With the economy teetering on the brink of recession, the days of unlimited expense-account dining have gone the way of the three-martini lunch.
Much of the business world is cutting back on nonessential perks, including lavish business meals, to the chagrin of restaurant operators who count on corporate customers. Though business dining continues to be on the plates of many companies, discretionary spending for meals related to travel and entertainment has been put on a diet.
Increasingly, “companies are approaching restaurants with a predetermined amount that they have to spend per person,” said Sharon Fine, director of sales and marketing for the Chicago branch of Lawry’s The Prime Rib, one of four U.S. locations in the Pasadena, Calif.-based multinational chain.
That kind of budgetary caution marks a change from typical corporate behavior in the past, she said. Operators that cater to expense account diners are trying to prevent them from retreating to less-expensive alternatives.
The Chicago-based Morton’s steakhouse chain, whose 79 branches get 80 percent of their covers from business customers, is running limited-time specials that represent relative bargains, such as a four-course steak-and-seafood dinner for two, $99. The deal included two filet mignons and a choice of a jumbo lump crab cake, shrimp Alexander or broiled scallops, plus salad and dessert.
Still, preliminary estimates had Morton’s same-store sales falling 2 percent to 3 percent in the first quarter as total revenues were $91 million to $93 million. Some analysts had forecast first-quarter sales of $98 million.
Woodland Hills, Calif.-based Grill Concepts, which operates five upscale Grill on the Alley restaurants in Southern California, Dallas and Chicago, is seeing power-dining customers opt for economies, said chief executive Philip Gay, who estimated that about half of the meals served are business occasions.
“People are still dining out, but they’re trading down a little. They may not order that second bottle of wine,” Gay said. He characterized the economic climate as “the choppiest environment I’ve seen in 25 years. Everyone is going through some challenging times.”
However, business is holding fairly steady for 15-unit Oceanaire Seafood Room, according to the high-end, Minneapolis-based chain’s chief executive, Terry Ryan. “We are within 1 percent of comparable-store sales from last year. Some restaurants are down, and others are up,” Ryan noted, adding that having a good mix of corporate and social business has helped the chain weather economic turbulence.
“Restaurants are still the best place to extend your business meeting,” maintained Ryan, who said Oceanaire gets 50 percent to 60 percent of its weekday sales from corporate customers, versus 5 percent to 10 percent on weekends.
Though they may be spending less, corporate customers have become more particular about service, and having a strong staff retention rate helps to keep service levels high, Ryan said.
“People expect fine dining service more than ever,” agreed Steve Millington, general manager of Michael’s in New York, sister restaurant to the 29-year-old original Michael’s in Santa Monica, Calif. “People are more careful where they’re going and don’t want to take risks,” Millington said. “I think that gives us a 100-percent advantage, having a known name.”
Michael’s power-dining patrons spend an average of $26 for breakfast, $50 for lunch and $75 for dinner, and those figures are unchanged, though the size of parties has tapered off with the soft economy, Millington said. “People are spending as much as they usually do,” though the size of business groups has shrunk somewhat, he explained.
Expense account traffic trends in locales that depend on just one or two industries can be problematic. In auto-dependent Detroit, which economists say is mired in a deep recession, an influx of nonmanufacturing industries and increased domestic sales of car parts by Asian firms keeps business-dining volumes viable, said Matt Prentice, chief executive of Matt Prentice Restaurant Group of Bingham Farms, Mich.
Affluent Asian corporate customers at Prentice’s No. VI Chop-house are especially fond of steak, lobster and good Scotch, he said.
In oil-rich Houston, the high-end Cafe Annie has not lost expense account diners because the city “is counter-cyclical,” said co-owner Lonnie Schiller. “There is so much oil and gas business here that there is a nice trickle-down effect.”
