Near the top of restaurants’ wish list: paying customers

LOS ANGELES — Adele Cabot and her husband used to dine out three to four times a week, regularly spending $75 to $100 at a sushi bar, sampling rainbow rolls and yellowtail nigiri sushi.

But that changed after Cabot, an adjunct professor of theater at the University of California, Los Angeles had to take a 6 percent salary cut. The couple now eat out half as much and frequent less expensive Mexican or Italian places.

“I just don’t want to spend the money to eat out a lot,” Cabot said.

With Christmas around the corner, restaurants are eager to win back customers such as Cabot, who seemed to disappear during a brutal summer for the nation’s eateries.

Restaurant owners are worried that tight corporate entertainment budgets, cash-conscious consumers and greater competition from price-cutting supermarkets will make for another dreary Christmas for them.

The number of people visiting restaurants has plunged for four consecutive quarters, according to NPD Group, a market research company, and companies as small as Southern California’s Tender Greens, with just three restaurants, and as giant as the Denny’s chain are braced for another difficult year.

“Until the economy gets through these unemployment and foreclosure issues, we are going to have a tough time,” said Nelson Marchioli, chief executive of Denny’s Corp. of Spartanburg, S.C. “The economy has really put our customers in a tough position.”

Marchioli is talking about people such as Harry Browne of Los Angeles. Browne lost his job in information technology and won’t be buying anything more than “a value meal from a fast-food restaurant” this holiday season.

“I am on my last extension of unemployment benefits, so I have to really watch my spending,” he said.

To reach such people, Denny’s plans a television ad blitz.

It’s just not midpriced family restaurants people are avoiding. Upscale chains such as McCormick & Schmick’s, the seafood house, and Morton’s, the steak purveyor, saw sales at restaurants open at least a year fall 18.8 percent and 16.8 percent, respectively, in the third quarter compared with a year earlier, according to Bellwether Food Group, a food-industry consulting company.

Bellwether doesn’t project an industry rebound to pre-recession levels until 2012.

The recession has taught consumers to eat out less often and to order less — skipping alcoholic beverages, appetizers and desserts — when they do, Bellwether said.

That’s made easier by supermarkets, which have cut prices and expanded selections of prepared food and takeout entrees.

“We used to eat out a lot and buy just some things at the supermarket,” said Grant Cramer, who owns a small television and film production company in Los Angeles.

Now he’s cooking at home more and finds himself stocking up at both the grocery store and farmers markets.

“I had a couple of projects that crashed with the economy. We had to tighten up,” Cramer said.

Christmas-season spending at bars and restaurants this year will be an estimated $7.8 billion, according to IBISWorld Inc., a market-analysis company in Santa Monica, Calif. That’s one of the rosier industry estimates — up almost 6 percent from a year ago, but that’s only because last Christmas was so lousy, the company said. It is still down 11 percent from the pre-recession level of $8.8 billion in 2007.

“I think it will only get tougher. People are still losing their jobs, credit is still tight and we could see another wave of foreclosures,” said Erik Oberholtzer, co-owner of Tender Greens.

Restaurants are redoubling their efforts to prevent a repeat of last year’s poor holiday season. In particular, they are focusing on catering private parties and hosting business gatherings — a vital source of income.

“We called back a lot of people this year who canceled on us after the economy collapsed last October,” said Joachim Splichal, chef and founder of Patina Restaurant Group, which owns Patina, Cafe Pinot and Nick & Stef’s Steakhouse and other upscale eateries in the Los Angeles area.

Splichal found that many companies wanted to do parties for their workers if for no other reason than to celebrate surviving a tough year of wage freezes and layoffs.

“They were all on a tight budget,” Splichal said.

So to close deals, he offered a 10 percent discount for early bookings and then came up with all-inclusive plans, such as $60 for a three-course dinner, wine, tax and tip. Now the hope is that customers will upgrade — for example, picking more expensive wine or making other add-ons — during the event, he said.

But he also found that many clients who still want to celebrate are downgrading from a formal dinner to a cocktail party.

California Pizza Kitchen is looking to gain more family and office-event business by offering a new catering menu that bundles entrees together to make it easier to order for groups. It also is giving $20 in gift cards for every $100 purchased.

Denny’s, which saw same-store sales at company-owned restaurants fall 6.6 percent in the third quarter, plans to “look for ways to market our strengths,” said CEO Marchioli.

That means pitching the chain’s Grand Slam budget breakfasts, which start at $3.99, and launching a 6.6-ounce grilled hamburger for $6.99 to try to build lunch and dinner traffic.

But even those initiatives will leave the 1,500-restaurant chain battling economic head winds.

“It is not a pretty picture,” said Bonnie Riggs, a restaurant-industry analyst with NPD in Chicago. “Consumers have pulled back so much.”

In 33 years of tracking restaurant traffic, NPD “has never seen this type of a weakness for this long of a period,” Riggs said. “The industry really has its work cut out for it.”

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