Over-eating? Cafe owners try to buck the odds

Despite industry numbers showing Bellingham to be eatery-heavy, local entrepreneurs are opening new restaurants at a record pace

Bruce Bauer is optimistic about opening a new restaurant, Café Ohya, despite the surge in new restaurants in August. The fact so many restaurants are opening shows there is plenty of demand for new eateries.

   When told that nine new restaurants opened in Bellingham in the past month — Café Ohya, Sirena, Wendy’s, Lychee Buffett, Chiribin’s, Giuseppe’s, Grammy’s, and Maggie Moo’s, with J&J Mongolian Grill and several more in the final stages of renovations — Chris Irwin, owner of Boomer’s Drive-In, said he wasn’t surprised.
   “There are always restaurants opening in Bellingham,” Irwin said. “It seems this area can always find room for another place to dine out.”
   While nine eateries opening in a month’s time is unusual even by Bellingham standards, there has been a noticeable increase in the number of restaurants in the past five years. In the 2005 edition of the telephone book, there are 209 Bellingham restaurants listed in the Yellow Pages and 322 in Whatcom County. Five years ago, there were 182 Bellingham restaurants listed in the Yellow Pages and 269 in Whatcom County.
   The previous five years tell a completely different story. In 1995 there were 177 Bellingham restaurants listed in the yellow pages, 265 in Whatcom County. So in a five-year period between 1995 and 2000, the total number of restaurants in Bellingham only increased by five.
   There are several reasons for this recent jump in restaurant openings, according to Tom Dorr of the Small Business Development Center. The SBDC counsels small-business owners as well as startups, and Dorr has seen plenty of people walk into his office with plans to start a new restaurant.
   Dorr said contributing factors include a stable economy; population growth; a surge of new retirees with a substantial nest egg, ready to pursue a dream; and a growing national trend where Americans are dining out more often.
   Despite these positive factors for growth in the restaurant industry, Dorr is not at all bullish about starting a new restaurant, and tries to be honest to those pursuing this dream.
   “I believe restaurants are an oversaturated market in Bellingham, and it will continue to be for some time,” Dorr said. “It is difficult to succeed in the restaurant business even in the best of circumstances, and there is way too much competition here.”
   The basis for Dorr’s concern lies in the industry numbers he sees every day. For a restaurant owner to make an average Whatcom County salary (around $36,000 a year), they will need to generate a huge amount of sales.
   Dorr counsels his clients to shoot for a net profit of 10 percent, while the industry standards are 4 percent for a full-service restaurant (where customers sit down for a meal) and 8 percent for a limited-service restaurant (takeout places, such as a pizza parlor). At a 4 percent net profit, a restaurant owner would have to generate about $900,000 in sales a year to get paid $36,000. A limited-service restaurant (at 8 percent net profit) would have to generate $450,000 annually.
   Even more: the average net profit for a restaurant in the state of Washington is 1.8 percent, the lowest in the nation. In order to make $36,000 net profit on 1.8 percent, the restaurant would have to generate $2 million in annual sales.
   “That net profit average for Washington is just insane; what it tells me is there are a lot of restaurants in this state not making a profit at all, bringing down the average,” Dorr said. “You cannot have a viable restaurant at 1.8 percent in Bellingham.”
   Despite those numbers, there appears to be no slowing down when it comes to restaurant grand-opening ceremonies in Bellingham.
   Bruce Bauer, who opened Café Ohya in September, said the fact so many restaurants are opening now says something about the changing demographics of the area.
   “I actually look at the fact that so many restaurants are opening the same time as I am as a positive,” Bauer said. “Many people know that restaurants tend to fail as a business, but despite that people are opening up places here in Bellingham because of the growth that is really just starting to happen. A lot of people are reaffirming my idea that there is a lot of opportunity in the Bellingham restaurant industry.”
   Bauer’s strategy in getting his restaurant to stand out from all the other new eateries is to get the word out about what Café Ohya does different: It’s an Asian-style menu that uses healthy foods at an affordable price (menu items are in the $5 range).
   “We want to make our money on volume instead of a higher mark-up price,” Bauer said. “It’ll be meals that can be prepared quickly, but also in a way where customers are getting a good, healthy meal.”
   Michael D’Anna is another one of the nine restaurant owners who opened a new restaurant this month. He has an advantage that many others do not have: He has already opened a successful restaurant in Bellingham, D’Anna’s Café, which has been open for eight years. His newest restaurant is Chiribin’s, located in the former Calumet site at 113 E. Magnolia St.
   “There are so many restaurants in this area to choose from, but I believe there is room for more, if you have a good idea and can find the right niche,” D’Anna said. “With a new restaurant, you definitely have to prove yourself to the community. There are so many places to choose from, so if you don’t start well, customers will quickly go elsewhere.”
   D’Anna said he learned from opening his first restaurant in 1997 that it is better to start off with a shoestring budget and work on building a good reputation by providing a good dining experience.
   “What I think often happens when restaurants fail is the owner overextends themselves financially right from the start, and they can’t make it up,” D’Anna said.    “You have to expect the first few years will be something where you are trying to survive. It takes about five years to become established.”
   Other established restaurant owners also expect the industry to keep growing locally. John Sands, owner of Boss Tweed, said the restaurant industry has been competitive since he opened in 1984, and he expects that will continue.
   “With every five restaurants that open, there is usually three or four that close,” Sands said. “It’s tough for established restaurants because there is always a new place for people to try out.”
   Sands said Boss Tweed’s success revolves around the idea that they stick with what they know and stay within their niche, which is seafood.
   “What we’ve been able to do is create a place that has a broad appeal,” Sands said. “We want everybody to drop by, whether it is someone who has been out pouring concrete all day, or the attorneys getting something quick to eat.”

Following a dream?
   With the chances of making a restaurant successful slim at best, why do so many people take on the challenge? Entrepreneurial spirit has a lot to do with it, said Gene Vosberg, president and CEO of the Washington Restaurant Association. The association has more than 4,700 members across the state.
   “That spirit abounds everywhere, but more so in the restaurant industry than other types of businesses,” Vosberg said. “I often hear stories about someone who started as a bus boy at a restaurant and worked their way up to become the owner. There are so many more opportunities to own a restaurant than is typical in most other sectors.”
   Vosberg also echoed Dorr’s concerns about starting a restaurant, saying the potential owner needs to be well-informed before starting such a venture.
   “There are new health codes that just went into effect that new owners must be aware of before starting a restaurant, and the owner must have a good idea of how much higher the costs are when operating in Washington state,” Vosberg said. “The minimum wage is the highest in the nation, unemployment costs and L&I costs are high. For those that don’t know this, it will be a very rough ride.”
   Vosberg’s advice for new business owners is to be prepared financially to operate a restaurant for at least a year, because that is how long it usually takes before restaurants begin showing a profit.
   “Restaurants are not a get-rich-quick industry,” Vosberg said.
   But it can be a profitable one if owners are aware of the work they have to put in to get established. One of the biggest reasons, said Vosberg, is people are dining out more often than they used to.
   “For many people, the reason they dine out more is to save time,” Vosberg said. “Everyone is so much busier these days, it is harder to find time to shop, prepare and clean up a meal.”
   He also noted that in a recent Gallup survey, the restaurant industry was ranked No. 1 for being the most highly regarded industry in America.
   “Restaurants have become a big part of the fabric of America, and dining out has become an important part of society,” Vosberg said.
   Across the state, the restaurant industry has been growing in different pockets, especially in areas where the economy has been either stable or growing.
   “What I’ve noticed recently is the growth in Asian restaurants in this state, such as Vietnamese, Korean and Chinese,” Vosberg said. “There is a perception that Asian meals tend to be healthier, and that is something the public is looking for more often.”
No matter what kind of food is being served at a restaurant, however, Irwin said it is important to know that just being a good cook won’t cut it in Bellingham’s restaurant industry.
   “Restaurants either make money, or quickly suck away money,” Irwin said. “There needs to be someone involved in the restaurant who can handle the operations side. If there are people who can handle the cooking, service, and expenses, the restaurant should do fine. You see it happening in Bellingham. There are a lot more restaurants opening these days than closing.”


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