Wednesday, December 19, 2007

Michigan Restaurants Suffering

cross-posted at Michigan Messenger
The state's restaurants are facing belt-tightening in 2008.

The Michigan Restaurant Association has forecast growth of only 3.2 percent for 2008, down a half percent from the 2007 forecast. The modest growth rate places Michigan's food service industry dead last in the country in growth for the second year in a row.

"The industry is certainly struggling here," said Andy Deloney, vice president of public affairs with the Michigan Restaurant Association. He said that most states see restaurant sales grow by 5 to 7 percent annually.

As the state economy goes, so goes the food service industry. "It's not news to anybody what the state of the Michigan economy is. People just do not have as much money in their pockets anymore," Deloney said. In addition to the nation's highest unemployment, people who do have work are experiencing periodic layoffs and less overtime.

Michigan's economic stress affects all sectors of the food and beverage industry. "Some people think fine dining is immune to recession because the people who are still going there are the ones who have money," Deloney said. "But don't forget about the ones who would go out to celebrate an anniversary or promotion. There are fewer promotions now."

During Michigan's extended economic slump, restaurant profit margins have been extremely slim, making it increasingly difficult for them to stay in business. "If you are doing 2 percent, you are doing well," Deloney said. "There have been a number of restaurants this year that have closed due to the economy."

Even long-standing establishments are calling it quits. The Embers in Mt. Pleasant closed its doors this summer after nearly 50 years in business. After a run of almost 80 years, the Fox and Hounds in Bloomfield Hills also closed this summer.

Michigan's statewide restaurant sales in 2006 were $12.3 billion. The association projected $12.8 billion for 2007, which has been borne out by business this year. The forecast for 2008 is $13.1 billion in sales.

"Folks have been waiting for a couple of years for a turnaround to come, and they are running out of gas. They are trying to pinch as many pennies as they can," Deloney said.

Modestly priced eateries catering to the needs of busy families are still holding their ground. "One segment doing well right now is 'fast casual.' Places like sandwich shops are providing what people are demanding," he said. Innovations like curbside pickup and phone-ahead ordering help restaurants stay competitive.