Recession Dashes Restaurant Hopes

Photo by Jasoon/Flickr CCi

In even the most robust economies, the restaurant business is a mug's game: While the oft-quoted figure that nine-out-of-ten new restaurants quickly fail may be overstated, at least 60 percent of them do go under within five years. In a poor economy like today's, it's even tougher. Nationally, there were 4,000 fewer restaurants in business during the spring of this year as compared to the same period in 2008--a one percent drop. The number of people dining out fell 2.6 percent, the largest slip since 1981, according to the NDP Group, a market research firm. (McDonald's is one of the few restaurant businesses that have thrived in this recession.)

The restaurant scene in New York has mirrored this national trend. And while reports of notable restaurant closings occasionally make the news, they're crowded out by the hoopla accompanying new ventures. As diners, we're unlikely to take much notice of a restaurant closing--unless it's a favorite--nor spend much time contemplating the tribulations of its owners. Most restaurants, like people, die unremarked.

Sato, a sushi joint in my neighborhood of Manhattan, the Upper East Side, shuttered a few weeks ago without fanfare, which is not surprising given that the island has more than 600 sushi restaurants. Sato wasn't my favorite restaurant, but it was a reliably good one. It opened on 2nd Avenue in December of 2007, and I first visited with some trepidation. For whatever reason, turnover at this particular space has been high. And the previous, short-lived tenant had been a sushi restaurant that trumpeted its cheap, all-you-can-eat dinners, which were awful.

But Sato's fish always tasted fresh, and its cooked dishes--delicately fried oysters, eel, and foie gras--were refined. Moreover, the owner, Sato Cheuk, was friendly, stopping by the tables to chat and sending over personalized chopsticks and free courses to preferred customers. I wanted him to succeed.

But he didn't. When I walked by a few weeks ago, the restaurant was closed. Workers were pulling down the marquee and renovating the interior. They were able to hunt down Cheuk's phone number, and I gave him a call to ask about the closing and his life in the restaurant business.

"I grew up in Hong Kong, but I moved to Paris when I was 15 and got a job as a dishwasher," Cheuk said. He slowly worked his way up in some of the city's French and Asian restaurants, and in his mid-twenties he came to the United States. He lived and worked in Queens, and after seven years he opened his own restaurant, Sato Japanese Cuisine. But he had always wanted to open a Manhattan restaurant, and last year, after securing financing, he did just that.

"It was terrible timing," Cheuk told me. "We opened up just as the country was entering the financial crisis." His Queens restaurant took a 20 percent hit in revenue. "But we could survive there, because we had built up a loyal clientele over many years," he said. "As a new restaurant, we never had that in Manhattan." (Those who went did give good reviews, however.)

Cheuk's timing was doubly bad. Last year's Christmas season saw a surge in customers, but soon after construction began on Sato's block for the 2nd Avenue Subway line. The line was originally planned in 1929 but then, seemingly endlessly, delayed. "The project kept getting pushed back, so it was difficult to anticipate when the work would actually start," Cheuk said. With Sato's marquee obscured by the construction and dust billowing against its windows, what little chance the restaurant had quickly evaporated.

Six months ago, Cheuk put his Manhattan restaurant on the market. During this time, he was as friendly as ever. But a few weeks ago, when I last visited, he was working behind the sushi counter--the first time I saw ever saw him there--and only said a few words as I left. He was downsizing, yet I didn't know it.

Last month, Cheuk finally found a buyer, who offered him less than what he owes his creditors. "For now, I'm just going to concentrate on the Queens restaurant and try and earn back the money," Cheuk said. He sounded as upbeat as always. "I went for it and it didn't work out, but that's the nature of the business," he said.

Meanwhile, above Cheuk's former restaurant a shiny new marquee has been erected: Szechuan Chalet. It's another first foray into Manhattan, this time from a restaurateur who operates China Chalet in Florham Park, New Jersey. The island needs a new Chinese restaurant even less than another Japanese one: there are more than 1,000. I wish the new venture all the best, but I doubt it survives any longer than Sato did. I've walked by a couple of times during dining hours and have yet to see a single customer.