DALE'S DISH

Local restaurant owners wary of competition, price increases

Roundtable discussion focuses on new pressures facing Austin-area eateries.

By Dale Rice
AMERICAN-STATESMAN STAFF
Wednesday, July 30, 2008

Curtis Osmond, the proprietor of III Forks restaurant in downtown Austin, says everyone tells him the same thing since he moved to the city two years ago to open the upscale steakhouse across from City Hall. They wish the gates to the city had closed right behind them when they arrived. "Everybody wants Austin to be no bigger than it was when they got here," Osmond said during a recent discussion of the city's growth with other restaurant owners.

Those owners — Teresa Wilson of Aquarelle, Chris Courtney of Galaxy Cafe and Zocalo, Sharon Watkins of Chez Zee and Emmett Fox of Asti and Fino — face more than the consequences of population expansion. The number of restaurants is growing, too, increasing the competition for available diners dur-

ing what is turning out to be a tough economic period.

The owners came together at Fino, at West 29th and San Gabriel streets, for a roundtable discussion, organized by the American-Statesman, to explore the challenges they face in the current climate.

Restaurant capacity is expanding dramatically. Nearly 2,000 seats have been added at the Domain alone, and there are still two more phases of that shopping/residential development to be built in North Austin. Virtually every new residential or office tower in downtown Austin has at least one restaurant.

Perry's Steak House, at Colorado and Seventh streets, and Vin, in the new Monarch tower on Fifth Street, will add nearly 500 combined seats within a few blocks when they open in the coming months. And many more tables and chairs are slated to follow in planned dining rooms downtown.

Plus, in the past year, restaurants have opened in Round Rock, Pflugerville, Lakeway, Bee Cave and Cedar Park, as well as in the East Austin, Southpark Meadows and Circle C areas, with no end in sight.

"I do feel like we have too many restaurants," said Wilson, whose small French eatery near Rio Grande and Sixth streets is located in one of the fastest-growing neighborhoods in Austin.

Although Aquarelle has established a niche as a special-occasion restaurant, Wilson says, it has been lost in the surge of new spots. "I've done several demonstrations at the (Austin) Farmers' Market," she says, "and people don't know who we are or where we are, and we're just down the street."

It also takes longer to fill the restaurant on special nights, such as on Valentine's Day, she says. A few years ago the restaurant would be fully booked several months in advance; now that happens just a few weeks before the event.

The issue isn't so much the number of restaurants, but the way in which diners are making their choices, says Watkins, owner of the longtime Chez Zee restaurant in Northwest Austin.

"There has always been a lot of places in Austin, because it's an eating-out kind of town," she says. The problem is that many diners are not choosing to go to the old spots.

"New is the most powerful word in advertising," says Watkins, who worked in marketing before going into the restaurant business. Many diners, she says, make the rounds of the new places without taking time to visit the longtime ones.

In addition, she says, the huge influx of national-chain restaurants means that many of the recently arrived competitors "have deep pockets and can hang on longer than local restaurant owners," a concern that she says is casting a big shadow over local businesses.

Those pockets help in a time of rapidly rising food and energy costs, she says, when price lists seem to increase every day.

"And those aren't mistakes," Fox interjected to laughter and nodding heads. "Any more, these are the real prices."

Those increases by suppliers for produce and other goods, plus the fuel surcharges added to the frequent deliveries of fresh items, put pressure on restaurateurs to raise their menu prices, something many of the roundtable participants are reluctant to do.

At Asti, an Italian restaurant in Hyde Park, "we don't want to have a menu item over $20, but we may have to go there," Fox says. The problem with that, Fox says, is that "all it takes is one entrée over $20" and customers will view a restaurant differently.

But prices aren't the only adjustments the restaurant owners have to make.

"We have got to be better. We have got to work harder. We have got to be stronger managers," Fox says.

One of the most compelling reasons to better manage their restaurants is the skyrocketing cost of food, the owners agreed.

Osmond, for example, has had to deal with a significant increase in the price of his main commodity — steak.

"Beef prices in general have gone up double-digit percentages every year for the past several years, and the past two there has been a stronger increase," he says.

To keep from raising menu prices at a comparable rate at III Forks, Osmond now spends time in the kitchen, checking plates as they are about to be taken to diners.

"I work a lot more to help absorb some of that," he says. "My labor costs are certainly not as liberal as they might have been before. Any given night, I've got an apron on in the back."

Wilson, citing price increases that affect her French restaurant, says, "Flour has gone up to something like $35 (for a 50-pound bag) for high-gluten; we were paying $12 to $13. Eggs have doubled. Foie gras, we were buying it for $28 a pound; now it's up to $38."

The price of blueberries — used primarily as a garnish at Chez Zee — more than quadrupled one day, Watkins says, and the chef was "practically shaking" when he brought the bill for her to see.

"It must have been one of those days where something happened," she says. Kitchen managers have to be vigilant because an item may end up on the delivery truck at a much higher price than expected, Watkins says, and the restaurant must decide whether to accept it.

"This is where you have got to have a good manager," she says.

Courtney, co-owner of Zocalo in Clarksville and the local Galaxy Cafe chain that now has three locations in North, Central and South Austin, said the biggest effect is from steep fuel costs and the fuel surcharges that are being tacked onto deliveries. The effect is compounded, he says, because he and his colleagues use multiple vendors, with many of them making trips daily to his restaurants to keep ingredients fresh.

"You take all these trucks that are coming to your door and when you start seeing those fuel surcharges, I am like, wow, this is really going to affect me. It's not just a couple of bucks for gas any more," he says. "These charges are adding up because of the way we do business."

It was a point that brought unanimous and emphatic agreement from around the table.

These business owners also are facing pressures as more competitors fight for a share of the local customer base.

"Austin is making the shift now to the next tier of major city," Courtney says. That's one reason, he says, that big national chains are entering the Austin-area market.

The city already is the 16th largest in the country, says Osmond, who moved to Austin from the Dallas area where the original III Forks operates. "It's every bit as big as San Francisco," he says. "It's interesting to think of Austin as a small town, but it hasn't been that way for a long time."

A major question that Osmond ponders is whether Austin "is building restaurants that meet the changing climate."

Until recently, the city was tied largely to state agencies and the University of Texas. But with the economic expansion of the past two decades built around the high-tech and service industries, the clientele has shifted.

"We have more astute diners," he says, noting that they expect more in the quality of service and food. "Are the restaurants that are coming on board catering to the demands of the new diner or visitor?"

And to whom should restaurants cater?

Watkins brought up the recent decision of Castle Hill owner Cathe Dailey to close her longtime Southwestern restaurant that had a citywide draw and reopen it as a Mexican eatery aimed at residents of the new, nearby residential towers and questioned the implication of that move for other restaurant owners.

Courtney clearly thinks Dailey made the right call.

"Austin is very regionalized," he says. "You look at your neighborhood first. That's where you build on."

But could these five restaurant owners survive on neighborhood business alone?

"We could survive," Fox says, "but I'd have to go back into the kitchen and work."

There's more to it than mere survival, Wilson says.

"Can you still do what you do?" she asks, citing the amuse bouche, palate-cleansing sorbet and mignardise that Aquarelle gives without charge to each customer as part of the meal to enhance their dining experience.

Neighborhood revenue alone, she says, might not allow a restaurant to continue that kind of practice.

drice@statesman.com; 445-3859

Roundtable participants

Chris Courtney — co-owner of the local Galaxy Cafe chain of three American-style restaurants serving breakfast, lunch and dinner, and Zocalo, a modern Tex-Mex eatery serving lunch, dinner and weekend brunch in the Clarksville neighborhood. All moderately priced, order-at-the-counter restaurants. Galaxy Cafe: 1000 West Lynn St., 478-3434; 9911 Brodie Lane, No. 750, 233-6000; 47th and Guadalupe streets in the Triangle development, 323-9494. Zocalo: 1110 West Lynn St., 472-8226

Emmett Fox — longtime Austin chef, co-owner of Asti Trattoria, a three-star Italian restaurant in the Hyde Park neighborhood, and Fino Restaurant Patio & Bar, a three-star Mediterranean eatery near 29th Street and Lamar Boulevard. Both with modern ambience and open for lunch and dinner. Asti: 408-C E. 43rd St., 451-1218. Fino: 2905 San Gabriel St., 474-2905

Curtis Osmond — owner of III Forks, an upscale steakhouse chain founded in Dallas, with third location in Palm Beach Gardens, Fla. Unlike many high-end steakhouses, this three-star, dinner-only restaurant downtown includes vegetable sides in the price of its steaks. III Forks: 111 Lavaca St., 474-1776

Sharon Watkins — owner of Chez Zee, an American bistro with fare that runs from a Southwestern-style pizza to Italian-style pasta dishes. The three-star, moderately priced restaurant is best known for its crème brûlée French toast, served at weekend brunch, and its spectacular dessert case. Open for lunch, dinner and weekend brunch and banquets. Chez Zee: 5406 Balcones Drive, 454-2666

Teresa Wilson — co-chef and co-owner of Aquarelle, a five-star French restaurant just off West Sixth Street in one of the most high-growth neighborhoods in Austin. Open for dinner, the expensive restaurant is known for its classic cuisine with a modern twist. Also has a wine bar with lower-priced plates. Aquarelle: 606 Rio Grande St., 479-8117