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March 19th, 2008 Byron Beck | News Stories
 

Lean Cuisine

Has Portland lost its insatiable appetite for its restaurant scene?

     
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Hannah Bea’s owner Anita Smith chats up customers
IMAGE: Chris Ryan

Detroit has cars. Seattle has software. Portland has food.

Farmers markets, bike-thru vegan bakeries, cheese-only shops and more free-wheelin’ food carts than any one stomach could ever, well, stomach.

Beyond these bite-sized businesses, this town has restaurants. World-class restaurants that have forged this city’s reputation.

As Eric Asimov, of The New York Times, asserted in September 2007: “This is a golden age of dining and drinking in [Portland] that 15 years ago was about as cutting edge as a tomato in January.” From last September’s enRoute, a Canadian airline magazine: “With a commitment to sustainability and progressive agricultural suppliers…and the ability to attract and nurture creative young entrepreneurs, Portland is creating one of the hottest dining scenes in North America.”

Hotness factor aside, it’s not just reputation. This city’s restaurants are playing a fatter role in the regional economy. Deborah Wakefield, of Travel Portland, says visitors to our city spent $54 million more on restaurants last year than they did on hotels. Her records indicate that more than 37 percent of travel articles written about Portland last year highlighted our food scene.

Much of the focus is on a sliver of the restaurant pie, often referred to as “upscale casual.” It may represent a minority of Portland restaurants, but it is these hand-honed dining halls—locally owned, often using regional ingredients, and frequently owned by the chefs themselves—that have become emblematic of the creative, daring, even groundbreaking reputation this city enjoys.

And it’s that very scene, according to industry insiders, economists and the chefs who cook in these kitchens, that seems to be hurtling toward an uncertain future.

Gulp.

Most experts who do economic forecasting look at housing and condo sales, unemployment figures and the number of Californians who move here. Others look to the vitality of the restaurant scene—particularly the finicky upscale-dining market—as an equally good guide. And what they’re seeing isn’t pretty.

“My personal opinion is, the restaurant scene in Portland is in trouble,” says “Food Dude,” the anonymous blogger behind Portland Food & Drink, a website that has become gossip central for local foodies. “I go to restaurants at least four days a week,” he told WW, “and have noticed a steady decline in crowds. I’m wondering how many restaurants with $34 entrees this town will support. Even in a good economy.”

The food industry is our Hollywood. We don’t have movie moguls. We have restaurant owners. We don’t go to movie premieres. We go to bigtime bistro openings. Like Hollywood, though, which thrives on the hype and hope of unknown quantities, when times get rough, the gossip starts flying.

So it goes in Portland’s starry-eyed food scene.

Nostrana, the Southeast Italian eatery named 2006 Restaurant of the Year by The Oregonian, announced last week that two of its partners, lauded chef Cathy Whims and her partner David West, were splitting from co-owners Marc and Deb Accuardi. While the reasons given were professional differences, one insider told WW the restaurant’s financial struggles played a part. “It’s easy to put up with ‘differences’ when times are good,” he said.

Just in the past few months, a number of what looked like solid dining hot spots have closed, including expense account-friendly Tondero, the eco-focused Terroir, downhome Lagniappe, chi-chi Hurley’s and the offal-obsessed Alberta Street Oyster House (which found a new owner and has since reopened).

“We just don’t have enough bodies coming in,” says Lagniappe co-owner Melissa Carey, of the Alberta Street po’ boy house (part of WW’s Restaurant Street of the Year 2005). She and her husband took out two lines of credit on their home in 2005 and the summer of 2007, but the restaurant continued to struggle and eventually closed its doors in February.

Tom Hurley, the notable and notorious owner-chef of Hurley’s, is glad he’s no longer in Portland. “It was getting harder to do what I wanted to do,” says Hurley, who admits to a downturn of at least 20 percent from the previous year before closing in January. Finding much more success (and praise) for his foie gras-friendly style up north in Seattle, at his restaurant Coupage, Hurley says, “The day I found out I was moving to Seattle I became very excited.”

Even those who are open are experiencing sleepless nights.

“It’s scary out there,” says Roux owner Dwayne Beliakoff, who opened his New Orleans-inspired, 160-seat dining spot on North Killingsworth Street in 2005. “When I opened this place, I thought I was going to feed hundreds of people. Now I just want to survive.”

Beliakoff says he is weeks shy of refinancing to give the restaurant a much-needed infusion of cash.

“January was not a good month for the restaurant business in Portland,” says David Machado, the owner-chef of Southeast’s Vindalho and Lauro, WW Restaurant of the Year 2004. “If anyone says it was, they’re in la-la land.”

Small hot spots, like Le Pigeon, are experiencing a slight downturn. “I have no complaints,” says Le Pigeon chef Gabriel Rucker, who thinks the weather here is as much a factor as the economy in how busy he is. “We’re doing a little bit less than last year, especially during the first hour of business. But a year ago we were in Food & Wine.”

Tim Edwards, independent manager of Young’s-Columbia, one of the larger beverage distributors in the Northwest, has sold wine to the high-end segment of the restaurant business for nine years. He says, “Our sales are down by at least 20 to 30 percent from this time last year.”

Nate Tilden, one of the owners of Clyde Common, located within the new Ace Hotel on Southwest Stark Street, says: “At our peak [last year] we had six good nights a week. Now we’re lucky if we have four. If I can do two good days during the week, then that generally averages out to a good week.”

According to Hal Finkelstein, general manager of Wildwood, business was markedly down in February from January. Chef-owner Greg Higgins of Higgins, which opened in 1994, indicated that his sales for the beginning of this year were flat for the first time in 14 years.

Dave Marlin, who brokers the sale of restaurants in Portland, would give no details, but did say he has “seen an increase, in the past year, in prospective sellers that are experiencing some financial difficulty.” That opinion is consistent with what others in his industry are saying.

Bars and taverns often thrive during hard times by making money on alcohol—Paddy’s Irish Bar was expected to make anywhere from $60,000 to $80,000 on sales alone for St. Patrick’s Day. “Booze is king,” says Paddy’s Terry McCarthy. “People still go out and drink even if they don’t go out for dinner.”

Other nightspots depend on video poker, one of the major lifelines of the low-end dining bar scene, since it was legalized in Oregon in 1992.

But fine dining is much tougher. Says broker Marlin: “Fine-dining restaurants are a great addition to Portland. But it’s hard for them to make a buck in good times, let alone bad.”

Here’s one indication: Of the establishments deemed Restaurants of the Year by Willamette Week and The Oregonian over the past 15 years, nearly one in four is no longer in business.

“A ‘white tablecloth’ restaurant should spend 30 cents of every dollar it takes in on food,” says Jamie Dunn, owner of Gilt Club at the corner of Northwest Broadway and Everett Street, an upscale eatery combining good food, great atmosphere and killer cocktails for what could be considered the quintessential “Portland vibe.” “If your food cost is much less, you’re overcharging—or you’re a Dairy Queen.”

Dunn says overall product costs come to 35 cents on the dollar after waste, loss and other variables. Then tack on 35 cents in labor. That means 70 cents of every dollar goes to product costs and labor. With the 30 cents left, a restaurant owner needs to pay for rent, insurance, repairs, supplies, utilities, advertising and “all of the 90 million other things.”

“I spend $100 a week on napkins alone,” says Dunn, who indicates that the national average of profit on a busy restaurant that’s running a tight ship with minimal loss and maximized labor is not even 7 cents on the dollar (restaurant association studies indicate it’s closer to 4 cents). “Makes owning a tavern look attractive,” says Dunn.

The recession—or almost-recession, or whatever it is our economy is now in (some call it “stagflation”)—is certainly making some diners more reluctant to drop $50 to $80 or more on a meal. But the restaurant industry is facing other pressures as well. One is an increase in wholesale wine prices (weak dollar + European wines = ouch). Another is the price of oil, which continues to raise the delivery costs of all food, even locally grown stuff. The interest in biofuels, like ethanol, is sucking up the grain supply in the Midwest. And let us not forget that the minimum wage for all workers in Oregon (even for waiters who get tips) is $7.95 an hour—the fourth-highest in the country.

Egalitarianism can be a bitch.

Bill Perry, vice president of government affairs for the Oregon Restaurant Association, says “profitability is at its worst ever.” “As long as consumers continue to spend money, most economic storms can be weathered,” he adds. “But that doesn’t mean there isn’t cause for concern. [The] 7.6 percent increase in food costs last year is the highest in 23 years. Add on the [threat] of $4-a-gallon gas, a 13 percent increase in health-insurance costs and the reality that roughly 10 percent of Oregon’s workforce is here illegally [and are feeling pressure to leave], and you bet I’m scared. I’m afraid independent, family-style restaurants are going to be the hardest-hit.”

How are restaurants responding?

While restaurant owners and chefs say they refuse to cut back on quality, other areas—including wine lists and number of employees—are taking a hit. Meriwether’s Tommy Habetz is cutting costs by growing his own produce himself. The chef managed to cut his food costs last September to 21 percent just by using greens from his own “garden.”

Lauro and Vindalho owner Machado has reduced his wine inventory: “You look for the things that don’t sell and eliminate them. A short-sighted operator will raise prices, but that’s only going to reduce the number of people coming to your restaurant.”

Clyde Common’s Tilden has downsized. After two staff members left, he decided not to rehire for those positions. On slower nights, he sends his bar backs, prep cooks and dishwashers home early. “I’ll cut a host and end up doing that job myself. But it’s a gamble. If you pare it down too much, then you’ll get popped.”

“I raised prices for the first time in a long time,” says Lisa Schroeder, owner-chef of Mother’s Bistro. “I basically give away my lox platter. At $14 I am not even covering my costs. The bagel alone is two bucks. But people in this town are only willing to pay so much for a dish. People in this town are too frugal.”

Leather Storrs, one of the masterminds behind Southeast wine bar Noble Rot, as well as Rocket, says, “We are taking our lumps and watching our costs very closely.”

Doug Schmick created the super-cheap $1.95 happy-hour bar menu for his McCormick & Schmick chain decades ago. For years, people called him crazy for offering his entrees at such a bargain. Now it’s spread across the industry. Food Dude says “2008 will be the year of the bar happy hour,” and as the guide in the middle of this paper indicates, people love to eat “cheap.”

On the other hand, Naomi Pomeroy, of 24-seater Beast (and formerly of ripe, a much-ballyhooed catering and restaurant operation she shared with her husband, Michael Hebb, which imploded under the weight of its own ambition in 2006) is keeping her check averages high—around $85—and her staff numbers low. There’s usually only one other person besides her in the kitchen.

Bruce Carey (no relation to Melissa), who runs Bluehour, Saucebox, 23Hoyt and clarklewis, says he’s scaling back his restaurants and any plans for new haute spots.

Some have concerns about the long-term health of this industry.

The next few months could be tough for businesses that have done so much, directly and indirectly, to make Portland what it is today.

To give but one example of the importance of Portland’s dining scene, consider what Brian Ramsay, a broker for Realty Trust Group, has to say about the role great restaurants have in his business. “People who move to the Pearl District are focused on surrounding businesses, especially restaurants,” he says. “These people eat out every night and want quality food options to go with their condo.”

The short-term solution lies with us. If we want to keep up our town’s foodie rep, we have to step up to the plate, literally, and eat out.

After all, James Beard was born here.

We’ve got a reputation to uphold.

THESE AREN’T LOAN STARS


For years, the Portland Development Commission has quietly given low-interest loans to restaurants. Some of those loans are now in arrears. According to PDC, restaurants with loans past due include Ethiopian eatery Mudai ($60,000 at 7 percent interest). One of the largest (now closed) is Harold’s Barbecue. It was given an interest rate of 3 percent on $130,000 in loans. Another restaurant that stopped making its PDC payments is the Al Roker-approved Hannah Bea’s, which took out an original loan of $170,000 but hasn’t made a payment since 2005. Fred Atiemo, PDC’s senior manager of business finance, says, “The client and PDC acknowledge the loan is still there, and we’re all just waiting for things to get better so they can start paying it back.”

THE GOOD SIGNS


The long-term attitude about dining in Portland is still bullish. Nowhere is that more evident than downtown, where three high-end eateries will open this year, including Lucier, a 7,400-square-foot, 100-seat, modern European eatery under the west end of the Marquam Bridge. The Nines, a high-end boutique hotel high atop Macy’s downtown, will feature two uniquely upscale eateries. Urban Farmer Portland Steakhouse will be a sustainable steakhouse spotlighting the efforts of local farmers, ranchers and fishermen. Departure, located on the rooftop and designed by Jeff Kovel, will offer modern Southeast Asian fare.
According to recent census data, Portland has more restaurants per capita than any other major market except San Francisco.

Joe Cortright, a leading economic analyst, claims that one of the reasons Portland is such a food-centric town is that we don’t drive. “People drive a lot less [here] than the typical American, about 15 to 20 percent less per year,” he says. “Because they don’t spend as much money on cars and gas, they have more [discretionary income] to spend on everything else, including restaurants.”

On March 2, 2008, The Oregonian detailed the failures of N.W. Hayden Enterprises and the efforts of Bill Hayden, a longtime local restaurant consultant, to open six restaurants in as many months.

Intern Deeda Schroeder contributed to this story.

 
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