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Thursday, May 14, 2009

If 2009 is the Year of the Restaurant Closure, Why Are There So Many New Openings?

Posted By on Thu, May 14, 2009 at 5:01 PM

click to enlarge Azie was one of 2009's early casualties
  • Azie was one of 2009's early casualties
Many assumed that 2009 would shape up as the year of the restaurant closure in San Francisco, and there have been notable failures: Azie, Bong Su, Jack Falstaff. But the large-scale collapse you might be expecting if you read the business pages hasn't occured, at least not yet. At the same time, with some half a dozen restaurant openings in the past week alone, the mood in restaurant circles is hardly bleak. What's going on here?

The director of the Golden Gate Restaurant Association told SFoodie that the situation in the past six months has been about the strangest he's seen - starting with last fall's precipitous drop. "Overall, the restaurants did really, really well last year," said Kevin Westlye. Until the end of September 2008, SF eateries were seeing gains of 3 to 6 percent over the previous year. But by the last quarter of 2008, most restaurants lost those gains, plus another 4 to 10 percent. "Most just fell off a cliff."

Westlye said he was fearful going into January (the two worst months for restaurants are traditionally January and April). But thanks to an unseasonable heat wave, many restaurants avoided catastrophe. "Most restaurants were down 8 to10 percent in January, when I thought it would be 25 or 30 percent," Westlye said. Bad weather returned in February, and diners stopped going out: The GGRA estimated many eateries were down as much as 10 percent over the year before.

But by March, restaurant owners were beginning to adjust their cash flow. "Their goal was just to survive," Westley said -- he called the first two weeks of April "absolutely devastating." But by the middle to the end of April, it seemed like optimism was coming back.

"Overall, the real devastation of the industry has not occurred," Westlye said, even if lots of owners are taking longer to pay their vendors than the usual net-30. Customer counts are down a little bit for the year, but it's the large-party corporate accounts that have completely evaporated. Plus, said Westlye, the per-customer dollar amount is way down. "Instead of ordering two bottles of wine, tables are ordering maybe one glass of wine each, and even that's at the low end," he said.

And what about all the new openings? Some were in the works before last October, Westlye said. In some cases, landlords and developers have given aspiring owners deals that are too good to walk away from. And there's always what Westlye described as the "brash young chef in his 20s who thinks that he's got a better idea or can work that much harder to succeed." For them, 2009 may yet to prove a fatal year.

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