Economic aftershocks still plague Bay Area operators

Nation's Restaurant News, August 27, 1990 by Alan Liddle

Economic aftershocks still plague Bay Area operators

As San Francisco gears up for the Western Restaurant Show, local businesses are struggling to get their feet on the ground after last year's major earthquake

SAN FRANCISCO -- Times are tough for many restaurateurs here, and what worries some of them the most is that not all of their woes are related to last October's devastating earthquake.

"We're heading for a recession," veteran steak-house owner Phil Lehr concludes. "If I'm here during the day and answer the phone, invariably, the first thing people ask is `What are your prices?' They never asked about the prices before; they just wanted to know if they could get a reservation."

The local industry's hardship forms a backdrop this week for the Western Restaurant Show, which was expected to attract tens of thousands of hospitality professionals to the Moscone Center here. The show, sponsored by the California Restaurant Association, alternates annually between Los Angeles and San Francisco.

Carlo Middione, co-owner of a respected 10-year-old regional Italian cafe, take-out business and catering company called Vivande, says his revenues are up from last year, but adds that he has definitely sensed a change in the mood of his customers.

"People just don't seem to be as cheerful or excited about food as they have been in the past -- I believe it comes from the economy," he says.

"The one area where we have seen a bit of a slump is in full-service catering," Middione notes. "People are saying things like, `We're interested in real simplicity', but what they really are saying is, `How low can we go?'"

"I'm doing exactly what I did last year--about $2 million--and I'm happy to be doing it," Sam DuVall, owner of Izzy's Steak & Chop House, remarks. DuVall, who has opened and closed more than a dozen San Francisco food and beverage outlets, added, "A lot of people are singing the blues. I've never seen so many restaurants for sale."

Even the renowned are expressing relief over flat or minimally declining sales.

"I think business in general has slowed down in San Francisco," observes chef Hubert Keller, co-owner of Fleur de Lys, an intimate 75-seat restaurant that is among the best French restaurant in the city. "We're down a little, I really shouldn't even say `down', but we can't complain when we hear about others."

Though evidence is mounting that outside economic forces and the well-known nemesis of any industry, saturation, are contributing to an environment of flat or declining sales for all but the most successful San Francisco restaurants, many owners still are being directly and indirectly impacted by the earthquake.

Officials of the Chinese Chamber of Commerce have blamed congestion caused by the closure of quake-damaged roadways for much of the economic downturn in Chinatown and parts of Fisherman's Wharf and North Beach.

The chamber officials and others also say it appears that residents of nearby communities, who once went out of their way to dine in San Francisco, no longer make the effort because they discovered quality establishments in their own neighborhoods following the quake.

"Across the board, we [Chinese businesses] are down 20 percent from last year this time," Chinese Chamber of Commerce consultant Rose Pak says.

Pak says most of the chamber's members are small businesses, including about 100 restaurants, and adds that the margin of profit for such businesses falls in the range of 10 percent to 15 percent of sales.

"When you talk about a general citywide decline of 10 percent to 15 percent, you're talking about wiping them out. Small businesses do not have the capital reserves that bigger businesses might have," Pak says.

Direct access to Chinatown, North Beach and Fisherman's Wharf from the east side of San Francisco Bay was cut off when the October earthquake damaged the interchange connecting the Bay Bridge to the elevated Embarcadero Freeway. Sections of the freeway, which has off-ramps leading to the three popular neighborhoods, also were damaged.

To reduce the isolation of Chinatown, North Beach, and Fisherman's Wharf businesses, the city has put up a series of directional signs and icons designed to help motorists find their way into those neighborhoods from the Bay Bridge.

A free park-and-ride program that permits visitors to park in a financial district garage and ride a shuttle to Chinatown, North Beach and Fisherman's Wharf also was put in place in recent weeks. Pak said 250 businesses already had signed up for the congestion-relieving program, which operates on Thursday and Friday evenings and all day on Saturday and Sunday.

When the earthquake undermined the Embarcadero Freeway, it also damaged the business opportunities of the California Cafe Restaurants Corp., which operated a restaurant directly beneath a section of the elevated roadway.

The two-year-old restaurant was undamaged, and state inspectors indicated that the stretch of the freeway overhead was not a danger, but the public was apparently unconvinced.