Slowing economy taking toll on eateries

OAKDALE -- After 27 years of business, the lights at The Nutcracker are dark.

Known for its hearty meals and cheese fondue, the restaurant closed its doors last week. More closures are expected to follow.

Formerly one of the finest places to dine in Oakdale, it's the latest casualty of a slowing economy made worse in Oakdale by the closure of the Hershey plant.

Owners O.J. and Kay Jackson started thinking about closing more than a year ago.

"We kept hoping the economy would get better," Kay Jackson said. "Hershey closing was the straw that broke the camel's back. When they lost their jobs, the first thing people did was stop going out for nice dinners."

The trend of restaurant closures goes beyond Oakdale. When people have less disposable income, eating out is one of the first things to go, said California Restaurant Association spokeswoman Kearsten Shepherd.

More than 32 percent of consumers nationally say they are dining out less often because of high gas prices, according to an Ohio-based BIGresearch poll conducted in November.

In a September survey, 54 percent said they would eat out less in the next three months, according to an RBC Capital Markets survey.

Restaurant activity fell to its lowest level in more than four years as of November, which is the most recent available information from the National Restaurant Association.

Very few areas of the food service industry have gone unscathed. But very high-end restaurants, places that assemble meals and allow customers to cook them at home, and fast food places have seen the least impact. Sacramento-based restaurant consultant Tom Bruce figures people are opting for inexpensive fast food over sit-down restaurants.

"People who do come in are spending less and looking for more value," he said.

At the same time, commodity prices have increased 25 percent in the past year, he added.

Gas prices are largely to blame for the increased cost of production. But the shift away from gasoline is driving beef prices. As demand for ethanol increases, the price of corn follows. So things such as corn oil and cattle feed cost more. The price of beef has increased 5 percent in 2007, according to the consumer price index.

Bruce suggests restaurant owners change with the times and move away from focusing meals around large cuts of meat.

"Now, people prefer lighter foods: appetizers and wine," he said.

House of Beef owner Steve Medlen has seen a change in customer demand and is adjusting by offering smaller portions of premium cuts at a lower price along with a soup and salad bar, potato, garlic bread and vegetables with meals. At the same time, he is dealing with a higher minimum wage and trying to support local growers, dairies, ranchers and vintners.

"These hard economic times are going to leave scars all over," he said. "We're trying to keep as many businesses open in a small town as we can."

The Almond Tree Restaurant recently closed as well, but soon will reopen under new management. Joe Fernandez bought it and plans to cater meals at the Turlock Poker Room. In the midst of a slowing economy, Fernandez is confident he'll make it because catering will ensure he has 150 customers a day, he said.

The loss of The Nutcracker and closure of the Almond Tree leaves five places to order a steak in the Cowboy Capital and 42 places to dine out, said Oakdale Chamber of Commerce Chief Executive Officer Mary Guardiola.

It was hard for the Jacksons to end their 27-year business that evolved from a "little coffee shop and honky-tonk bar" into a place men proposed marriage and couples went to celebrate their anniversary.

"We've had so many, so many people propose at table 23, we call it the honeymoon suite," Kay Jackson said with a tearful laugh. "We stayed in business a lot longer than we should have."

Bee staff writer Eve Hightower can be reached at ehightower@modbee.com or 578-2382.