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In restaurant industry, high turnover and intense competition

Turnover is always high in the restaurant industry, but the Grim Restaurant Reaper seemed particularly busy here in the past year or so.

O’Connell’s American Bistro. City Grill. Cozumel Grill. Romanello’s South. Tantalus. DiGiulio’s & Co. Solé. Sal’s Famous Pizzeria.

Old and new, cheap and expensive, exotic fare and mainstream grub, they – and a score of other local restaurants – recently closed their doors.

“There’s not a whole lot of room for error in the restaurant business,” said Cindi Thomason, a senior business adviser for SUNY Buffalo State’s Small Business Development Center and coordinator of the center’s Restaurant Institute.

Veteran restaurateurs say there’s a low barrier to getting into the business, with many people deciding they want to open a restaurant because they like to cook, but it’s difficult to succeed in the industry.

Restaurant owners face intense competition, and rising costs for food and labor, and the lingering recession took a toll as more people ate at home or chose to dine out at lower-cost restaurants instead of the mid-tier establishments where entrées cost around $20.

“It’s a perfect storm of things, I believe.,” said Maura Crawford, a veteran of the business who was a partner in Left Bank, Le Metro, Solé and Muse.

However, for every restaurant that closed, another opened – often in the same space, often under the same management.

Experienced restaurateurs say they remain bullish on the industry, but they recognize that even the most successful restaurants can grow stale if they don’t update their menu or their physical space.

“You have to reinvent yourself at least once every 10 years,” said Steve Calvaneso, whose restaurant holdings over the years have included Hooligan’s, City Grill, Bacchus Wine Bar & Restaurant and Libation Station.

Restaurants are a major industry. There are 980,000 restaurants and bars in this country, with 42,610 of them in New York as of 2011, the National Restaurant Association reports.

They employ 13.1 million people nationally – 750,900 in this state, or 8 percent of the work force. Across the country, they generated sales of $660.5 billion, with $33.6 billion coming from New York.

It’s tough for a fledgling small business to gain a foothold in the marketplace, and many restaurants fail to make it past their first, second or third years in operation.

For example, of the 47,292 restaurants that opened across the country in the 12 months ending in March 2005, just 68 percent remained open in March 2008 and only 48 percent were open in March 2012, according to the U.S. Bureau of Labor Statistics. For the restaurants that opened in the year ending in March 1995, just 26 percent remained open in March 2012. “There’s a huge failure rate for small businesses,” said Thomason.

Still, the business remains attractive to a lot of people who enjoy cooking for friends and family, or who got a taste for the industry while working as a server or dishwasher.

Easy to get in

There’s a relatively low bar to enter the restaurant business, and most people who want to open a restaurant have a better sense of what they want to do with the menu than how they plan to operate the business.

Successful restaurant owners have a detailed business plan, are good at delegating and have set up a system for training their employees, said Thomason, who owned a bar and restaurant in North Carolina.

“Anybody who eats thinks they can open a restaurant. Being successful at it is another long row to hoe,” said Donald Will, owner of Will Poultry Co., which supplies hundreds of restaurants in the region.

For one, restaurants face fierce competition from other restaurants that serve the same type of food, from national chains with huge advertising budgets and undercutting prices and even from food trucks and supermarkets that offer dine-in meals.

“It’s a constant effort to make sure you’re financially stable,” said Bob Syracuse, co-owner of the two Pizza Plant Italian Pub restaurants and former president of the Western New York Restaurant Association.

Applebee’s, Olive Garden and other chains offer consistent quality at low prices, including “2 for $20” specials, that independently owned restaurants can find hard to match, Will said. “They can afford to advertise, and they can afford to give away,” he said.

Restaurants offer those types of specials, sacrificing their profit margins in the process, because they need to get people in the door to help pay their bills, Thomason said.

“Fish fries in Buffalo, that’s a total loss leader,” she said, adding the hope is just one person will order the fish fry and everyone else will order something more expensive, along with alcohol, appetizers or dessert.

Restaurants face pressure to keep their prices down even as their costs are rising: for food; for wages, payroll taxes and workman’s compensation; and for rent and property taxes.

Locally, part of the fight to survive includes “Local Restaurant Week,” which runs from Monday to Sunday. For the 2013 spring edition, more than 200 establishments are offering meals for $20.13 and other specials to attract new patrons.

Recession hangover

Many restaurants saw their business decline during the recession and its aftermath, when people opted to eat at home more often to save money.

The high-end restaurants seemed to make it through the downturn OK, experts said, because the people willing to pay $40 for a steak weren’t worried about losing their jobs.

And the low-priced places did pretty well, too. “They’re cheap, and they get you in and out. The mid-range is where the trouble is,” Will said.

Mid-, upper- and lower-range restaurants can’t stand still, said Syracuse, who opened his first restaurant in 1980 and now has two in Amherst.

It’s not clear whether 2012 and early 2013 have seen an unusual level of turnover, or whether this is the normal churn of the industry, restaurant veterans said.

But an incomplete list published in The News in January recounted 24 restaurants that closed the previous year, while at least 26 opened in 2012.

Some restaurants closed only to make way for another venture in the same space, such as Madonna’s taking the place of Fiddleheads in Allentown.

In other cases, an owner closed one establishment and opened another restaurant with a different format.

Last month, for example, the owners of Tantalus in East Aurora closed that restaurant before renovating their space and reopening as Medici House.

Last year was a year of transition for Crawford, who saw two of her restaurants – Solé and Le Metro in the Walker Center in Williamsville – close while she opened her latest eatery, Coco Bar & Bistro, in downtown Buffalo.

Crawford, who got into the business while working in the late 1970s in restaurants on Cape Cod, Mass., during summer break, later helped to start the Left Bank, several Le Metro locations, Muse at the Albright-Knox Art Gallery and Solé.

“I knew the restaurant business was horrible,” Crawford said, but that didn’t stop her.

She pushed herself to exhaustion. In one three day stretch in 2006, she opened the “nouveau Latino” Solé in the Walker Center on a Wednesday, she opened Muse two days later – and on the Thursday in between, she was so stressed out she threw up in the parking lot of the art gallery.

“What the hell was I thinking?” Crawford said.

Over time, she ended up selling out her share or closing all of her other restaurants, whether because of a disagreement with a landlord, differences with a partner or, in the case of Solé, because it struggled following its move to Elmwood.

Now she is focusing on Coco, which she opened at 888 Main St., previously the home to The Eights and, before that, to Campieri’s pizzeria.

Coco is a modern, French-inspired bistro, but it recently hosted a “Game of Thrones” themed dinner. “You have to stand out as something different,” Crawford said.

Can’t stay away

Calvaneso, too, can’t completely give up the restaurant business, which he’s been in since he was 21 and, with a partner, opened a tavern in the Kensington-Bailey neighborhood where he grew up.

Calvaneso later opened Hooligan’s, envisioning a series of restaurants under this banner, but said he later grew bored with the concept and converted his first Hooligan’s to Calvaneso’s Cosmopolitan Grille and the second to City Grill in Buffalo.

Calvaneso added Bacchus on West Chippewa Street and Ya Ya Bayou Brewhouse in the Market Arcade complex on Main Street in Buffalo. The struggles of Ya Ya almost dragged down the rest of his dining empire. Calvaneso said the restaurant did well, but not well enough for the massive space.

“It was my biggest gamble and my biggest loss,” he said.

He closed Ya Ya, sold Calvaneso’s and City Grill – the latter was closed by its current owners last year – and has agreed to sell his 80 percent share of Bacchus to his chef.

The space that housed Ya Ya was vacant from 2005 until this year, when Jay Haynes, the former owner of Jay’s Hilltop Bistro in Angola, opened Perfetto.

This is the fourth restaurant to open there since the ’90s, following Breckenridge Brew Pub, Empire Brewing Co. and Ya Ya. A confident Haynes said, “They were just the opening act for me,” in an interview last summer, but Calvaneso isn’t so sure.

“I wish him well,” Calvaneso added.

Calvaneso still has his Exquisite Catering – the exclusive caterer at Babeville, the former Asbury Methodist Church on Delaware Avenue in Buffalo – and he owns Libation Station in Amherst.

He plans to open two other pubs in the town: Bogie’s, in the former Bogart’s on Bailey Avenue, and Blue Bull, on Sweet Home Road across from the University at Buffalo.

“I just think people are staying closer to home these days. And the smaller, low-overhead places are more practical and more manageable,” he said.

Correction: An earlier version of this article incorrectly reported that Fiamma Steak had closed. The restaurant did close for renovations last August but reopened April 5.