Business

Tri-City restaurant owners feeling cautious

Steady population growth and a stable local economy continue to attract new restaurants to the Tri-Cities.

Since January, several have opened -- many with first-time restaurant owners. But some of them may be nibbling away at the customer base of established restaurants or poaching from one another. And that's making some longtime restaurant owners a bit cautious.

They have cut labor costs, become more efficient and watched thin profit margins get thinner as consumers watch their dollars.

That's not surprising, said Nancy Swanger, director of the School of Hospitality Business Management at Washington State University in Pullman.

When the economy is tight, consumers scale back, said Swanger, who has owned and run many restaurants and still owns two in Idaho with her husband. Her Subway shop is doing well, but sales at her casual pizza place are flat.

"People have scaled back their choices," she said.

Casual fine dining and fast casual restaurants have been especially hard hit, and that also appears to be the case in the Tri-Cities, she said.

Independent restaurant owners often are hardest hit, said Steve Simmons, co-owner of Country Gentleman Restaurant and Catering in Kennewick and chairman of the board of directors of the Washington Restaurant Association.

Once customers cut back, it's hard to bring them back, said Don Karger, owner of Henry's Restaurant & Catering in West Richland. "People are creatures of habit."

Even quick-service restaurants have felt the pinch, said Ed Mulhausen, who owns Burger Ranch restaurants in Kennewick and Pasco. He said he has fewer employees and is part of the crew flipping burgers and serving customers, he said.

High state payroll taxes and a high minimum wage have compounded the problems, said Mulhausen, Simmons and Karger. The cost of doing business is climbing steadily, said Mulhausen, citing a recent increase in credit card transaction fees.

All of them also are concerned about new state taxes on bottled water, beer and carbonated beverages that take effect in the next few months.

"It'll hurt us bad," said Karger. Beverage sales add substantially to the bottom line, and any price increase deters customers, he said. Some restaurants are in "survival mode," he said.

"Some of us are not going to be there in the next four or five years, " agreed Mulhausen, who's been in business for 45 years.

But Jim Sterling, who owns two Tri-City restaurants that bear his name, said sales were up 1 percent in Kennewick and about 3 percent to 4 percent in Richland.

"It's really exciting," he said, attributing his success to loyal customers and good locations. "We are an all-purpose restaurant. We make our soups, sauces and salad dressing from scratch. People (taste) the difference and appreciate it."

He recently opened a third eatery in Walla Walla since many regular customers from there visited his Tri-City restaurants, he said. The new 6,500-foot-restaurant can seat 140 and has a banquet room, he said.

Over the years, he's followed a practical business philosophy: If taxes or minimum wage go up, so do his prices.

"We try to operate as best as we can. It's my job to figure out how to pay my workers" he said. His goal is to make a dime on every dollar customers spend.

His formula for success also includes owning -- not leasing -- restaurant space. That way the land and building are paid for in 15 years, and he can seek loans, if needed, to expand, he said.

Restaurants that offer excellent customer service get a lot of repeat business, WSU Professor Swanger said, and don't have to worry about offering deep discounts to attract business.

But restaurants do need to "stay new and fresh" to attract customers, she said.

A slow economy may mean customers are cautious about returning to dining out, but it will happen, because generations of American working couples are used to eating out, she said.

Bob's Burgers & Brews

Bob’s Burgers & Brew, a Washington gourmet burger chain, recently bought land in the Southridge area, near Highway 395 and Hildebrand Road, to build its biggest restaurant.

The company paid about $440,000 for a one-acre-plus parcel and plans to invest about $3 million in a new 6,700-square-foot building and landscaping. It will have a large patio conducive to outdoor barbecue parties, said Bob Kildall, CEO of Bob’s Burgers & Brew, which owns other restaurants on the west side and opened a Yakima eatery about six months ago. Groundbreaking will be within a month, and the 239-seat Kennewick restaurant should be ready by late fall, he said. “We are very excited to be in your town.”

Kildall, who started the chain in 1982, said he became interested in the area after a Kennewick city official invited him to visit.

“I liked what I saw. I drove around and talked to some people. They said they would love to see a casual dining restaurant like ours,” he said. “We are affordable and offer quality food.”

The burgers have a six-ounce meat patty and come with 11 ounces of fries, he said.

Talk of a slow economy and competition doesn’t bother him, Kildall said. His company controls costs to keep its food affordable.

“We have lowered our profit margins instead of trying to pass the costs to consumers,” he said.

Hot Wingz

Ken Avery opened Hot Wingz in Kennewick earlier this year and is satisfied.

“Things are going as projected,” he said. Customers like his casual, quick-service diner, but he hasn’t seen the big bucks yet. “It takes six to eight months before you start seeing profits,” Avery said.

He said he’s been getting a lot of repeat customers, with weekends really busy. That’s helping him reach a break-even point, he said. His average customer spends about $10.

Business has grown 10 percent every week in the last month or so. Avery said he’ll stick to his game plan and continue to market Hot Wingz through radio ads, sponsorships and by distributing samples to nearby businesses and reaching out to homes and apartments near the North Columbia Center Boulevard and West Deschutes Avenue intersection where’s he’s located. He expects 20 percent growth in May over April.

He said he’s lucky there wasn’t a mandatory minimum wage increase this year. The state minimum wage, which is adjusted annually for inflation, stayed at $8.55.

If his costs go up, he may have to pass part of them on to customers. “We don’t like it. That’s just the way it goes.”

The King & I

For Katie Hamner and her husband Lincoln Panasy, taking over The King & I restaurant in January was a dream come true.

Hamner said working there full-time is fun, but dealing with the paperwork to get a liquor license has frustrated them. Not being able to serve beer, wine or other alcohol has affected business. Some of the old-timers don’t come because they couldn’t have a drink with their meals, Hamner said.

Getting high-quality raw materials has been another challenge, she said. A small business can’t get wholesale distributors to deliver, she said, because they need a minimum of 15 items per order. “We are forced to pay retail prices.”

She said she’s looking forward to visiting the farmers markets this summer for fresh produce.

The couple have pruned menu offerings and added Chinese fare. “People seem to like it.” Customers on average spend about $12. It’s helping pay the restaurant bills, though not the personal ones, Hamner said.

She said the business took a dip briefly when new restaurants opened on West Clearwater Avenue, but it quickly stabilized and regulars returned.

Randy and Jolene Bibe also bought one of Kennewick’s established eateries — The Spaghetti Establishment — last year. And, they’re happy with the results. “We are doing well,” he said.

They didn’t change the menu or pricing, but worked to keep regulars happy and add new customers, he said. “I have a 50-hour work week.”

The restaurant is celebrating its 36th year. “Having an established business has been helpful.”

-- Pratik Joshi: 509-582-1541; pjoshi@tricityherald.com; Business Beat blog at www.tricityherald.com

  Comments