2008 wasn’t half bad,literally,for the largest restaurant chains based in Orange County. But 2009 is another story as the slowdown that started midway through last year plays out with job cuts and a sales slowdown.
Revenue for the 25 largest OC-based restaurant chains rose 2% in 2008 to $6.6 billion, according to this week’s Business Journal list.
The gain largely came from restaurant openings, as many chains struggled to keep up sales and profits at existing restaurants.
The trend has become even more pronounced this year.
Case in point: No. 6 Huntington Beach-based BJ’s Restaurants Inc., which runs a chain of restaurants known for pizzas and microbrew beers. It saw first-quarter revenue rise 18% to $102.4 million, thanks to new restaurants. But sales at those open at least a year were flat for the quarter.
The past 12 months have been a whirlwind for restaurants, starting with last summer’s gas price surge that scared off some diners, and then fall’s financial and economic meltdown.
“It’s safe to say that the end of 2008 and beginning of 2009 have been the most challenging and volatile years in recent memory,” said Stephen Carley, chief executive of No. 7 Costa Mesa-based El Pollo Loco Inc. “I’m afraid we haven’t seen the bottom yet, which means we’re in for another very challenging year.”
The list ranks the top restaurant chain operators based in the county by 2008 revenue. It includes subsidiaries of companies based elsewhere that run chains from here.
The list’s 2% revenue gain is something of a lagging indicator as it doesn’t capture the first half of 2009, in which the industry’s downturn worsened.
A more accurate picture comes from the list’s employment column, which measures OC workers in June versus a year earlier.
Local employment at the rest-aurant chains declined 5% in the past 12 months to 14,640 people.
The chains have cut jobs from their offices and scaled back service staff at restaurants.
The biggest drop in employment came at No. 5 Mimi’s Cafe, an Irvine-based unit of Columbus, Ohio-based Bob Evans Farms Inc. It shed 290 jobs, a 35% drop, to 550 local workers.
Another big job decliner was No. 16 Pick Up Stix, a San Clemente-based unit of Dallas-based Carlson Restaurants Worldwide Inc. It was down by 162 workers, a 27% drop, for a total of 438.
Others that didn’t report job cuts said they’ve scaled back in other ways.
“We’ve been affected all the way down the line,” said Steele Platt, founder and chief executive of No. 13 Irvine-based Yard House USA Inc. “Executives at Yard House have taken pay cuts. I’ve even gotten rid of my reserved parking spot.”
Some chains have fared better, or even thrived, during the downturn.
The list’s perennial No. 1, Irvine-based Taco Bell Corp., a unit of Louisville, Ky.-based Yum Brands Inc., is estimated at $1.9 billion in 2008 revenue and is believed to have seen gains as diners bypass more expensive eateries for the Mexican fast food chain’s inexpensive tacos, burritos and other items.
In the first quarter, Taco Bell saw a 9% increase in same-store sales.
No. 4 Irvine-based In-N-Out Burgers Inc. is estimated to have seen 2008 sales rise 5% to $450 million with the opening of restaurants and the burger’s chain cult-like, recession-resistant following.
No. 9 Lake Forest-based Johnny Rockets Restaurant Group Inc., which runs a chain of 1940s-style burger diners, has held steady by diversifying with eateries aimed at tourists and in other countries.
“Our business kind of ebbs and flows with the American dollar,” said Brett Badick, vice president of operations at Johnny Rockets. “When the dollar is strong we get great local business, but when the dollar is challenged we see our business flow from a more international standpoint.”
Casual, sit-down restaurants have been among the hardest hit.
No. 8 Irvine-based Claim Jumper Res-taurants LLC is believed to have struggled in 2008 with a decline in revenue and subtle job losses.
Los Angeles-based Leonard Green & Partners LP owns Claim Jumper and reportedly has hired Minneapolis-based Piper Jaffray Cos. to explore a sale.
The private equity firm bought a majority stake in Claim Jumper for $250 million in 2005.
No. 13 Yard House, known for its specialty beers on tap, has seen revenue slip 6.5% in the first half of 2009 from the same period a year earlier, after seeing 2008 revenue grow 20% to $169 million with new restaurants. But the chain still is expanding, Platt said.
“We’re still showing our growth and we’re looking at the environment as an opportunity to enter new markets and do deals with landlords,” he said.
