quick-service place, offering a deal on popular foods like burgers, is doing better" than more formal dinner places, Balzer said. McDonald's has benefited from the downturn, as Americans who had stretched to go to casual sit-down dining chains like Cheesecake Factory (CAKE, news, msgs) and Darden Restaurants' (DRI, news, msgs) Olive Garden and Red Lobster have returned to fast food to save money, at least for the moment.

"Consumers can either go to a casual-dining restaurant and pay $15 and pay a tip or go to McDonald's and get the same thing for $7 or so," said Joe Pawlak, a vice president at restaurant industry consultant Technomic.

Recession-proof restaurants?

There are some bright spots at the high end of the trade. Über-upscale restaurants such as Meyer's Union Square Cafe in New York and Thomas Keller's French Laundry in California's Napa Valley don't seem to notice that a recession has been weighing on the nation for the past year.

"You don't want to turn your white tablecloths into paper mats to save cost," Meyer told The Wall Street Journal, "because that changes the sense people have of who you are as a restaurant."

But there have been setbacks at the high end: New York's Rainbow Room in Rockefeller Center -- which opened in 1934 -- closed in January because of slowing business. Cape Cod's acclaimed Abbicci has closed, and Steve Hanson, the owner of B.R. Guest Restaurants, has closed his Michelin-star-rated Fiamma and his Ruby Foo's uptown restaurants in New York, as well as his Blue Water Grill in Chicago.

Technomic analysts expect 12,000 to 18,000 restaurants to close this year, ending a decade-long expansion of the business.

As for the future of dining out when the economy recovers, Arpaia said: "People will loosen their purse strings a little. But we'll never go back to that way of spending, spending, spending."

Produced by Anh Ly / Graphics by Anh Ly

Published Feb. 6, 2009