One day, not too long ago, Corks just didn’t look the same to co-owner and chef Jerry Pellegrino.
In its 11 years, the Federal Hill restaurant had developed a loyal following. But as Pellegrino developed his craft, entree prices inched upward. Finally, he decided to undertake a renovation of the restaurant and its menu.
“I turned around and it was a higher-end place, I thought it should go back to its roots as a neighborhood restaurant,” Pellegrino said. “Everyone’s going to have to look at their pricing. I think prices have gotten out of hand at restaurants, I just can’t reason $40 for an entree.”
» Projected 1 percent increase in sales, adjusted for inflation, in 2009 to $556 million
» 4 percent of the U.S. gross national product
» 9 percent of U.S. employment
» Food prices increased 8.4 percent in 2008
» Menu prices increased an average of 4.4 percent in 2008
He’s not alone. As local consumers tighten their spending habits, restaurants are seeking new ways to stay profitable, retain their customers, and encourage first-time diners to make a return visit.
Vacancies, meanwhile, remain at some of Baltimore’s premier restaurant locations, which have seen dining options depart over the last year and a half. Three major spaces remain open at Harborplace, and the former Legal Sea Foods space on Pratt Street has yet to find a new tenant.
The National Restaurant Association expects industry sales to reach $566 billion this year, an inflation-adjusted decline of 1 percent from 2008. The association said restaurants will represent 4 percent of the national gross domestic product and employ 9 percent of the U.S. work force.
“The 2008-to-2009 period is the most challenging period for the restaurant industry in decades,” said Hudson Riehle, senior vice president of research and information services for the National Restaurant Association. “The industry is more competitive than ever.”
One of the biggest challenges facing restaurant owners is the high rate of wholesale food price inflation, Riehle said. Food prices increased by about 8.4 percent in 2008, while menu prices grew only about 4.4 percent on average. Owners aren’t passing those price increases on to the customer, meaning they have to watch all of their operational costs.
“There’s very little room for missteps in the restaurant business,” Riehle said.
With food prices expected to increase again in 2009, the challenges continue for restaurants. “Given a growing appetite at the household level to cut spending, it seems to me that restaurants are poised for a particularly bad year,” said Anirban Basu, president and chief executive officer of the Sage Policy Group. “I think that the restaurant industry will be reflective of the broader move toward trading down in the American economy. [Consumers are] trading down from Starbucks to Dunkin Donuts, trading down from Macy’s to Wal-Mart, and restaurants will be no different.” Despite the difficult environment, some areas have seen a relative restaurant boom. Andrew Parks, owner of Sam’s on the Waterfront in Annapolis, has seen several new places open in recent months — and thinks they may not all see the spring. “I think there are definitely too many restaurants for a town this size,” Parks said. “Those of us who do make it though will be in pretty good shape. There’s only so many people to vie for É you can only cut prices so far. It’s tough times, there’s more and more chains and fewer of us independents.” While national chains curb their expansion plans and look to meet costs, local restaurants have been hard-hit by the economic downturn, said Kathy Snyder, president and CEO of the Maryland Chamber of Commerce. The chamber counts the Maryland Restaurant Association and several dining establishments among its members. “From my own experience, if I go out to lunch, the restaurants don’t seem to be as full as they had been maybe in October,” Snyder said. “The strong will survive. Loyal patrons ought to try to make an effort and go back and support those restaurants that have given them good service at decent prices.” [email protected]
