Eating at the bottom line

Restaurants finding diners choosing cheaper fare

The Four Cheese Deep Dish Pizza is already a casualty at Uno Chicago Grill. So is the Shrimp Panini, recently replaced on the menu with a cheaper chicken version.

Outback Steakhouse is serving up smaller steaks at the same price, while Legal Sea Foods is unveiling a seafood roll that costs $4 less than its $22.95 lobster roll.

Restaurants across the country are similarly shaking up their menus as talk of a recession grows to a roar. Many chains are slowing new openings and attempting to reduce expenses to offset soaring food costs and shrinking consumer spending. And, unlike in past recessions, the restaurant industry faces additional challenges this time: overexpansion, and a shift by consumers to grocery stores that offer high-quality prepared meals.

People are quick to scale back on eating out when the economy becomes shaky - restaurant and bar sales have declined since December, from $38.5 billion to $38.2 billion in February, according to preliminary figures from the US Census Bureau.

Back Bay resident Nina Braun, 35, said she is dining out less to save money. And when she does go to a restaurant, she skips wine or beer with dinner, or meets friends for appetizers instead of a full meal. But she has also noticed scrimping on the part of restaurants.

"Restaurants have cut back either on portions or quality over the past few months, and these are the places I now stay away from," Braun said.

After nearly two years of growth, sales dropped at Uno's last fall and have remained flat since then at its more than 200 restaurants. At the same time, costs for basic ingredients have jumped. The price of some cheeses, for example, has leaped nearly 50 percent to $2.09 a pound. Frank Guidara, Uno's chief executive, says the chain realizes it has to change.

"With the economic downturn, you can't just do the same old thing," he said. "We're getting killed with cheese prices, with wheat, soy, and oil prices. So we're reworking the whole menu, looking at every ingredient, and reducing waste."

While trying to cut costs, restaurants are also stepping up promotions to try to lure budget-minded diners. Uno's recently expanded its $1.99 and $2.99 snack menu for the happy hour and late night crowds to include items like a caramelized onion and gorgonzola miniburger. Last month, Boston bakery chain Au Bon Pain rolled out Portions, smaller meals at lower prices. And Bennigan's last week launched a "Lucky Three" promotion for $10.99 that lets guests choose three courses from a special menu.

In recent weeks, Legal Sea Foods has seen demand drop for higher-priced items across the board, from meats to wine to seafood. In addition to featuring less expensive haddock and cod entrees, Legal is also training its staff to stress value. Entrees at the 32-restaurant chain range in price from $15.95 for fish and chips to $41.95 for Alaskan king crab legs.

"You don't want to cut back on what you're giving the consumer, but you really have to think strategically on how you can give as much if not more value as in the past," said Legal Sea Foods chief executive Roger Berkowitz.

Analysts say high-end restaurants have seen less of an impact on business than casual dining chains, and that Boston's emerging reputation as a foodie town is unlikely to suffer because of the economy.

L'Espalier chef and owner Frank McClelland said the number of diners and average check size have remained steady at his upscale Back Bay restaurant. McClelland said he has not changed any ingredients or increased prices, but he is signing more long-term contracts with locked-in prices for raw ingredients, and centralizing buying to save money for L'Espalier and his other restaurant, Sel de la Terre, which has locations in Boston and Natick.

Kim Peretti, a self-described foodie who lives in Easton, said she and her husband now eat out together once a month, instead of three times, so they can still afford the fine meals they enjoy.

"I'd rather go out once and get what I really like and have a full dining experience rather than go twice and have to order something cheaper on the menu," Peretti, 40, said.

She has also scaled back family dining with her two children at restaurants like Bertucci's or the 99 Restaurant - from five to three times a month.

Such casual dining restaurants are showing increasing signs of economic stress. For example, PF Chang's China Bistro, a chain with 179 restaurants in 35 states, is experiencing less traffic and slimmer profit margins, Morgan Stanley analyst John Glass wrote in an April 2 report. Nearly 25 percent of the company's Bistro units are in real estate bubble markets, second only to the Cheesecake Factory, according to Glass.

Also, overbuilding is a major problem facing restaurant operators, with full-service restaurants opening at rates well beyond the market growth over the last five years, according to Ron Paul, president of Technomic Inc., a Chicago market research firm. Applebee's was one of the first that was forced to respond, closing 24 of its more than 500 company-owned stores over the past year. More chains are expected to retrench.

"Almost everybody has reduced the amount of planned openings for '08, let alone '09," Paul said. "And it's not only the overexpansion. Retailers like Whole Foods have been creeping into the restaurant industry, getting better at prepared fresh meals."

Some chains, like Legal, view the downturn as an opportunity to take more market share and grow stronger as struggling brands falter. Legal is negotiating a deal for a coveted New York City location being vacated by a failed restaurant, which Berkowitz declined to name. Meanwhile, Charles M. Perkins, president of the Boston Restaurant Group Inc., a restaurant broker firm in Boxford, has about 40 restaurants listed for sale in the area, double the usual 20 listings he carries.

Uno's is among those businesses responding to the economy by slowing down store openings, with plans to open 8 to 12 restaurants this year instead of the typical 12 to 16.

But that doesn't mean the company has put growth on hold. It's accelerating the introduction of Uno's Express, a shop that sells pizza by the slice inside discount warehouse clubs like BJ's Wholesale Club. Over the past month, two Uno's Express opened at BJ's, in Stoughton and Stoneham, selling pizza for $1.99 a slice, and 100 more stores are planned for this year, giving Uno's access to bargain hunters on the go as the chain slows growth of its sit-down restaurants.

The brand is in addition to the company's Uno Due Go, a new, fast, casual restaurant focused on lower-priced salads and sandwiches that is appearing at airports, malls, and other venues.

"We're broadening our brand, touching on many different price points so we're better prepared for the next economic downturn," Guidara said.

Jenn Abelson can be reached at abelson@globe.com.