Hungry for business, eateries get inventive

The economic pressures on consumers, coupled with high gas and grocery prices, are cutting into a popular American pastime: Dining out.

While not all Coachella Valley restaurants are struggling, many are offering discounts to lure customers these days.

Fixed-price summer menus — usually three-course meals — are popping up around the Coachella Valley. Early bird specials, two-for-one deals, happy hours and “kids eat free” deals abound.

Some eateries are getting even more creative.

City Wok of Palm Desert is offering a $5 rebate to clients to compensate for the gasoline their vehicles burned just to get there.

The restaurant also is offering free delivery in its neighborhood with a $20 minimum purchase to spur sales for those inclined to stay at home to beat the heat or keep gas in the tank.

“Fuel prices are a hot-button issue these days, so instead of giving out a $5 coupon or a buy one, get one free, we said, ‘Come on out: We'll pay your gas to get here,'” City Wok chief executive Stuart Davis said. “We're making up for the lower margins in volume.”

John Santucci, who runs Capri Italian Restaurant & Steakhouse in Desert Hot Springs with his brother Joe, is now open for lunch to increase the family business' income.

The rising cost of food is driving the move.

Cooking oil rose from $19 to $38, Santucci said. A 20-pound box of Barilla pasta, once costing $16, is now $24. The price of beef is creeping up. And a 50-pound bag of flour that fetched $12 a year ago now costs $48.

“With every delivery we get, there's an added charge — anywhere from $3.50 to $10,” he said.

With restaurants paying more to buy their own food, profit margins have thinned.

“The big problem is food products are going up and up, the economy is on the skids and people have less disposable income,” said Tony Bruggemans of Le Vallauris, a Palm Springs restaurant that typically closes for the summer season.

That puts restaurants in double jeopardy, he said. “You can't up the prices to cover costs, so special pricing is imposed.”

Competition heats up

A maelstrom of economic maladies has spawned new competition.

The situation's gotten so heated, Bruggemans predicted a few restaurants — particularly start-ups — might not be in business next season.

“If they do not have enough capital to maintain their position through three years, they're probably pretty uncomfortable at the moment,” he said.

Lee Morcus of Kaiser Restaurant Group has ridden many downturns but believes this is the toughest one yet.

“I think there will be a shake-out because this is a resort economy,” he said, one that's dependent on discretionary spending. “We have four months in the year where we make hay, while others do it all year long. Any bump in the road is magnified because of the short cycle we have to turn a profit.”

Those restaurants that can build up reserves seem to be able to sustain business with creative deals.

“There's always been summer deals,” Morcus said. “This summer is no different, except in this economy, the discounting has gotten deeper.”

The Kaiser chain — which operates restaurants from Palm Springs to La Quinta that include the Chop House and Hogsbreath Inn — is offering specials or fixed-price menus. As are a number of other long-established ventures in the desert: Spencer's Restaurant, LG's Steakhouse, The Falls Prime Steakhouse, the Rattlesnake at the Classic Club, Melvyn's at The Ingleside Inn, Arnold Palmer's Restaurant and Fisherman's Market & Grill, to name a few.

Tommy Bahama's Tropical Cafe in Palm Desert put on a pair of proverbial flip-flops to attract a bar crowd.

It's offering a summer bar menu, with $5 items and discounted drinks — a step general manager Michael Shimer said was taken for two reasons: It keeps the bar full, and it appeals to appetites that tend to diminish with the summer heat.

Creativity is needed

Restaurants that are getting creative are in a sweet spot, Davis said.

Offering affordable deals draw in those who are tired of the $5 pizza takeout, a deal by several pizza chains.

“It's forcing other pizza vendors to discount, as well,” he said. “It's like the gasoline wars of the '70s.”

The biggest bellwether on the health of the industry came when Wall Street analysts looked at major restaurant chains such as The Cheesecake Factory, Applebee's Neighborhood Grill and Bar, and P.F. Chang's China Bistro and noted poorer-than-expected performance in the past 24 months, Davis said.

Willie Rhine, general manager of Piero's Acqua Pazza at The River in Rancho Mirage, said the crush of locals who came in for a Happy Hour campaign illustrated to him just how much people are going out of their way to find deals.

“We tried to do an early-bird special, but the three-course option has been more popular,” he said. “Since its start, I'm up 20 percent over last summer.”

Palm Springs downtown administrator Tammy Perezchica said the Palm Springs Restaurant Association has just come off a successful Restaurant Week that led some businesses to extend their evening fixed-price or early diner menus.

Theme nights are gaining in popularity, she said, and the pooled efforts help all restaurants keep their edge from a cooperative marketing perspective.

“It helps consumers plan their budget as well,” she said.

Cities such as Cathedral City are stepping in to help, as well.

The city's business development team has sent a letter to its restaurants inviting them to choose a day of the week, Monday through Thursday, to offer a “Locals Dine Out” discount through October.

Cathedral City plans to promote the participating restaurants, and their specials, in advertisements, as well as on the screen at the IMAX and Mary Pickford theaters along Highway 111.

It's as competitive as restaurateurs have ever seen.

“It's a perfect storm of low consumer confidence and low spending along with incredible increases for us with commodity prices, grocery and utility costs,” Davis said.

“It's as bad as I've ever seen, but I preface that by saying the valley — with its aggressive growth — never believed the bubble was going to end. Now that it's happening, those who've been thinking ahead and planning for the future will come out ahead.”

Even the better restaurants are running flat, Perezchica said. “And they're happy with flat.

“In this economy, year-over-year numbers means you're actually taking a gain.”