Spokane Restaurant Industry Bitten By Soft Economy, Excess Capacity

Skipper’s has closed half of its six seafood restaurants in Spokane.

One is on West Third Avenue in an almost solid strip of extraordinarily busy and successful eateries stretching block after block.

Until now, “Restaurant Row,” as the halfmile stretch of fast-food joints and fullservice restaurants is often referred to, has been invincible. Nobody has ever pulled the plug.

A few have remodeled. Or changed format. But none quit.

Why now?

Well, as some restaurant operators see it, there are far, far too many outlets opening in Spokane these days.

Others term the Skipper’s format passe.

Still more say sales are soft.

And veteran Spokane restaurateur Cyrus Vaughn, who has been called the Mayor of West Third because of his long involvement in restaurants along the strip, has even gone so far as to use the “R” word.

A Spokesman-Review story in April reported “competition is fierce. In fact, area diners have never had so many restaurants vying for their taste buds and dollars.”

In recent months, many restaurants have opened. And many closed.

A year ago, the S-R asked readers what kinds of new businesses are needed in Spokane and Coeur d’Alene. The overwhelming response was: “More restaurants.” Restaurants remained popular in the same poll this year.

But that’s the last thing restaurant owners need, says Vaughn.

A softening in the local economy is showing up in retail figures, in sales tax collections, and in restaurant trade, says Vaughn.

He and quite a few others say retailing is slow all over town.

But Vaughn is the first I’ve heard use the dreaded, politically incorrect, “R” word.

And any mention of recession is not to be taken lightly coming from an entrepreneur of Vaughn’s caliber, experience and insights. He is the owner of Cyrus O’Leary’s and a raft of other full-service and fast-food restaurants downtown, around town, and around the area.

When I first saw the “For Lease” sign on Skipper’s in Restaurant Row, it figured to be an aberration of some sort. How else could this be on West Third? If you can’t make it in the restaurant business there, you can’t make it.

To be sure, there has been no secret about Skipper’s dismal earnings performance and operational chaos. So I chalked it off to that.

Even so, it seemed prudent to get Skipper’s side of the story. That took persistent prying, because the chain is struggling to survive and not eager to talk about it. Since the first of the year, 78 “company-owned” outlets have folded, leaving just 116 company and franchised outlets.

Most of the units closed were unprofitable or hard up for cash flow, said Jim Schwartz, president of National Pizza Co. International Inc. in New York City, parent of Skipper’s.

“But,” said Schwartz, “we tried to close one Skipper’s in Spokane, and we ended up closing three - by accident.”

By accident?

One was not producing sufficient revenue, he said. In the case of the other two, a “not very kind” landlord wouldn’t extend leases.

In Spokane, real estate broker Greg Arger views Skipper’s exodus from West Third as a “freakish thing” arising from the chain’s operational restructuring.

At it’s peak, he said, the West Third outlet approached $1 million in sales. That’s huge.

Another chain is looking at the location. “Obviously, it’s a hot area,” said Arger.

Meantime, said the real estate agent, Skipper’s is considering closing still another of the three remaining units.

Observes Vaughn, “Skipper’s is conceptually not working well.”

As to Spokane, it’s not working so hot either, he said. The tide has turned.

“I think we are probably in a recession,” said Vaughn. “Retail sales are down. Sales tax collections are down. Housing is down.

“If you asked 50 retailers and restaurant operators in Spokane, 49 would probably say they are down.

“Maybe some odd restaurant may be up. But nobody’s happy. There are too many seats.

“In the past 18 months,” said Vaughn, “there have probably been 1,400 new dining seats open up in downtown alone.”

All over town, with the possible exception of South Hill sectors where sites are at a premium, oversaturation has been reached.

“You add up all the additional seats,” says Vaughn, “and there is almost certainly going to be a big shakeout.”

, DataTimes MEMO: Associate Editor Frank Bartel’s column appears on Monday, Wednesday and Sunday.