Sunday, September 13, 2009
Nashville steakhouses scale back to survive
By Wendy Lee • THE TENNESSEAN • September 13, 2009 How do high-end steak restaurants keep the sizzle alive when business diners, and their squeezed expense accounts, slow to a trickle? Many take it down a notch, offering lower-priced menus in a bid to rekindle profits while attracting a broader range of customers. Consider the strategies of Stoney River Legendary Steaks, Fleming's Prime Steakhouse & Wine Bar and Morton's The Steakhouse, all of which have reduced menu prices and gone downscale — at least to a degree. "They are having to get very creative in order to keep their restaurants alive, so to speak," said Bonnie Riggs, a restaurant industry analyst at NPD Group, a research firm. Fine dining customers lost a lot of wealth during the recession, and they're rethinking how and where they want to spend money. "As consumers do that, food service operators have to do the same thing," Riggs said. At Stoney River, gone is the $255 bottle of Napa Valley Beringer Cabernet Sauvignon, vintage 2002, and likewise the $28 pecan-encrusted swordfish listed in a seven-page menu sheathed in a beefy leather binder. Instead, the staff has begun to offer a two-sided paper menu that retains some favorites but adds lower-priced items like a $12 prime burger. White tablecloths, once on all of the restaurant's tables, are now generally only on top of long tables and inside the private dining rooms. "We're doing that to make it a more accessible concept," said Anthony J. Halligan III, president of Stoney River Legendary Steaks. The idea is to build guest loyalty and encourage more frequent visits. The changes come amid a sales decline for many steak restaurants. Sales at Stoney River locations open at least a year fell 20 percent in the second quarter compared with 2008. Meanwhile, Morton's same-store sales declined 26.1 percent, and Fleming's same-store sales dropped 22.4 percent in the second quarter. NPD Group projects the restaurant industry will remain weak for another nine months in terms of customer visits. It will take a year after that for the industry to recover to where it was before the recession, Riggs said. "We're in for a tough ride here," Riggs said. Average check shrinks Some upscale restaurants hope to move from an average check of $50-$70 per person to $20-$45 per person, said Bryan Elliott, a senior restaurant analyst with Raymond James & Associates Inc. Stoney River would like to transform itself and join what's known as "the polished casual segment," Halligan said, a niche that includes The Cheesecake Factory chain, where the average check was just $18.50 per guest last year. "To a degree it makes a higher-end brand accessible to a broader range of incomes and budgets," Elliott pointed out. "But still (it's) going to be an above-average income, sophisticated consumer." Fleming's, which typically has an average check of $60 for dinner, has recently started offering $6 cocktails, wines and appetizers. Later this month, Morton's on Church Street will put up a sign in front of the restaurant advertising its $100 three-course seafood and steak special for two. Morton's in the past had offered this special to its regular customers, but earlier this summer started rolling it out to everyone, a savings of around $40 per couple. "A lot of people see us as a special-occasion-only place. They feel intimidated," said Cory Mason, maitre d' and general manager of the downtown Morton's. The new special, along with "bar bites," or small meals at the Morton's bar starting at $5 during select hours, has helped attract a younger demographic. It also delivers a message that Morton's isn't just for anniversaries or special occasions, Mason said. In fact, August business was more profitable this year than in 2008, in part, because of the steak and seafood deal and bar bites, Mason added. On a typical Friday night, about one-third of Morton's customers order the steak and seafood special. Leo Waters, co-owner of Music City Information Centers Inc., a tourism and service business, said he and his wife have tried out other upscale restaurants offering discounts, but they said it hasn't compared to the service and quality at Morton's. "They don't treat you like you are buying a discount meal," Waters said, dining at the restaurant in casual attire before a recent Tennessee Titans exhibition game. Still, one risk of repositioning prices is it may turn off some longtime consumers, analysts warned. In addition, the process of raising prices back to where they once were once the economy improves could rub some customers the wrong way. Raising prices once again will require the slow introduction of different higher-priced items and fewer coupons, analysts said. "It's like being a drug addict," Elliott said. "You have to slowly wean yourself off of it. You can't go cold turkey." For now, discounting seems to be working. For diner Tonya Jones, a $10 off coupon on two lunch entrees turned her back into a Stoney River's customer. Jones, a commercial contractor, returned to the restaurant three times in three weeks. "Personally, I didn't notice," Jones said of changes in the restaurant's atmosphere. "The thing I notice is service, and I've had excellent service. Promptness and getting the food to the table hot; that hasn't been affected," she said.
Posted by Blogger at 10:04 PM