Hard times force some area restaurants out of business

The economic downturn continues to cause havoc in the Richmond area's restaurant industry as cash-strapped consumers stay home rather than head out to eat.

More than 30 independent restaurants -- including some well-known eateries such as Zuppa and Pomegranate Euro Bistro -- have closed in the Richmond area since January 2009.

Among the latest victims: Manakin Grill in Goochland County, which will serve its last meal Monday night.

Manakin Grill joins 1 North Belmont restaurant and Bottega Bistro in Chesterfield County, both of which shut down late last week.

Many of the closings were a result of the general malaise in the economy.

"As the economic environment has become more difficult and unemployment is exceeding 10 percent, consumers have pulled back their discretionary spending in restaurants and have chosen to eat at home more," said Jeffrey F. Omohundro, an analyst in Richmond with Wells Fargo Securities who follows the restaurant and food industries.

"This is the most challenging restaurant environment I have ever seen."

Manakin Grill owner Darrin Witten said sales were down all last year. "Because of the reduction in volume, we just weren't able to make a profit."

Last month's snowstorm the weekend before Christmas -- one of the busiest times of the year for restaurants -- also hurt already-struggling eateries.

The current economic downturn could prove to have a permanent impact to the industry, experts say.

"The psyche of consumers has fundamentally changed and is much more valueand service-oriented," said B. Hudson Riehle, senior vice president of research for the National Restaurant Association, a trade organization based in Washington.

Michelle Williams, executive chef and operating partner of the Richmond Restaurant Group, said she has seen traffic slow down at some of her group's five area restaurants, but customers still are coming. The group's restaurants include Europa and deLux Diner & Lounge in Richmond.

What has changed in the past year, she said, is that the average ticket price has declined. Williams would not give specific sales figures.

Some of her group's previous practices, including offering discount prices on historically slow days, have helped it maneuver through difficult times, she said.

"We've always been about that, having specials on slower nights to drive business," Williams said.

Many national chains also have been offering aggressive discounting on meals, which puts more challenges on independent restaurant operators, Omohundro said.

"That has made it much more difficult for the independent restaurant to compete when you have aggressive pricing to attract customers and to drive traffic," he said.

The small independent restaurant operator also might not have the credit availability or the capital depth to weather several quarters or a year of operating losses, he said.

Grayson Collins, co-owner of Strawberry Street Café in Richmond's Fan District, said he has made adjustments to combat declining sales because of the economy. Strawberry Street has been in business for 33 years.

"We've tried to expand menus to offer meals at lower costs, curtailed spending to lower overhead, and have tried to keep our name out there," said Collins, one of the owners since about 1990.

Giving diners options is particularly important as attitudes change and consumers cut back on dining out, he said.

Diners "might have gone out several times a week, but now they are cutting back and maybe going out only once," he said. "We have to remind them we're here and offer them something."

Paul Sorensen, director of operations for Diversified Restaurant Management, which owned Bottega and owns the Ruth's Chris Steak House restaurants in Chesterfield and Virginia Beach, said changes in customer dining habits helped doom Bottega.

Bottega had been doing steady business on Friday and Saturday nights, but traffic had dropped during the rest of the week.

"Sunday through Thursday, our entree count was not what it needed to be," he said. "We took a microscope and a scalpel" to the operation to adjust, he said.

But that still didn't help.

The Ruth's Chris operations, however, are doing well because it is a nationally known brand, he said. (Customers who have Bottega gift certificates can use them at the Ruth's Chris.)

"When someone comes to town, they know the [Ruth's Chris] name and the meal they are going to get. That's not necessarily the case with Bottega or 1 North Belmont," Sorensen said.

Many fine-dining restaurants count on business travelers to generate much of their revenue. But companies have curtailed use of the expense account or corporate travel, which hurts sales at those upscale restaurants, Omohundro said.

Richmond's Jefferson Hotel, which relies on both travelers and local diners, made wholesale changes when it reopened its Lemaire restaurant in July.

The hotel created a price ceiling on its entrees in an effort to bring in diners more frequently, said Ben Eubanks, the hotel's director of restaurants and wine.

The average price of an entree at Lemaire dropped about $10, a price that makes the restaurant more accessible to more diners, he said.

"One of the biggest challenges was to let people know that they can come here for more than just a special occasion," he said.

Contact Louis Llovio at (804) 649-6348 or LLLovio@timesdispatch.com.

Staff writer Melissa Ruggieri and Deputy Business Editor Gregory J. Gilligan contributed to this report.