Around New Orleans, Dianne Sclafani’s last name is well known from the Italian restaurant her family ran for decades. Today, as a culinary business consultant, she helps new restaurateurs get their own start.
These days, though, she sometimes finds herself counseling them to hold back.
“They’re always so optimistic. They just feel everyone is going to run to their door,” said Sclafani, a consultant with the Louisiana Small Business Development Center.
“It’s good to have that confidence, but they have to look at who their customer really is and how many they need to get coming in day after day."
To make it in a famously demanding business, restaurateurs must navigate slim profit margins, perpetual staffing issues, perishable inventory and fickle trends.
Lately in New Orleans, they’ve also had to contend with ever more competition. That has been changing both the outlook of established restaurateurs and the way new players approach the field.
The city has seen a surge of different dining options, to the delight of adventurous foodies. But that has stirred concern over just how much the market can bear.
That anxiety is particularly pronounced in the long, slow New Orleans summer, when the number of closures always increases and talk of tipping points and over-saturation picks up.
A new analysis of the competitive landscape for restaurants in New Orleans conducted by The Advocate puts numbers behind the long-running discussion about growth in the sector.
The Advocate found there were 1,216 restaurants open in Orleans Parish in May, ranging from full-service restaurants to counter-service eateries, fast-food outlets and bars with food. That’s up almost 24 percent from just before Hurricane Katrina, and it's the highest number of restaurants the city has seen in the 15-year period The Advocate reviewed.
The number of full-service restaurants alone has risen 33 percent over that time, accounting for 152 more restaurants of this type open in May 2018 than in August 2005.
Though it fluctuates by season, the overall trend has been a rising number of restaurants year after year, while the closure rate has remained fairly steady.
Since 2007, when post-Katrina redevelopment began to ramp up, the closure rate for New Orleans restaurants has been between 7 and 10 percent a year, according to an Advocate analysis. Put another way, of all the restaurants open in New Orleans in any given year over the past decade, between 7 and 10 percent of them closed within 12 months.
Local dining aficionados may lament when one of their favorites shuts its doors. But new restaurants keep coming, a fact that often has industry veterans wondering where it will all lead.
“I was an accountant, I have an MBA, and what we’re seeing goes against everything they teach us in economics regarding supply and demand,” said Ralph Brennan, whose company runs six restaurants in the area, including the landmark Brennan’s on Royal Street.
“We keep seeing more restaurants opening and they keep going,” he said. “It keeps the pressure on us all, that’s for sure.”
Some additions come from established restaurant groups adding more properties, others from young chefs building their first businesses.
New hotels often open with built-in restaurants from name chefs, and big-time developers have increasingly worked restaurants into their projects, a trend that has planted whole new clusters of eateries together, particularly downtown. National chains have set up shop locally, and food trends spawn whole new categories of restaurants across the city.
That growth has built a framework for a more densely populated dining scene. When a restaurant does close, there’s often a new contender eager to jump in and give the same location a shot.
“You see someone take an old retail space, spend all the money to convert it into a restaurant, and then go belly-up in a year or two,” said Greg Reggio, managing partner of the restaurant group behind the local Zea Rotisserie + Bar brand. “Well, that makes it much easier for the next guy to come in. So that space will probably stay a restaurant, and on and on it goes.”
Pop-ups, food trucks, the rising roster of food festivals and other unconventional outlets further add to the field of competitors for the dining dollar.
The growth of New Orleans restaurants mirrors a story that has been playing out across the country in recent years.
Figures from the Bureau of Labor Statistics show a 23 percent rise in the number of “food services and drinking places” in the U.S. between 2005 and 2017, though the federal government counts a broader range of food service providers and bars in this category than The Advocate’s own analysis of New Orleans.
Another key difference in New Orleans is the customer base. While the U.S. population has grown by 10 percent since 2005, the New Orleans population today is only 81 percent of its pre-Katrina level.
The city had about 500 residents per restaurant in 2005, but in today’s increasingly competitive environment there are only about 325 residents per establishment.
But New Orleans has another population that greatly influences the restaurant sector: tourists.
New Orleans & Co., the city’s recently renamed convention and visitors bureau, reported 17.7 million visitors in 2017, up 5.7 percent from a year earlier.
John Williams, dean of the College of Business Administration at the University of New Orleans, says the city’s reputation as a food town is a major draw for visitors. For that reason, he thinks the growing number of restaurants is good for the city.
“Even though it makes the market more competitive and might contribute to the failure rate, I do hope new restaurants keep coming here," Williams said. "It’s part of what makes us a great market for people to visit.”
But he also credits New Orleanians themselves with keeping the local restaurant scene more robust than in other comparably sized cities.
“One reason New Orleans defies the experience of other cities is we have a local population who really does live to eat,” said Williams. “Those catch phrases are true. They dine out a lot. One reason we’re able to have so many restaurants available for visitors is we have a local group that loves those restaurants.”
"Extremely busy at first"
For restaurateurs, though, doing business in this ever-shifting sector can be brutal.
Sean Josephs was already a seasoned restaurateur when he and his wife Mani Dawes opened the upscale Uptown restaurant Kenton’s in 2015 to glowing reviews.
It still didn’t last.
“We were extremely busy at first. Generally, what we’ve seen is you build off that early momentum. As much as everyone wants to check out the new spot, you’re building a foundation for later,” Josephs said. “Our experience at Kenton’s was the opposite. The first year was the busiest; then things started to tail off.”
While new restaurants get buzz, the constant flow of new additions means attention quickly shifts to the next new thing. Josephs also acknowledged that Kenton’s was competing in the same category as many long-established restaurants that are already built into the rhythms and social rituals of local customers — that small but crucial customer base that can afford upscale dining on a regular basis.
“I felt like we built true regulars, people we would see every week, but we needed more of them,” Josephs said. “You’re competing with old favorites.”
Kenton’s closed in March after 2½ years.
Adolfo Garcia, a chef who has opened and closed multiple restaurants in New Orleans through the years, believes the restaurant environment has grown tougher, citing key factors of intense competition and higher lease rates.
“When someone comes to me and asks if they should open, I usually say, 'Chill for a bit, you've got to be conservative, it has to be the right place and a good deal,' ” said Garcia. “But you can’t tell that to someone who has a dream.”
Will “Trey” Smith is a local chef with that dream, and he and his partners have a plan to pull it off when they open their bistro and wine bar Saint Germain in the Bywater this fall. He says the plan is based on a clear-eyed look at the city’s competitive landscape.
“With so many restaurants in such a small market, and knowing how tough it is to get the notice of tourists, you have to put a lot more thought into how you’re going to survive now,” Smith said.
That’s why Saint Germain is a two-in-one proposition. The St. Claude Avenue property is a double shotgun. One side will be a 16-seat restaurant for modern French bistro cuisine. The other side will be a bar. By keeping the restaurant small, they minimize payroll, while the bar can bring in a different kind of cash flow, Smith explained.
“We’ll work the symbiotic relationship between the two,” he said. “Maybe we’re crazy, or maybe not.”
Sclafani, the consultant, said that as the restaurant scene grows more crowded, that kind of business planning becomes as crucial as anything chefs might put on the plate.
“If I truly believe a project doesn’t have the right support, I do try to talk them out of it up front,” she said. “They think I’m being so negative. But I’m there when it's time to close a restaurant too, and that’s the worst part of my job. This is a passionate business, and closing is so emotional.”
Staff writer Jeff Adelson contributed to this article.
Correction: an earlier version of this story used an incorrect title for John Williams at UNO.
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