Restaurants struggle as diners spend less

As some establishments close, others offer bargains as they try to stay afloat

For a nation that loves to eat out, there are cheap eats to be had. But even $5 footlongs and dollar burgers may not be enough to entice recession-era diners.

Confronting declining traffic, rising food prices and the normal winter slowdown, restaurant owners are fighting back -- touting value, slashing prices, running specials, increasing marketing and promoting loyalty clubs -- amid faint hopes of turning a profit.

For many, it's a matter of survival.

"It's like operating in quicksand," said Arthur Gordon, proprietor and chef at Raleigh's Irregardless Cafe, which has been in business since 1974. "As soon as you think you have some solid footing, it seems to dissolve."

Already, there are a growing number of Triangle businesses closing, including two Prime Only steakhouses, Yancy's in downtown Raleigh and the Symposium Cafe in Durham.

Gordon isn't giving up. He kept his restaurant open on Thanksgiving, Christmas Eve and Christmas Day. He is offering more small plate options, and has resisted raising prices. He offers some live entertainment.

"I'm not willing to sit in the cave and curse the dark," he said. "What I'm waiting on at this particular time is to see what really is going to unfold in the next 60, 90 days. That will tell the tale."

Other companies are also trying to recruit customers:

* The Cheesecake Factory is now pushing a "something for everyone" message and last month introduced a special menu with seven entrees and one salad all priced $11.95 to $14.95.

* Wendy's is actively advertising the three sandwiches on its dollar menu.

* Subway has found great success with its $5 footlong campaign.

Still, it may not be enough.

Consumer confidence has slumped, hitting its lowest point in December since 1967, when tracking began.

Restaurant sales -- which had enjoyed steady growth -- are predicted to be down 1 percent this year, after adjusting for inflation, according to the National Restaurant Association.

Fast food soldiers on

Fast food and "quick serve" restaurants such as Moe's Southwest Grill are still faring well, as some consumers choose cheaper options. But mid-tier restaurants and upscale dining are feeling the effects of the recession.

Shares of Texas Roadhouse dropped Monday after a Deutsche Bank analyst downgraded the company's stock, saying, "the fact remains that a trip to Texas Roadhouse is a lot more expensive than eating at home."

Chicago research firm Technomic estimates a net loss of 9,400 restaurants this year nationwide, up from the net loss of 7,700 restaurants in 2008.

"In my mind, it's the worst since we've been measuring [since 1972]," said Bob Goldin, executive vice president for Technomic. "'08 was bad, and '09 we think is going to be worse."

Most small restaurateurs are reporting sales down 10 percent to 20 percent, said Paul Stone, president of the N.C. Restaurant and Lodging Association, and check averages are also down as people buy a glass of wine instead of a bottle or a Bud instead of a microbrew. Some have cut staff or reduced hours.

"Right now in the middle of January, it's notoriously slow," he said. "Around Valentine's Day, it picks up again. It's fairly steady after that."

There are still diners such as Odis Newsome, who said he and his wife still dine out two or three times a week.

Newsome, a Durham resident who works as a computer technician at N.C. State University, said he and his wife stick to mid-level restaurants like Brixx pizza, Bogart's and Armadillo Grill.

While he hasn't cut back on dining out yet, Newsome said he has started paying more attention to sales at the grocery store and using more coupons there.