Rising commodity and energy prices, combined with customers' shrinking wallets, contributed to those declines-an estimated 0.9 percent in 2008 and 2.8 percent in 2009, and a projected 0.2 percent in 2010, according to the National Restaurant Association.
While NH restaurants weren't immune to the recession, they fared better because the state as a whole weathered the recession better than other parts of the country. New Hampshire's unemployment rate in January was 5.6 percent, the lowest in New England, meaning local diners have more disposable income. And there are other good signs. Between January 2010 and 2011, the industry added 4,900 jobs in NH, the most of any industry segment, according to the NH Economic and Labor Market Information Bureau.
Regionally, the Seacoast did better than Southern NH, a reflection of its lower unemployment rate. That helped people like Jay McSharry, who runs several Seacoast-area restaurants. Sales at Jumpin' Jay's Fish Caf in Portsmouth were up 10 percent each year for the past two years. His other Portsmouth ventures, The Red Door Martini Bar and 106 Kitchen and Bar, which opened last May with a moderately priced menu and a laid-back vibe, also did well. He credits some of his increased business in Portsmouth to a lower unemployment rate, but he notes sales at his four Dos Amigos restaurants have been flat except for his Concord location, which grew.
The restaurants that survived and thrived have done so by reevaluating menus and business models. Restaurants are offering expanded and healthier children's menus to attract families; locally sourced ingredients for eco-conscious customers; and online coupons and deals for tech-savvy and budget-minded consumers. They are also offering smaller portions at lower prices.
Take Luca's Mediterranean Caf in Keene, which continued to grow during the recession. The restaurant started as a 40-seat restaurant with 10 employees in 2000. Over the years, chef and owner Luca Paris has continually added to the menu to appeal to broader palates and price points while simultaneously adding a catering company, market and deli, private dining room and a downscale eatery, Pasta Pasta, that's open on Friday night and Saturday-targeting families and those on a lower budget. He employs 30 to 35 waitstaff, front-end staff and cooks, as well as five full-time managers.
Diversifying has paid off. While expenses have grown, revenue has doubled and tripled in the past few years. Paris says without those new avenues, sales would have been flat. Pasta Pasta opened only two years ago but served 100 people a night last summer with a waiting list. What I saw as a trend was people would still go out to restaurants like mine, but they went less, Paris says. So I was able to attract them with another restaurant-a cheaper restaurant. I'd see people come in with their kids to Pasta Pasta and two days later come in to the restaurant alone.
Trading down is a trend, says Mike Somers, president of the NH Lodging & Restaurant Association. Many people traded down a tier during the recession, whether from fine dining to a family restaurant or table service to counter service. The result, he says, was good business for middle-tier family restaurants.
In good times when things are moving along, it is easy to take details for granted. When they're tough, you look at your business, reexamine it constantly. With fewer dollars being spent out there, you want to be the recipient, says Nigel Leeming, owner and founder of Murphy's in Hanover, a 19-year-old establishment. Leeming's business has been up almost every month for two and half years. The reason, he says, is attending to details like adding affordable options for families, using social media to attract a younger crowd and sourcing food locally.
Something for Everybody
Restaurants often thrive on a sweet spot-the best takeout, the cozy neighborhood bar or serving the best burgers. But what if one place could do it all? It's one approach many restaurant owners are taking to attract crowds and increase sales.
Younger people perceive us more as a bar and a nightclub, middle-aged people perceive us as an upscale casual dining place and older people perceive us as a lunch place, says Chris Fokas, co-owner of Martha's Exchange in Nashua. While 87 percent of his business occurs before 10 p.m., he says the late-night crowd is good for business as well. You know they say you shouldn't be something for everybody. We kind of disagree with that. We think we can be, Fokas says.
He says business was up 20 percent in 2010 after being flat in 2009. A diverse menu has been key to the success of Martha's Exchange-from a $10 salad to a 20-ounce Delmonico steak for $20. This summer, the restaurant is adding homemade ice cream at the attached sweet shop for that something different to attract diners, especially families.
Having something for everyone can be challenging for an operation with one location, but it's perfectly suited to owners of restaurant chains. The Common Man Family of Restaurants operates 20 restaurants statewide, from fine dining to diners with counter service. We were fortunate to actually see our sales over the past couple of years remain stagnant during the downturn, says CEO Jason Lyon.
In the Lakes Region, Scott Ouellette of Magic Foods Restaurants Group says his family-style restaurant, The North End Restaurant in Moultonboro, was the one that suffered the most while his pricier venue, O Steaks and Seafood in Lakeport, remained busy. Ouellette opened a second O Steaks in Concord earlier this year and he says business is brisk.
Z food & drink, which opened in 2007 in downtown Manchester, is another thriving restaurant. What started as a small restaurant is now a 125-seat venue, offering unique programs, like inviting an amateur guest chef to work in the kitchen, and raw night, which features raw food including vegan specialties. Revenue for 2011 is projected to be 200 percent higher than 2010, in part due to a new catering contract for The Currier Museum of Art in Manchester. That catering contract is expected to pump up its catering business to 30 percent of total business. Z already employs 50 full- and part-time staff.
Beefing up Profit Margins
Even when the recession didn't affect the number of diners, it often resulted in customers ordering less or cheaper food. Add to that high commodity prices, the rising costs of insurance and unemployment taxes, and the result is tighter margins.
Innkeeper Karen Meyer of The Three Chimneys Inn in Durham found she actually had more diners than in previous years, but they were ordering less. That left her in a quandary. It's difficult to staff. You're seeing less revenue coming but you're having to still staff it to give good service, says Meyer. She adjusted by cutting the hours of her food and beverage manager and had the bartender do some seating on quiet nights.
In Conway, Delaney's Hole in the Wall had its best year ever in 2010, but it wasn't an easy one. Sales were up about 8 percent, but the restaurant cut two front-end positions. The three top people, including Owner Dick Delaney and his wife, took on extra duties both in the kitchen and helping customers.
That was what we felt we had to do in order to stay viable, Delaney says. He also added more sandwiches and salads to the dinner menu but no longer offers salads with entres, though entre prices were reduced. One thing he didn't do was discount. People that do that, like two for one on Thursday nights, that's the only night they are busy. They're giving away food, Delaney says.
Not everyone agrees. Targeted discounting, some say, has its place. For instance, the Common Man has a texting club with about 4,500 subscribers. During snowstorms it texted two-for-one deals aimed at those living nearby. We couldn't recoup our total sales loss due to the snowstorm, but we did bring in some additional business we wouldn't have while having minimal staff, Lyon says.
Scott Sewade of Suddenly Susan's signed on with Valpak and Couptopia, a Manchester-based coupon site. The downtown Manchester deli depends on corporate catering for about half its business, and that side of the business took a hit in recent years with companies ordering less or not at all. It seemed as though most of the people who came in with the coupons were people we hadn't seen before, Sewade says. I was surprised a $2 coupon would bring so many people in.
That additional business was important to Sewade as he not only faced increased prices on basics like lettuce and tomatoes but also competition from a slew of new restaurants opening downtown.
Since restaurant owners weren't sure who would come in and what they would order, they did what they could to reduce costs and steer people to higher-profit-margin items. When fish was high, specials' boards were filled with chicken. When greens were up, restaurants offered fewer salads in their daily specials.
Unable to predict diner behavior, Ouellette of O Steaks and Seafood found other ways to cut costs. He installed energy-efficient lighting and motion detectors and closely monitored gas and electric use. The Common Man used its bargaining power to negotiate with manufacturers for rebates and better prices. It also changed uniform requirements, switching from traditional cooks' coats to black T-shirts. Our employees were very open to it and preferred that move actually, says Lyon. Plus, it saves on average $2,500 a year per location, or $50,000 statewide.
Even those restaurants that experienced higher sales are cautious. Sales at Great NH Restaurants Inc., which operates seven T-Bones and Cactus Jack's restaurants in NH, was up 4 percent between March 2009 and 2010, and 7.5 percent between March 2010 and 2011. Owner Tom Boucher credits that to loyal customers and strategic decision-making. His menu now includes 16 healthier options and a two-page kids' menu that accommodates younger and older children.
Boucher also reached out to families, a key constituency for him, with kids-eat-free specials during school vacation and around Halloween. That promotion allowed three free kids' meals per adult. Kids have also become a surprisingly important group at Wine Thyme in downtown North Conway, a restaurant, wine bar and retail store. Kids were not in my business plan, says owner Cathy Smith. In the summer, especially, around 5:30, families empty out of Storyland and come here with strollers or babies. They want their glass of wine. When we first opened, we didn't have a kids' menu. We didn't have sippy cups or straws. Now we do.
Harnessing Social Media
Texting, posting and tweeting has changed the way restaurants market themselves, providing them with new ways to engage customers and track responses.
The audience for social media is large and growing. The 2010 National Household Survey by The National Restaurant Association found that frequent restaurant goers are more likely than the general populace to use technology. More than 75 percent of frequent diners said they regularly used e-mail and the Internet, compared to about 68 percent of all adults surveyed. More than a third also use Facebook and text often. These individuals are also more likely to read and post reviews on consumer-driven review sites such as Yelp.
Leeming of Murphy's has taken those stats to heart. Working with students at the Tuck School of Business at Dartmouth College, he put his restaurant on Facebook and foursquare (a location-based service where people check in), and worked to get Murphy's as a top pick on Trip Advisor and other advisory sites, a fact he advertises on the board outside his restaurant. He also monitors Web traffic and review sites closely, posting positive reviews in the kitchen to motivate staff. With his online following growing, he redesigned his homepage to better engage customers.
Boucher of Great NH Restaurants offers an interactive game where customers collect baseball cards to compete for gift certificates. Customers who become Facebook fans or join the e-mail and text message club receive alerts about what menu item to order to get a card. At the end of the promotion in July, customers will submit their cards and Boucher will give out 600 prizes totaling $30,000. The thing I like about social media is you can measure it and then I know who is seeing my ad, opening an e-mail, or liking us on Facebook," he says.
Restaurant owners with different types of venues say social media is valuable-but it has a certain audience. McSharry uses Facebook, sending weekly e-blasts to customers. But he notes it's most effective at driving business to the The Red Door, his martini bar. Facebook and foursquare are more generational right now in their appeal, McSharry says. I still think they are a small percentage of people. I would never rely just on them. Fokas of Martha's Exchange agrees. He sees Facebook and Twitter as the main advertising for his nightclub but hasn't seen it help his restaurant business.
Others are less convinced. Ouellette of O Steaks and Seafood does not use Facebook or Twitter. He says with time and money short, it is not his focus now.
Going Local Pays
For years restaurants, including The Common Man and Great NH Restaurants, have made charitable giving part of their business plan. The Common Man donates about $1 million annually in sponsorships, in-kind services and discounted offerings.
Managers at each Common Man restaurant must hold quarterly fundraisers. A recent pancake breakfast at the Windham location raised $30,000 for the Windham Fire Department. We do look at each of our restaurants to be the cornerstone in the community they reside in, Lyon says. We have the belief we should be a loyal and giving part of our community to show our appreciation to the community that supports us.
Great NH Restaurants picks a nonprofit each fall and raises money through a gift certificate promotion. For every $5 gift certificate purchased, Boucher donates $5 to a charity. Recipients have included the NH Food Bank, The Caregivers of NH and The Animal Rescue League of NH. Annual charity donations, Boucher says, total about $50,000.
Such efforts not only help the community, but often translate into more business as well. Charitable efforts at Wine Thyme are a fairly new but growing part of the business. The restaurant recently hosted a Mount Washington Valley Arts Association event that included a wine tasting and tapas menu, which led to an inquiry from a local Girl Scout group to hold its monthly meeting there. That regular local business is critical, Smith says.
Partnerships with other local businesses help restaurants succeed. In Nashua, a downtown dollars program keeps money in the community. Many downtown merchants, says Fokas of Martha's Exchange, reward employees with downtown dollars that can only be spent at other downtown locations. He accepts those dollars and says it creates a sense of community.
Nashua, like Portsmouth and Manchester, holds restaurant weeks. During those weeks, restaurants often offer reduced-priced multicourse meals and special deals, driving business downtown.
Local is a key selling point for restaurants, fueling an increase in local food sourcing. The farm-to-table or farm-to-restaurant movement involves establishments that acquire meat and produce from NH farms. Leading that charge is Edward Aloise and Claudia Rippee of Republic in Manchester. The couple also runs a consulting business and two restaurants at Manchester-Boston Regional Airport. The restaurant has a large blackboard inside the door that says No farms. No food and lists 21 farms where they source food. Fish comes from the Boston fish auction, with no fish from outside the United States used.
Locally sourcing all food is not cheap, but it's good for customers and for business, Aloise says. Republic opened in January 2010 and sales have been strong. On a recent week in March, sales were 60 percent higher than the same week last year. We're doing better in sales than we did last summer, he says, and summers are usually busier.
Aloise says local sourcing is difficult. What they buy depends on what's in season and available, and Republic staff can spend hours a day sourcing food. So from goat cheese to lamb, beef, chicken and even the Spanish mackerel that travel up the Gulf Stream a couple times a year, it's all local. We use what you get in season and do very little to it, Aloise says.
In some cases, he has specific farms growing specific items for him, such as rabbit and duck. In other cases, he works with multiple vendors, as in the case of ham, which he buys from one farm but gets smoked at another. The local model, says Rippee, does mean the freshest food, but less negotiation on price. We believe they are pricing the products so they can make a living wage. It's absolutely more expensive, she says.
Meals made with the most limited ingredients are listed on a blackboard and change twice a day, once for lunch and once for dinner. Regulars, Aloise says, order off the blackboard and not the menu because it's the most unique offerings. Aloise says a third of sales are from those specials.
Aloise says his restaurant is the first farm-to-restaurant model in the state that orders in larger volumes and 100 percent locally sources all proteins. Nobody drinks the Kool-Aid like we do, Aloise says. As a business model, I wanted to do something that would be hard for others to emulate. There are a limited number of farms that can accommodate restaurant needs and the costs would be prohibitive.
That doesn't mean the local movement doesn't have other followers. It has many. The NH Farm to Restaurant Connection started in 2004 and runs half a dozen growers' dinners to introduce chefs to nearby farmers. When we first started we had to twist arms to get restaurants to do this and now people are calling us to do them and now we have to put people on a wait list, says Gail McWilliams Jelly of the NH Department of Agriculture, who helps coordinate the organization.
Jelly says there are more than 4,000 farms in NH. The organization's site lists 50 farms and 50 restaurants each interested in working together to use local produce at area restaurants. While Jelly says many restaurants use some local products, the movement has challenges, chief among them distribution. We have willing farms and willing farmers. We're working with some distributors that cover New Hampshire to try to improve distribution, Jelly says. Restaurants don't have time to deal with multiple farmers. They are used to making two calls and getting everything delivered on a truck.
A Growing Industry
The National Restaurant Association projects NH restaurant sales will increase by 2.8 percent this year from 2010. Granite State restaurateurs share the optimism, though they fear higher oil prices could stunt growth.
Despite a lot of restaurant closures during the downturn-among them The Merrimack Restaurant in Manchester and The Cat 'n Fiddle in Concord, both popular campaign stops-many new restaurants have opened.
Aloise is looking into opening a second Republic location, and Boucher has spent $4 million on a new high-end venture, The Copper Door in Bedford, breaking ground this spring. He says it will replace the high-end niche C.R. Sparks used to fill.
Somers of the NHLRA says national chains were hit particularly hard-Bugaboo Creek and Applebees closed in Bedford and Uno Chicago Grill closed in Manchester. On the other hand, the success rate of new ventures- Ignite, XO on Elm, Z and Firefly alone in Manchester-is above average. Somers says that's because tight lending markets demand solid business plans.
Established restaurants are finding new life by tweaking their images. Michael Timothy's, a perennial favorite in Nashua for special-occasion dinners, has renamed itself MT's Local Kitchen & Wine Bar and advertises a creative casual restaurant with exceptional quality food in a relaxed atmosphere. Sue Butler, executive director of Great American Downtown in Nashua, says going more casual is a trend she sees throughout downtown. Somers agrees, At a lot of fine dining, you have to be in a coat and tie, but places are moving a little away from that, getting a little bit more casual.
Yet with all the turmoil in the industry, one thing remains the same: Providing good food and a good atmosphere are key. The primary challenge also remains unchanged. That's the biggest guessing game in the world. What are customers going to eat and what kind of business will you do? says Ouellette. You have better luck winning the lottery. N