NYC restaurants slammed by financial crisis

As customers start to fill his Lower East Side tapas eatery, New York City restaurateur Héctor Sanz is going over every detail of his menu.

He’s examining the wine list for his other restaurant, a high-end pan-Latin spot called Rayuela. About 16 months after opening to good reviews, Rayuela is still full, but tables are ordering less — sharing an appetizer or an entree, maybe skipping dessert and getting a glass of wine rather than the bottle.

To be able to offer the same amount of food — and quality — at the prices he’s set, Sanz looks for better deals to put on the wine list as well as ingredients he can buy in bulk to get lower rates. He also feels that the opening of his casual tapas restaurant over the summer was good timing because he sees many diners seeking restaurants with lower price points.

“My biggest worry is that I don’t know what’s going to happen,” said Sanz of the uncertain economic future. “Many restaurants are not going to make it.”

Sanz, like other restaurant owners in New York City, is seeing the first wave of the financial crisis rocking Wall Street and the world. Industry analysts say people are dining out less often, and when they do they are spending less per check.

Business at full-service restaurants is declining nationwide, according to Technomic, a Chicago-based restaurant consultancy. Preliminary figures for the third quarter show that sales at restaurants open at least one year fell 2.6 percent from year-earlier levels, despite higher prices. The figure is based on restaurants that are part of publicly traded companies.

Adding to the malaise is the soaring cost of food — about 9 percent over the last year according to the Bureau of Labor Statistics — as well as a fear that the tourism dollars that have buoyed New York's economy may disappear as the crisis goes global.

“This is really the toughest operating environment for the industry in 20 years,” said Hudson Riehle, senior vice president of research and information services for the National Restaurant Association.

Restaurants tend to run on tight profit margins — an average of about 4 percent before taxes, Riehle said. “When that margin is under pressure, there is less room for error,” Riehle said.

Food writer and blogger Andrea Strong said she thinks the downturn will translate into restaurant closures, citing the recent shuttering of the contemporary American eatery Sheridan Square, after less than six months, and its sister restaurant Tierra, which was open only two days.

“The chef got middling reviews, but it’s nothing that would have closed a restaurant a year ago,” Strong said.

“If a new restaurant is starting out and doesn’t have the roots and the following of a Daniel or Picholine, they may shutter quite quickly even if the food is excellent and the hospitality is exquisite," she said, referring to two of the city's best-known restaurants.

Australian-born chef Shaun Hergatt knows the stresses of opening up a restaurant in the current financial climate. His eponymous restaurant SHO Shaun Hergatt is set to open this autumn in the financial district, and like any high-end restaurant, has been years in the planning.

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