If the recession is hurting the Valley’s restaurant industry, it’s not readily apparent at Joe’s Farm Grill in Gilbert. More than a dozen customers are standing in line to place their orders at the window of the retro-looking burger stand on Wednesday night. Outside on the grassy grounds, picnic tables are filled with families devouring hamburgers, hot dogs and milkshakes.
If the recession is hurting the Valley’s restaurant industry, it’s not readily apparent at Joe’s Farm Grill in Gilbert.
More than a dozen customers are standing in line to place their orders at the window of the retro-looking burger stand on Wednesday night.
Outside on the grassy grounds, picnic tables are filled with families devouring hamburgers, hot dogs and milkshakes.
“We’re sometimes surprised there’s a recession because we see so many people eating out at restaurants,” says Kristina, a 30-something mother of two who declined to give her last name.
But the Gilbert resident admits she and her husband, Brandon, who works for the Air National Guard, are taking the family out about half as often as a year ago.
“We go out about once a week,” she says. “It’s usually for a lunch.”
A couple of tables away, Jill and Scott Gregor say they, too, are eating out less often, maybe two to three times a week.
But the change in their spending has more to do with the arrival of the young couple’s first child 15 months ago than the economy.
“We’re doing more takeout,” says Scott Gregor, a project manager for a chemical management company. “That way we spend less on things like drinks and tips.”
Rachel and Dave Vander Wall, sitting nearby, are introducing two foreign-exchange students from Europe to classic American cuisine.
“I don’t think we’re going out as much, maybe three times a week,” says Dave Vander Wall, a respiratory therapist. “It costs more now that there’s four of us.”
The Gilbert couple also say they’ve started using restaurant coupons for the first time.
“If we see a coupon for a place we like to go, we say, 'Well, we might as well save five dollars,’” he says.
His wife quickly adds, “After all, five dollars is five dollars.”
Last week, Gov. Jan Brewer and musician-turned-restaurateur Alice Cooper announced Dine 4 AZ, a three-month campaign to encourage Arizonans to dine at local restaurants.
Saturday, more than 110 Valley restaurants kicked off the second annual Arizona Restaurant Week, offering special three-course meals for $29.
Both promotions are aimed at boosting the state’s restaurant industry, which employs 277,000 people and provides 9.3 percent of the state’s tax revenues.
At first glance, it may seem odd Arizona restaurants would need a boost. Sales are on pace to reach a record $8.7 billion this year, an increase of almost $300 million over last year.
But that increase represents a significant slowdown from just a couple years ago, when the revenues were growing at a rate of $750 million a year.
Every $1 million spent in restaurants generates an additional $990,000 in sales for other industries and an additional 26.4 jobs, according to the Arizona Restaurant Association, the industry’s lobbying and watchdog group.
“Over the past five or six years, we’ve been one of the most rapid-growing states in terms of restaurant growth,” says Steve Chucri, president of the association.
But this year, according to the Mesa resident, the state has fallen from first place to fifth.
“Immigration issues, Arizona laws — particularly liquor laws — and the recession have been a perfect storm for restaurants,” Chucri says.
The list of East Valley restaurants unable to weather that storm includes such critically acclaimed establishments as Sea Saw and Sol y Sombra in Scottsdale, Citrus Café and Sautee in Chandler, Chef H in Gilbert and EJ’s Steakhouse in Mesa.
Even longtime favorites like Paradise Valley’s El Chorro Lodge (open for 72 years) and Scottsdale’s Pink Pony (60 years) and Quilted Bear (36 years) haven’t been immune.
According to Chucri, the closure rate for Arizona restaurants has doubled from a norm of 2 percent to 3 percent to between 4 percent and 5 percent this year.
So-called “fast casual” restaurants like Joe’s Farm Grill — typically those with higher-quality ingredients than fast-food restaurants but lower prices than sit-down restaurants — are benefiting the most from the recession.
While the National Restaurant Association reported a 1.2 percent drop in inflation-adjusted 2008 sales overall — the first drop in almost 20 years — sales for the fast casual segment were up more than 60 percent.
“Obviously in the quick-service segment, they’ve done well,” Chucri says. “People tend to 'trade down,’ as we call it in the industry.”
VALUE IS KEY
Joe’s Farm Grill creator Joe Johnston, regarded as one of the Valley’s most savvy restaurateurs, got his start in the business with the 1989 launch of his hugely popular Coffee Plantation on Tempe’s Mill Avenue.
Today, after selling Coffee Plantation, Johnston has three successful restaurants — the others are Joe’s Real BBQ and Liberty Market — all in Gilbert and all fast casual.
His oft-repeated mantra: Passion for the food, service from the heart.
“At the end of the day, people are going to look at their bill and ask, 'Is it worth it?’” Johnston says. “Here in Gilbert, you’d better have it dialed in in terms of value.”
Noting that Arizona “seems oversaturated with gas stations, grocery stores and restaurants,” he says significant closures were inevitable when the economy slowed down.
“I think when times are good, people tend to over-reach,” Johnston says. “In good times, defects in a business plan aren’t always apparent.
“It usually comes down to poor planning or insufficient resources. And by resources, I mean two things: talent and money.”
QUALITY COUNTS, TOO
Robert Morris wondered if the recession would prompt diners to forgo pricier restaurants such as Cork, perhaps the epitome of fine dining in the Southeast Valley, which he and his wife, Danielle, opened in April 2008.
“At first I thought that would happen, but what I found is our guests say if they have money to spend they’re going to go out fewer times but they’re going to go out for quality,” he says.
In fact, Morris says his sales in August, typically the slowest month of the year, were better than in January, usually one of the better months, at his south Chandler restaurant.
Still, he worries about how other Valley restaurants are faring.
“I’ve worked in the restaurant industry since I was 19 — that’s 16 years,” he says. “I’ve never seen it this bad.”
So, like Johnston, Morris also is focusing on value. Cork recently began offering a Sunday four-course dinner menu for $35, which has become a huge hit.
The restaurant also has a happy hour tasting menu — three courses and a glass of wine — for $25.
“I think it’s about both quality and value,” Morris says. “I think the random Wednesday night 'Hey, where do you want to go eat?’ has gone away.
“I think there’s more thought involved in it now: 'If we’re going to go out, let’s make it good.’”
First-time restaurant owners Blake and Nicole Mastyk opened The Deli, featuring locally produced meats, produce and breads, in Queen Creek in June 2008.
Crediting a number of positive media reviews, the Mastyks say this past June was their best month yet.
The Deli doesn’t fit into any one category: Customers can order sandwiches at the deli counter during the day, but the Mastyks also offer fine-dining entrees with wine pairings.
The most popular items on the menu, though, are Nicole Mastyk’s homemade ice creams, some of which come in unusual flavors like chile-honey and chocolate-Pinot noir.
“People really seem to like ice cream during a recession,” Blake Mastyk says. “Nicole can’t keep up. Everyone relates to comfort foods.”
As further proof of comfort food’s newfound popularity, look to downtown Tempe, where more than a half-dozen new restaurants specializing in comfort foods are scheduled to open in the next month alone.
The newcomers include Five Guys Burgers and Fries, Suckerpunch Sally’s Café, Jimmy John’s Gourmet Sandwiches, Smashburger, The Irish Pub and Electric Dave’s Brewpub, as well as the reopening of Regions Bistro.
BINGE OF OPENINGS
In fact, new restaurants once again seem to be popping up all over the Valley, sometimes even in clusters.
At Old Town Scottsdale’s SouthBridge development, restaurateur Joseph Gutierrez is launching not one but three new places — Tutto, Acua and Tapas Papa Fritas — in spaces recently vacated by other restaurants.
Chef Aaron May, who just closed his Sol y Sombra and Autostrada restaurants at DC Ranch in north Scottsdale, is opening two new places — Over Easy and 18 Degrees — next to the Ice Den skating rink this month.
Does this mean the Valley’s restaurant industry is back on the fast track?
Cork’s Morris is very optimistic.
“I’ve been saying this since March or May: This fourth quarter is going to be a great quarter,” he says.
Johnston is a little more cautious in his assessment.
“I think it’s still going to be a little slow for the rest of this year,” he says. “But by the fall of 2010 I expect a pretty good recovery led by value places and unique places.”