http://www.mydesert.com/article/20101030/BUSINESS02/10300320/Investors-see-a-growing-appetite-for-restaurants
Though economists have suggested the Coachella Valley may be more than a year from beginning to recover from the recession, the desert restaurant scene is starting to grow again, with millions of dollars in investments just as season arrives.
Tried-and-true valley businesses are expanding or relocating. New entrepreneurs and national restaurant chains are moving in.
Five Guys Burgers and Fries is planning to open its first valley outlet in La Quinta soon. Bananaz is expected to reopen, this time in Rancho Mirage after years in Palm Desert. And newcomer Dickie O'Neal's Irish Pub is under construction in Palm Springs.
“To me, it's a sign of light at the end of the tunnel,” said Michael Estrada, who owns and runs Matchbox Vintage Pizza Bistro in a building that overlooks the bustle of tourists on Palm Canyon Drive in Palm Springs.
Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University, said the recession has provided some of the necessary ingredients for small businesses to start. Costs of leasing, labor and capital have become much more affordable.
“Usually at the earliest stage of recovery, the small businesses see opportunity,” said Adibi, who compiles The Desert Sun's quarterly economic index.
“If they have a unique niche, they can be there for a long period of time,” Adibi said. “Usually as the economy improves, they should prosper with the economy.”
And investors, who are confident of the resiliency of the valley's $1 billion hospitality market, are snagging choice property that's available in high-traffic locations throughout the valley, including the former Riccio's in Palm Springs and Chart House site in Rancho Mirage.
Posh districts such as El Paseo, which recently added several new stores, are welcoming new restaurants as well.
“All this investment is wonderful,'' said Sara O'Flynn, marketing director of The Gardens on El Paseo and El Paseo Village. “It compliments the mix of restaurants we already have on our properties.
“It's a shot in the arm to all the merchants and restaurants to know we have growth in our community — a good sign.”
But the restaurant business can be risky, valley restaurateurs say. About 50 percent of new restaurants fail within the first three years.
“The business isn't getting easier,'' said Lee Morcus, a principle of Kaiser Restaurant Group, which owns and operates several restaurants in the Coachella Valley, including the Chop House and Kaiser Grill.
“The ability to generate revenue, control costs of business execution, adapt to the changing tastes of guests, and hire and train seasoned staff is getting tougher every day.”
For Estrada, the decision to shut down The Falls Steak House in La Quinta and sell The Falls location next to Matchbox in Palm Springs has been a bittersweet lesson in checkbook economics.
“The numbers weren't penciling out,'' he said.
Estrada turned the keys over to the new owners of the Palm Springs establishment a few weeks ago and will continue to run Matchbox.
“The steakhouse business is tough to be in right now,'' he said. “Palm Springs is challenging enough because of the seasonality of it.”
When one factors in the presence of two other strong steakhouse ventures and the economy, it was time to move on.
“We were fortunate to find a buyer,'' he said. “We were glad to hear all but one employee was rehired.”
Jerry Keller, who was part of the team that owned and ran Piero's Acqua Pazza in The River at Rancho Mirage, said the new economy is driven by price within each category of dining — from casual fare to gourmet.
“I think the valley is going to continue to grow and, if a restaurant does the right kind of job, keeps at it and is consistent, they'll do very well here.”
As for all the new investment, he said understanding why it occurs is simple.
“It's a very entrepreneurial business,'' he said. “It's a romantic business. And it's tough.”
Keller is so confident in the economy that he bought out his restaurant's partnership and now offers a breakfast menu.
Morris and Gloria Salem have followed Keller's affordable lead. They're transforming The Falls in La Quinta into The Flame at Happy Point.
It will feature Brazilian barbecue, Japanese hibachi, American bar and grill cuisine, and an “endless happy hour” of cocktails and appetizers.
They said they've sampled fare and happy hour specials at many valley venues to come up with strategies.
“I feel, today, people are tired of being gouged on price,'' Morris Salem said. “Our goal will be to give customers what they want at the best price we can; the restaurants that close have not adapted to what I call the new economy.”
Recent resurgence began in spring
An early sign of a restaurant resurgence came in the spring.
The long-shuttered Dominick's restaurant in Rancho Mirage, where Desi Arnaz and the Rat Pack hung their hats, was reshaped into the Crab Pot Seafood Restaurant and Bar. That gives the eatery two valley locations — the other in Old Town La Quinta.
“We're doing good — better than expected because of the economy,'' said Wendy Price, manager of Crab Pot, which alone carves out 75-80 new jobs in season.
“We're getting a lot of repeat business now, so that's a good thing,'' she said. “We're in a great location, and we have a feeling that when the snowbirds come back in town, it'll be gangbusters.”
Le Paon Restaurant, long operating along Highway 74, reopened on El Paseo as well.
Antoine Babai, director of operations, runs the reopened venue with brother Eddie as executive chef and proprietor.
“We are sensing from consumers a positive spirit going forward,'' Antoine Babai said.
“Someone's got to do it. We cannot go on blaming the economy or the government forever.”
Buying, leasing become affordable
After living in the desert for seven years, the Salems sold a teppanyaki barbecue restaurant they ran inside Harrah's Casino in Reno for more than 25 years to buy The Falls' building in La Quinta and live out their dream.
“We were tired of leasing,” Gloria Salem said. “We wanted something of our own.”
Affordable real estate prices helped the Salems achieve their dream.
But buying isn't for everyone. Leasing remains an affordable option for savvy restaurateurs.
Leases in architecturally significant spots such as the old Chart House are going at great rates.
Bob Hughes, a broker and owner of Hughes Properties in Palm Springs, said the new Bananaz site was leased at a rate of $1 per square foot.
“Leasing is down about 30 percent,'' Hughes said.
“The proprietors are getting much better rates than three years ago and all the landlords know it, so they're getting competitive to keep businesses in their spaces.”
The long-shuttered Riccio's restaurant, with its sun- bleached frescos on the wall, is expected to open this fall as Dickie O'Neal's Irish Pub. The four-partner investment team is banking on the promise of a better tomorrow.
“You have to strike while the iron's hot,'' said Rick Lamb, chief executive of the new Palm Springs venue.
This comment has been removed by the author.
ReplyDelete