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Cover story part 1: Opportunity knocks

Bad economy got you down? Core business just ain't what it used to be? Then get some ideas from these operators, who've developed some profitable sidelines. Unless you've been living under a rock, you've become painfully aware that these aren't the best of times to be in the restaurant business. For many operators out there these days, "growth" is a flat line, at best. For many more, it's even worse than that.

But amid all the hand wringing, some of the more enterprising operators have probably shared one thought in particular: If those new menu items aren't selling, if guests aren't returning, if the that new marketing plan isn't quite hooking 'em—well, then just where are the business opportunities these days?

Where, indeed.

We've wondered along with you. And it's with this weighty question in mind that we took a look across the country and across all segments in search of various plans, schemes, ventures, and ideas that restaurateurs are using (mostly successfully) to help build revenues in these troubled times. Ten of most colorful have been selected here. Granted, some of these ideas aren't 100% proven, and some don't even have much to do with the restaurant business at all. But all are being tried by forward-thinking operators—chain and independent, upscale, midscale, and downscale, to brighten up the balance sheets. So get ready to open your mind to some new ideas. They might just save your business.

Cooking schools

Plenty of customers want to learn how to cook, and some enterprising operators are finding that it can pay to teach them.

For years, Caprial Pence taught cooking classes in the side room of her Portland, OR, restaurant Caprial's Bistro. With only 20 spaces, the classes filled up quickly. Sometimes, Pence had to turn people away. Then a 4,000-sq.-ft. space opened up a few doors down from the restaurant. Pence grabbed it.

"Now, we can conduct the [pricier] hands-on classes we couldn't do before," says Traci Mandell, manager of the school.

In this Age of Food, in which culinary schools are more popular than ever and watching channels like the Food Network is a hobby for some, consumer interest in cooking is at an all-time high. And who better to teach the public how to cook than those who do it for a living? At least, that's what some savvy operators are doing by offering cooking classes, which can not only mean an added source of money for the restaurant, but a good way to promote it as well.

For Terri and Chris Milligan, owners of the Inn at Kristofer's in the resort town of Sister Bay, WI, the cooking school above their restaurant isn't so much about the $20,000 it brings in annually (though it sure helps), as it is about creating a point of differentiation and establishing guest relations. "The school has made our restaurant more popular with locals, and also gotten us a lot of press," says Chris. "It's another way to get people into the restaurant."

With the husband and wife team providing all the needed labor, expenses are modest. Chris says they'll spend about $3,000 on printing and mailing promotional and course materials. And food costs? The Milligans keep that in check by taking the dishes made in the school and selling them in the restaurant downstairs.

This is not to say that the tuition revenues aren't important. The Milligans get about 400-500 people annually for either the $28 demo class or $100 per hands-on class, where they get to actually cook. The volume at Caprial's is much higher—about $40,000 a month from 400-500 people at $35-$135 a head. (That kind of student traffic has led Pence to take on a full-time staff of three for the school.)

Just who's willing to plunk down money for a cooking class? Ironically, the economy may have a lot to do with supplying them. Nancy Evans, events coordinator at New York's Dish, which recently opened a cooking school upstairs from the restaurant, says that companies are sending employees her way in an effort to build morale in the wake of so much downsizing. "More and more HR people call me about working out the problems with a team-building session," she says. "I definitely see a trend."

She's seeing receipts, too. With tuition around $250-$750 a head for a day of instruction, Dish's upstairs school is now generating revenue equal to the restaurant downstairs.

Catering events

The banquet biz is nothing new. But these days, as plenty will tell you, a little extra catering can make a big difference.

Earlier this year, with the economy sputtering and a war about to erupt, getting enough guests to fill a 20,000-sq.-ft. restaurant where the sea scallops run $27 was a tall order. At least it was at Guastavino's, an upscale restaurant located under the towering arches of the Queensboro Bridge in Manhattan. The second floor dining area, which sat 215, was proving particularly hard to fill.

And so management made a decision. They closed the space to à la carte dining and started promoting it as a private-party area, in effect turning part of the restaurant into a catering hall. It's not what the restaurant's owners originally planned, but according to executive chef and director of operations Daniel Orr, the idea is working. "It's so much more profitable now," he says. "And it's a great way to utilize both staff and space."

Catering's not a new idea, and legion are the restaurateurs who've always had the proverbial back room for the private-party business. But these days, it's enjoying increased prominence. Indeed, according to the National Restaurant Association's 2003 Forecast, catering sales by full-time restaurateurs are expected to grow by 1.9%. Catering's benefits are well known already—increased control of food and labor costs foremost among them—and more and more operators are singing their praises.

Take Jim Patrick, founder of the 48-unit Obee's sub chain. Obee's has always offering catering, but lately that's grown to 30%-50% of his business. Obee's sends subs off-premise, and has lately catered everything from law-firm lunches to beach weddings. "We can serve 200-300 at one time," Patrick says. "And all the preparation's done before the lunch rush. It's a nice way to pick up good money for a couple hours' worth of work."

There are drawbacks, though. In some markets, restaurateurs vying for the catering business has led to competition every bit as tough as it is for regular à la carte business. Ryan Todd, manager at Mildred's Big City Food in Gainesville, FL, sees lower-end places undercutting his prices. "Some places will buy frozen food and just make $1 or $2 on it," he says. "You work hard to get a reputation, and don't want to compromise your food [by trying to compete with them]."

And there can be logistical problems, too. Back at Guastavino's, Orr has sometimes has had to turn away walk-in guests when the downstairs is full and the upstairs is closed. But this problem takes a back seat to the advantages, he says. He won't give a revenue figure, but says that five months after beginning catering in earnest, it represents fully half of the business at the restaurant.

Retail sales

While they won't give away the store,these restaurateurs will gladly sell customers a few pieces of it.

Saying that tumbleweeds were blowing through the dining room at the 75-year-old Adrian Cafe in Adrian, TX (pop. 150), isn't much of a stretch. Despite being the only dining option for many miles around, the diner—located midway between Amarillo, TX, and Tucumcari, NM, on fabled Route 66—wasn't exactly filling its dining room, much less an adjacent spare room. So proprietor Fran Houser decided to try out an idea she'd had for a while.

She took her side room and turned it into a retail store. She stocked it with gift items, Route 66 memorabilia, and even the antiques she liked to buy and collect on the side. Quaint little idea? Houser says it saved her restaurant.

"It's becoming harder for the mom-and-pops to stay afloat," she says. "If we were just a restaurant, we would've closed a long time ago."

Houser won't quantify how much revenue her Midpoint 66 Gift Shop (also staffed by her) garners from selling Route 66 t-shirts and the bric-a-brac her family unearths, but allows that it produces greater revenue than the diner. "It works very well for us," Houser says.

Whether or not the situation's as dire as Houser's, many have found that adding retail business to restaurant business can carry them through a lean period. A retail sideline doesn't just have the potential to add revenue, it can often be had at no additional labor cost, since the wares can be displayed throughout the restaurant and not even require a separate counter or register. This in turn, say operators, has secondary benefits, including an ever-changing decor, and providing a point of differentiation for the restaurant.

Tony Palumbo can tell you about all of that. In his Green Emporium Restaurant, located in rural Massachusetts, he sells the neon art he crafts himself for upwards of $3,000 per piece. This, plus the other art he sells in the dining room, pulls in $25,000 a year, on top of the $75,000-$100,000 his restaurant business does.

Palumbo will also hang and sell the work of others, taking a 15% cut of proceeds. Even when the art's not selling, he says, it adds to the character of his restaurant and accentuates the dining experience. "People come here because of the art," he says. "Our customers are regulars, and they like to see something different every time they come in."

Of course, there are costs involved, too. An oil painting will run Palumbo around $150 in supplies, and his neon sculptures in the several hundreds. It takes a few weeks to gather materials for a sculpture, he says, as well as the day or so of actually executing the piece. Those are big demands on someone who's got a restaurant to run, which is part of why the Green Emporium is only open on Saturdays.

But plenty of full-time restaurateurs are making similar sidelines work. Vince Totta and his wife Lindy, partners at Tuscany Manor, a Lee's Summit, MO, restaurant, do a brisk business selling antiques. In fact, the antiques are all over the restaurant. Guests are free to tour the old manor house's nine rooms and bid on the mirrors, dolls, or chandeliers rounded up by Totta's wife at estate sales and antique shops, and repaired or refinished, as needed, by him. "We were going to use one of the rooms as a gift shop," he says. "But then we decided, why not make it all a gift shop?"

Finding, hauling, and polishing doodads takes time and money, but selling the pieces (Totta says they'll sell for between $50 and $200) does represent significant revenue. Still, Totta sees the side business being more about decor than dinero. "We look at it more as a way to eliminate the expense of ongoing redecorations," he says.

Doctor dinners

Is there a doctor in the house? Given the profit potential of pharmaceutical events, maybe you'd better check.

It's a relatively quiet weeknight at the new Ruth's Chris Steak House in Manhattan, when sales manager Eric Ostrow gets a call from one of the big drug companies he often does business with. They've got 60 doctors that they want to tell about their new treatment for hair loss, and they want to do it in one of the restaurant's private dining rooms. Ostrow springs into action, and an otherwise slow night turns busy. "The pharmaceutical company dinners are a huge money maker for us," says Ostrow, who books as many as three a night. "If I have the space, I'll never turn one down."

In the fiercely competitive drug industry, pharmaceutical companies spend billions of dollars each year trying to woo doctors into prescribing their latest wonder pills. With competition increasing all the time, such companies will often spare no expense to wine and dine the docs—which is where the restaurant biz comes in. Sure, any banquet business is welcome business, but savvy operators have discovered that going after the pharmaceutical trade—which can fill an otherwise empty dining room with $100-a-head guests—can mean an especially big shot in the arm for the bottom line.

Just how big a shot? "I've made a pretty good living off these hucksters," one restaurateur said candidly on an online bulletin board. Added another: "We serve all of them the same food, and keep our cost low and our profit high!"

Okay well, it's not as simple as it sounds. Ostrow says Ruth's Chris goes out of its way to actively court the drug companies. It tailors its menu as needed. It even keeps audiovisual equipment like screens and overhead projectors on premises for presentations. And it's not always easy money, either. Parties sometimes come in with greater or fewer heads than promised, and try to wriggle out of a contract when they're short. Occasionally he's given just a few hours' lead-time.

But the operational benefits far outweigh the grief, he says. "The menu is usually set, so it's easy on the kitchen and server staff," says Ostrow, who adds a 20% gratuity to the bills. "And the meetings have set times, so we know when they're arriving and when they're done."

But the benefits of catering to pharmaceutical companies go beyond in-house events. Bella Notte, an upscale restaurant in Lexington, KY, has carved out a lucrative sideline serving meals to nearby drug companies by boxing takeout lunches. Each day, they move between 20-50 orders. "We're usually not that busy during lunch," says manager Matthew Hill. "So this is a little extra business for us."

For his part, Ostrow is sticking with the in-house crowd, and adds that any doctor an event pulls in his doors is a double plus because they could well turn into a loyal customer. "Many of these doctors have never tried Ruth's Chris before," he says. "Having them at a private dinner gives us the chance to make them fans of the restaurant."

Growth market 

Yeah, we know: There are just no good sites left out there. Or are there? Check out this New Jersey hotspot.

Time was, if you suggested to a restaurateur that he set up shop in Atlantic City, NJ, you'd be suspected of nipping at the cooking sherry. Or maybe drinking seawater.

After all, for decades now, about the only sign of life in this faded seaside resort 50 miles south of New York City has been inside its casinos—and every operator knows how that goes: cheap buffets, customers who seldom venture outside, and no real opportunities for restaurants.

But recent doings in this city of 40,000 suggest that all that could be changing. As with Las Vegas, Atlantic City seems to be morphing from a seedy gambling strip to an entertainment, shopping, and dining destination. In fact, there are some who say that Atlantic City could well become one of the hottest areas for restaurant development in the country.

"It's a whole economic boom, and restaurants are part of it," says Susan Ricciardi, spokesperson for the Atlantic City Convention & Visitors Authority. "The city has redeveloped itself." Adds Deborah Dowdell, president of the New Jersey Restaurant Association: "We're delighted that there's more grandeur coming."

While a still-soft economy and scaled-back vacation plans aren't good news for any restaurateur, it's had an unexpectedly good effect on Atlantic City—and holds promise for many restaurateurs going in there now. Why? The major urban centers of New York, Philadelphia, and Boston are all within a five-hour drive of Atlantic City, and with many affluent people opting for closer getaways (driving as opposed to flying), this old gaming town is benefiting handsomely. "Higher end things are happening," Ricciardi says. "We see younger people coming, and there's a wealth of opportunity for restaurants."

It started with the Borgata, a $1 billion hotel and casino that houses 10 specialty restaurants, including Ombra, chef Luke Palladino's shrine to rustic Italian, where some entrees go for $29. The coming of the Borgata seems to have sent a signal to the young and well-heeled of surrounding states that Atlantic City is suddenly a hip place to be. Developers have responded accordingly—and the developers are looking for restaurant tenants.

There's The Walk, a $60 million entertainment complex under construction on the Boardwalk, expected to draw many prominent national chains. There's The Quarter, a retail/entertainment adjunct to the Tropicana Hotel expected to add more prominent restaurants to the mix. There's Ocean One, the famed pier in the Atlantic that's being revamped, and also expected to be a hot restaurant site. A recently restored Convention Center is also drawing a higher caliber visitor, and helping boost the number of annual visitors to 33 million.

Dowdell points out that those siting opportunities, because of their relative high cost, will lend themselves to big national chains before local independents, though she says many different restaurants could stand to benefit. "It remains to be seen," she says. "And I'm hopeful."

Anthony DeMaio, partner in the upscale Mojo, a restaurant just up the beach, is cautiously optimistic as well. He observes that the Borgata has set a new tone for the city, and should raise the sophistication level of the other casinos and, hence, the people who come to them. But will that mean opportunity for area restaurants? "I think it will," he says. "When you have daytrippers coming, they're looking to spend entertainment dollars. They can come here."

Public Speaking

Maybe your employees don't want to listen to you, but the public sure does. Lots of operators are finding profit at the podium.

As Norman Van Aken tells it, the man behind Norman's in Miami would prefer not to do speaking engagements. "I'm opening three restaurants this year, so I'm not looking for any extra work," he says. "I actually try to avoid it."

So why, then, does he fly into various cities to discuss (or prepare) New World cuisine for large groups? "Money," says Van Aken, who does about five a year. "Money is good."

Granted, operators who don't happen to be celebrities can't pull down the $8,000-$20,000 day rate that Van Aken does. Yet that doesn't mean that restaurateurs of many stripes are excluded from the benefits of speaking to groups. From cooking demos to talks about sustainable agriculture, the expertise of restaurateurs is in demand, and a growing lot of them seem to be taking advantage of the fact —and the benefits aren't always in the pay.

Larry Bain, director of operations for San Francisco natural food restaurant Acme Chophouse, isn't a household name, and doesn't get a dime for addressing groups about the merits of sustainable agriculture. Yet he still sees the engagements as crucial to Acme's well-being, thanks to the extra guests that cross the restaurant threshold.

"I absolutely see a spike in business whenever I'm speaking," he says. "More and more people show up and say, 'I saw that article about you, and wanted to show my support.' Each engagement reaches a whole new market of consumers.

Hawaii-based restaurateur Jeremy Safron was an early proponent of the raw foods movement. His lectures about it proved popular enough that he decided to get out of the restaurant business altogether. "I made more on a few lecture tours than I did in a whole month in the restaurants," says Safron, who can snare up to $500 a talk today.

But for sure, not every operator is cut out for such a routine, especially when the talks take you away from the day-to-day operations of the restaurant. "I worked 25-30 years to create my core business, and wouldn't advise anyone with less than five years' experience trying it," Van Aken says. "Plenty have tried and failed." Still, he says, if an operator can sell his story or his expertise to a corporate group, conference, or culinary class, it's worth looking into. "If people are interested in tapping into the knowledge you've accumulated," he says, "there's an obligation to let them."

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