The Zagats Aren't Worried, but Everyone Else Should Be

Well, at least the Zagats say there's nothing to be worried about. The internet was abuzz yesterday over Tim and Nina Zagat's editorial for the Wall Street Journal titled "People Still Have to Eat." But I think their reasoning is seriously flawed.

Admittedly, they've been at this a long time—the Zagat Survey dates back to 1971, so they have a little perspective, having seen the restaurant industry struggle through the 1973 energy crisis, October 1987's Black Monday, and September 11th. Alright, I respect that. But come on — this is their argument: (1) more women have joined the workforce (and therefore aren't cooking); (2) tax laws "continue to favor eating out for business"; (3) the Immigration Act of 1965 "led to a diversification of inexpensive, ethnic cuisines"; and (4), that "for a generation that has grown up on The Food Network, dining out with friends or family in an attractive restaurant has become a source of comfort and entertainment."

This hodgepodge of debate-team tactics (seriously? The immigration act of 1965?!) is squarely at odds with the set of cold, hard data with which the Zagats lead off their editorial:

We've recently surveyed 45,000 restaurant-goers nationwide. One-third told us that they're eating out less, 28% say they're visiting less expensive places, and roughly 20% are cutting back on alcohol, appetizers and dessert. Also, the number of restaurant openings has slowed. This year in New York City, there were 119 openings versus 163 last year. Another grim sign: Companies are limiting entertaining at restaurants. One thing's for sure — Bear Stearns and Lehman aren't giving any holiday parties.

Those numbers sound far more realistic than hoping that WWII finally catches up with us, and women in the workforce drive restaurant cash registers. It might be anecdotal evidence, but I've got friends who are servers, line cooks, and chefs in New York City, Chicago, and San Francisco, and among all of them the word on the street is that the restaurant business is grinding to a halt.

Weekends are still busy, but weekdays are starting to get seriously quiet, leading to a lot less business, fewer waiters on the floor, less income per shift. Diners are ordering way cheaper wine, or none at all, and severely scaling back the number of courses they order. Restaurants operate on a razor-thin margin anyway, so they're getting hit hard by increasing costs for most commodity goods and raw materials — add to the increasing overhead the decreasing income, and it's not a pretty picture.

Other than the expensive or the trendy restaurants, walk by on a weekday, and you'll see a lot of empty tables. Check out Eater's resyfeed—there are a lot of tables available at some of the top restaurants at prime hours. Eater itself is calling it "bleak."

I'm going to be brutal: a lot of restaurants are fucked. The higher-end restaurants will likely weather this storm since there's a huge number of wealthy people and no shortage of expense accounts out there to prop them up. But for the low- to mid-range restaurants, the next few months are going to be rough. I'm sure a lot of restaurants are counting on holiday parties and year-end bonuses to carry them through, but come on! The insane finance industry bonuses are a thing of the past, and if there are going to be holiday parties, they're going to be timid affairs. Mark these words: we're going to see many restaurants close down winter 2009—January, February, and March are going to be ugly months. Let's call it a thinning of the herd.

The Zagats are right — people still have to eat. But no one said it had to be brick-roasted chicken with sunchoke puree. Top Ramen will do you just as well.

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