Sandra Clark finds herself constantly yelling at food distributors. Clark, the Gator’s Dockside director of operations, was irritated when fuel surcharges started showing up on their bills, but her ire was really raised the second time flour prices were increased in the last two months.
“When is it going to stop?” she said. Clark said the company refuses to pass these price increases onto the customers, so instead they are getting creative by trying new brands, weeding out items from the menu that do not sell each year, and including profitable menu items like steak — just added this week.
“If people cannot afford to go to higher- end restaurants, this will give them another reason to come to Gator’s,” Clark said. Geoff Luebkemann, Florida Restaurant Association vice president, said many of their 10,000 members are absorbing fuel and product price increases so they are not passed on to the customers. “They cannot raise prices or they will lose the customer. But that can only last so long,” he said.
“We are in a relatively low profit margin business so many of our members are digging into their household budgets to survive. It is a vicious cycle.” Restaurants across the nation are getting creative to save money and bring in more revenue. Chefs are playing with recipes, managers are buying smaller plates to make downsized portions look bigger, and menu re-engineers have been called in to analyze item placement in favor of the most profitable items.
But despite their efforts, many FRA members have folded under the economic pressure. “It is definitely a trend we have noticed. Under the dire economic conditions, a lot of our members are looking for anything they can do to survive,” Luebkemann said. “Restaurants are particularly vulnerable to a degree.
As disposable income drops and families devote a large portion of their income to gasoline, they might downgrade their dining choices or drop [dining out] altogether.” The May National Restaurant Association member survey showed softer-than-normal customer traffic reports and expectations. In the last few months, 36 percent of members reported an increase in customer traffic — down from 47 percent in April and the lowest level since November 2004 — and 39 percent reported a decline in customer traffic.
Member outlooks concerning store sales and business conditions over the next six months have not been this low since July 2004. HG Parsa, chairman of the University of Central Florida Rosen College Department of Lodging and Food Service, said generating restaurant traffic should be at the top of every restaurant’s agenda. “It is easier to sell more items to a customer who is already in the door than it is to get another customer in.
You sell an entree and then it is easy to sell an appetizer, a dessert, a beverage,” he said. To drive customer traffic, many FRA members are turning to price specials. Although they are sacrificing profit margins on the front end, Luebkemann said restaurant managers are hoping they will make up for it in sales volume. “Sales will cure just about anything in our industry,” Luebkemann said. “They are taking a leap of faith offering the deep discounts we are seeing out there.”
Luckily for business owners in Orlando, customer traffic has remained somewhat healthy because of tourists who see the U.S. as an attractive destination due to the weakening dollar. Darden Restaurants’ Rich Jeffers reported that all of their brands — Red Lobster, Olive Garden, Seasons 52 and Longhorn Steakhouse to name a few — are doing well.
“We are not doing any menu engineering as a result of the current environment. We continue to do what we do. We had an outstanding fourth quarter and we feel good about what our brands are doing,” he said. Other East Orlando restaurants like Linda’s La Cantina Steak House and the Mellow Mushroom reported healthy customer traffic and said they are not changing their menus or traffic.
Clark also reported no significant change in customer traffic or sales volume, but said they are still interested in ways to save money in order to brace for any future food and fuel price increases. “We are working with our vendors — keeping them honest. I think they respectfully listen to us and come back with good options. Sometimes we try a new brand, even though that does not always mean we make the switch,” she said.
“We have been extremely fortunate, but we are just as scared as everyone else. We are surviving it. People are not going to give up their chicken wings and beer.” Luebkemann said low-cost or quickserve restaurants seem to be surviving better than middle to high-end eateries. “Many years ago dining out was a treat. But in today’s dual-income households, where both parents are busy, dining out is a way of life.
Many families rely on our industry to be their dining room,” he said. “But now many people are choosing quick service or dropping it altogether. That precipitous loss in sales requires our business to react, and react quickly.” But even fast-food restaurants cannot escape high fuel costs. In fact, they are even more vulnerable to fuel surcharges because they rely on high product turnover.
Parsa said he was recently contacted by several major fast-food chains to re-engineer their drivethrough menus to increase sales volumes. “Quick service has traditionally been fairly insulated from economic downturn, but they too are starting to feel the pinch,” Luebkemann said. “High-end, trendy dinner houses can charge $50 for an entree, but there is not much profit built into the dollar menu.”
