Feeding Frenzy

Restaurateurs still bring in the dough, despite economic woes

ARE WE STILL IN A RECESSION? When it comes to the local restaurant industry, it depends on who you ask. While some restaurants have pushed “twofers,” special Happy Hours and even free BYOB — Bring Your Own Bowl — soup nights (the Pearl Hotel), others, like the Naked Café, have increased their staff and are even expanding.

“The Naked Café has always been reasonably priced, and although the profit margin isn’t high for breakfast and lunch, a moderate profit margin results in good value to customers,” says owner Gabe Wheeler, who has Naked Cafés in Solana Beach, Point Loma, Carlsbad and Encinitas.

“Customers are looking for a little bit more right now; they want better service,” he adds. “We haven’t compromised our product. You can’t cut portions, change items on the menu or decrease the quality of food, as many restaurants have done. Your customers have become accustomed to what you offer. If you change the consistency or quality of food or service, you’re cutting your own throat.”

Naked Café offers an eclectic menu, from blackberry pancakes to fuzzy monkey pancakes, sunrise burritos, blue cheese–walnut salad and grilled chicken sand wiches. “The combination of tasty, unique food with reasonable prices is what people gravitate to in a down economy,” he says.

Wheeler, who opened his first restaurant in Solana Beach in 2002, concedes the growth rate of his Carlsbad Naked Café has dropped, but he’s confident it will pick up. In a time when some restaurants are facing closure, Wheeler and his wife, Denise, his business partner, planned a June opening for their latest Naked Café in Encinitas.

How does Wheeler do it? He’s implemented several cost-cutting strategies to maintain the company’s bottom line, including negotiating with vendors and suppliers. “Back when gas prices were high, vendors were charging surcharges — every delivery was $4 to $6 more,” he says. “I called my vendors a couple of months ago and said gas prices aren’t high anymore, and had the extra surcharges wiped from our invoice. Negotiating prices with vendors rather than relying on fluctuations in the market will help control costs. You can spend hours shopping various vendors, but if you negotiate set prices you save yourself a lot of money and time in the long run.”

Wheeler has also managed to trim his restaurants’ gas and electric bills by 20 percent a month by having SDG&E run a free business analysis on how much energy each location was using — and wasting. He replaced a lot of the lights with compact fluorescents and replaced all leaky gaskets for the refrigerators and freezers.

“Everything comes down to pennies and nickels in the restaurant business,” Wheeler says. “It’s a slim-margin business. You have to know where you can save a penny or nickel; that keeps you alive. For example, if you can fix something yourself, you should do it instead of hiring someone to fix it for you. One of our employees does maintenance, and that saves us thousands of dollars a year.”

EVEN IN GOOD TIMES, restaurants historically operate on a 4 percent margin and have a high failure rate, according to the National Restaurant Association. But things can’t be that bad. According to the association’s 2009 forecast, the nation’s 945,000 eateries should hit $566 billion in sales this year. The overall economic impact of the industry is expected to exceed $1.5 trillion in 2009. The association also reports that 45 percent of adults say restaurants are still an essential part of their lifestyles.

“Americans can’t not spend money,” says Matt Rimel, owner of Rimel’s Rotisserie and Zenbu restaurants in La Jolla and Cardiff by the Sea. “Going out to dinner is probably the first thing you are going to do to treat yourself.”

While profits are down about 20 percent for Zenbu in La Jolla, Rimel says business is still good for his other restaurants. The Zenbu he opened in Cardiff earlier this year continues to have 45-minute to hour-long waits on the weekends — prime time for its popular fresh sushi and local sea food.

Zenbu, which offers Happy Hour all night on Monday and Tuesday (and for several hours on other nights), adjoins Rimel’s Rotisserie at the Cardiff location. The two are located within a mile of each other in La Jolla. “By doing the two concepts side by side, we’re able to keep our prices down,” he says.

It’s Rimel’s no-nonsense approach, however, that has kept his restaurants afloat. He buys all his produce from local growers and farmers, and uses products from his own companies: Homegrown Meats/La Jolla Butcher Shop and Ocean Giant, made up of a close-knit group of local fisherman who produce the freshest fish caught by eco-friendly hook-and-line methods.

“We’re all about San Diego,” he says. “You need to be putting your money into local businesses and people. If everybody bought local, we wouldn’t be having the economic problem we are having right now.”

Rimel — a La Jolla native who started his restaurant career at 14 as a busboy at Chart House — even delivers some of his own products to his restaurants. “I’m at the dock one minute and at the ranch another minute. I’m in a T-shirt, jeans and boots, and I’m delivering fish right now to my restaurants,” he says. “I’m driving my own truck; I cut out a delivery guy. That’s $500 a week. People need to think more like that and work the system.

“Most people in this business are having a hard time right now,” Rimel says. “Instead of sitting on your ass and complaining about it, you have to get creative and be willing to get back to the basics by getting in the trenches with your employees.”

TOM PENN, owner of San Diego–based consulting firm Real Restaurant Solutions, uses Darwinian language to describe the sustainability of the restaurant business. He says it’s not always the smartest and strongest who survive, but those who can adapt to change. Penn, former operating partner of Sammy’s Woodfired Pizza restaurants, now works with clients one-on-one and offers workshops on the fundamentals of running a profitable restaurant company, including one titled “How to Survive in Today’s Economy.”

He says during slow economic times, panic strikes many restaurateurs, who respond by offering food and drink specials and heavy discounting, which often backfires. “It can erode your value perception,” he says. “Many people who respond to these discount ads are people who won’t come in when the discounts stop.”

Penn says it’s better to be proactive by taking a look inside the operation and creating more efficiencies. “I do think that the people who learn how to operate efficiently in this environment will reap the benefits when the cycle picks up in a couple of years,” he says. “I know people are hurting right now, and the only way to give real help is to improve cash flow. But they need to do so in a clever way, where the guest experience is enhanced at the same time.”

The restaurant business, Penn says, is an industry where innovation meets efficiency. Since this industry rides up and down with the economy, it’s crucial, he says, to stick to business basics: Control your costs, be flexible, and never compromise your value.

Check, please.

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