High-end restaurants start discounting

Owners lower profit margin to fill tables

Facing the scary proposition of rooms full of empty tables and piles of bills that have to be paid, restaurant owners are cutting menu prices to entice diners to eat out.

At the area's two Ruth's Chris Steak Houses, there are new happy hour specials starting at $7.95, and a special deal Mondays through Wednesdays that allows diners to buy one and get another at half off.

The chain has also introduced an "economy proof" $35.95 meal option that allows people to select a soup or salad, an entree and a side dish from a set menu of items for the set price.

"In the normal days, just a few months ago, just the filet would have been $35," said David Sadeghi, chief operating officer for Big Steaks Management, the Baltimore company that owns the Triangle restaurants. "We broaden our demographic by providing a menu that is a lot more affordable."

Sadeghi acknowledged that the deals definitely do cut into the profit margin on those items. "We know for a fact that we will not bring in the profit margin that will take us on a Hawaii trip," he said. "But it keeps our employees employed, and it keeps our consumer attached to us."

More and more restaurants are being forced to make similar decisions as discounting becomes a "competitive necessity," said Bob Goldin, executive vice president of Chicago food industry research firm Technomic.

Fast-food chains and casual dining restaurants have always discounted and offered coupons. The move by more upscale restaurants into discounting is a more troubling sign for the industry.

Technomic is not predicting any growth in the restaurant industry until 2011, Goldin said.

"The danger becomes that you start training your customers to go from one discount to the next," Goldin said. "I think it's a slippery slope. You have to be judicious about it, but I don't think they have much choice."

TGI Friday's announced it was dropping prices on its popular Right Portion Right Price menu, which allows customers to choose a smaller portion for a smaller price. Prices will now start at $5.99, a dollar less.

Friday's officials declined to comment on the price change.

However, it seems slashing prices may have the desired effect of bringing more people through the doors.

At Margaux's in North Raleigh, owner Steve Horowitz normally offers a three-course "prix fixe" menu option for $27.95, but this summer he introduced a special $19.95 prix fixe menu on Mondays.

Since then, his Monday traffic has increased, and he even has some people who come every Monday for the special deal.

"Most Mondays, 50 to 60 percent of the people in the dining room are taking advantage of it," he said. "I'd be lying to you if I said we weren't feeling the crunch of what just went down [with the economy]. You've got to keep it interesting and change with the times. You've got to survive."

There may be more discounting as restaurants head into the crucial holiday season.

Ruth's Chris restaurants are wooing large parties by offering a set menu for a flat rate of $50, $60 or $75 a person, including tax and gratuity.

Sadeghi said he'd rather offer bargain deals and keep his doors open than try to maintain sales while charging higher prices.

"The question always is, 'Are you willing to lose the guest and have an empty seat,' or 'Are you willing to continue to bring the guest, continue to keep your employees and continue to pay the bills?' "