Texas Restaurants Struggle in Tough Economy

Texas restaurants are slowly recovering from the recession, but difficult conditions remain because of rising food and utility prices and consumer spending caution, industry officials say.

“It’s still really tough out there,” said Wendy Saari, vice president for marketing with the Texas Restaurant Association.

However, Texas is doing better than some states, with sales projected to grow this year.

Whether they specialize in chicken-fried steaks, Tex-Mex dishes or fine French cuisine, many Texas restaurant owners are trying to find ways to regain the customer base they had before the 2008 economic meltdown.

“Certainly the pocketbook has affected everybody,” said Eddie Wilson, owner of Austin’s two Threadgill’s restaurants, which serve Southern home-style foods and salads.  “We’ve had to get better and better at managing what we do.”

Rising utility costs during what he euphemistically calls the “summer warming trend” and increased food costs make it tough even for established restaurants to make their profit margins, Wilson said. But he said a long-running business like his - his original Threadgill’s opened in 1981 - isn’t struggling to the same degree as some others. 

The booming food truck and trailer business, with its low overhead, and chain restaurants, which hold costs down through volume and set operation formulas, provide intense competition for independently owned restaurants, he said.

The National Restaurant Association’s most recent tracking survey, which covers only a small sample of the state’s restaurants, found that 55 percent of those Texas restaurants responding reported higher same-store sales in July 2011 compared with the same month in 2010. Seventy-five percent reported higher food costs than the previous year; 50 percent said their menu prices were about the same; and 60 percent said they expect about the same general business conditions in six months.

Meanwhile, restaurant sales in Texas were projected to grow at a rate of 3.9 percent in this year, reaching $36.7 billion and placing the state among the top seven in annual growth, according to the association’s 2011 restaurant industry forecast.

Nationwide restaurant sales were projected to exceed $600 billion in 2011 and have a sales growth after a three-year downturn. “Quick service” restaurants were expected to experience slightly stronger sales than full-service restaurants.

The national report also named Texas and Florida as the states expected to have the strongest job growth among restaurants in the coming decade, with about 17 percent growth.

Texas experienced a shorter recession than many parts of the country, though it was the worst in Texas since World War II, according to officials with the state comptroller’s office. Texas hit bottom in early 2010, and while the state is now adding jobs it is not yet back to its 2008 level, the officials said.

Wilson, who learned the food business at the Armadillo World Headquarters music hall in the 1970s then at his downtown restaurant the Raw Deal, wanted to expand beyond his Threadgill’s restaurants with a new venture in nearby Cedar Park, but that stalled because of the 2008 economic crash.

For now, he’s sticking with his well-known Threadgill’s brand. He incorporates plenty of live music to help boost his bottom line at both his original Threadgill’s and at the Threadgills next to the site of the old Armadillo.

“It’s just a highly competitive market,” he said. “It’s a constantly changing new age.”