New England restaurateurs expect increased challenges while facing slow-growth environment

Nation's Restaurant News,  Jan 1, 2007  by Bret Thorn,  LeeAnn Cannon

• E-mail
• Print
• Link

Like restaurant operators in most regions throughout the country, New England operators say they are expecting increased pressures on their bottom lines. In addition, they say they will face added troubles from an environment of only moderate economic growth.

The National Restaurant Association projects nominal growth of 4.6 percent for the six-state New England region, the second-to-last growth rate among the six geographical regions, trailed only by the Midwest. Aggregate foodservice sales are expected to reach $23.15 billion in 2007, according to NRA data.

Additional challenges to a slow-growth environment include more attempts at minimum-wage increases, more local regulations, more government-mandated employee benefits and more "sin taxes," operators say.

Still, bright spots do exist, sources say. Solid employment rates in Massachusetts--New England's most populous state--bode well for stability there, and some operators in the tourism-based economies of northern New England are hoping for an economic boost from the weak U.S. dollar.

New Hampshire operators have a reason to cheer, mainly a higher growth rate than the average for the region, says Michelline Dufort, president and chief executive of the New Hampshire Lodging & Restaurant Association.

Restaurant sales in that state are projected to grow at a robust 5.3-percent nominal rate to $2.08 billion, according to the NRA data.

"New Hampshire will be the only state in the region to post faster growth than the nation through 2010," Dufort says, citing the U.S. Department of Resources and Economic Development.

Although Vermont's restaurant sales are expected to increase by about 4.3 percent--among the lowest in the country--Tom Shampnois of the Vermont Chamber of Commerce says local research indicates that the stronger Canadian dollar might help bring more revenue to restaurants, especially those in the northern part of the state.

James Greco, chief executive of Bruegger's Enterprises Inc. in Burlington, Vt., which is parent to the fast-casual Bruegger's Bagels chain, says he anticipates a good year in 2007. Results probably will be at least in line with recent years, he says.

"Assuming we have an economy that continues along at [the current pace, 2007] will be good," Greco says.

For the company's third quarter ended Oct. 3, the most recent available period of results, same-store sales increased 3.8 percent systemwide from a year earlier, and gross sales at corporate locations rose 15.4 percent to $23.7 million.

Bruegger's expects to open restaurants at about twice the rate of last year, when it opened 25 locations, Greco says.

Reflecting the mood of many New England operators, Greco adds that his chain's plans are based on an assumption that "the status quo," as it relates to the economy and consumer spending, would remain. Bruegger's currently has about 260 units in 21 states.

Peter Christie, president and chief executive of the Massachusetts Restaurant Association, says the overall outlook for his state is good, with relatively low unemployment rates and a continued increase in the strength of the state's larger companies and their ancillary partners. However, Christie says he is concerned about the Democrats' control of both the legislative and executive branches of the state government after the inauguration of the new governor, Deval Patrick.

Patrick already has expressed support for local meal taxes to help cities and towns raise money.

"We're very much opposed to that," Christie says. "We've stopped it over the last several years, but the stars are kind of aligned [against us] right now."

On a more positive note, Christie says he hopes a Democratic state congress would be more sympathetic to immigrants who provide the labor restaurant operators need so badly.

Dick Grotton, chief executive of the Maine Restaurant Association, says similar moves for increased taxes are afoot in his state. For example, the town of Bar Harbor wants to introduce a local meals and lodging tax to help pay for city services and public infrastructure.

Grotton also anticipates an attempt to increase state taxes on beer, wine, soda and tobacco in order to pay for $25 million in health insurance mandates.

A bill requiring five days of paid sick leave for employees might also be passed in Maine this year, he adds.

Both Grotton and Christie also say they expect moves to ban trans fats, similar to what occurred last year in New York City.

Jeff Ackerman, owner of Chair 5, the Qdoba chain's franchisee for Massachusetts and southern New Hampshire, says he faced pressures in 2006, especially related to utility costs. Those expenses have doubled since he opened his first restaurant in April 2004, particularly because of electrical costs, he adds.

"We've burst through all of our budget lines," he says.

In 2007 he says he is looking at some forward-purchase contracts, or buying larger quantities of energy from suppliers other than the ones he currently uses--something he can do now that he has eight units.