October 24, 2010 in Business

Despite slow economy, new eateries are springing up all over

By The Spokesman-Review
 
Kathy Plonka photo

Jacob Rauth brings out the open sign for the Flying Pig on East Sprague in Spokane on Friday. The restaurant’s owners are trying to reach out to neighborhood foodies.
(Full-size photo)

Hands on deck

Spokane County has had an increase in food-handler permit applications in the first nine months of the year:

2010  13,877

2009 13,183

2008  12,455

Source: Spokane County Regional Health District

Banks or agencies that help business start-ups say they typically see new restaurants as the No. 1 start-up choice for Spokane-area loan applicants.

That hasn’t changed, even in a slumping regional economy.

What’s unexpected, they say, is discovering a large number of new or recently opened restaurants popping up in Spokane and North Idaho, even though the economy is still sluggish and credit is hard to get.

Industry watchers at companies that help find financing and firms that assist start-ups say they can name more than 20 recent or soon-to-open restaurants in the area.

They range from fast-food shops and pizza pubs to full-service sit-down eateries. Some – like the Flying Goat in northwest Spokane, and the West Wing on the South Hill – are second establishments added by an owner looking to reach more customers. The former is a pizza brewpub across the street from the Downriver Grill. The same partners who opened the Downriver Grill decided to open a less-formal, quicker-service food business with the Flying Goat.

The West Wing, which expects to open soon on the South Hill, is the first Spokane restaurant for Raci Erdem. He said he’s trying to provide the same cuisine that attracts Spokane customers who have been driving to his Post Falls restaurant, the White House Grill.

Some of the new restaurants are local versions of regional or national chains. Ciao Mambo, a full-service restaurant, will open next year in downtown Spokane; it is the first operation here for Montana-based Glacier Restaurant Group.

A good number of the new restaurants are first-time ventures that fit a pattern seen statewide this past year, said Anthony Anton, CEO of the Washington Restaurant Association.

Eating out again

Anton said as the recovery moves along, more residents are willing to go out and spend a bit more at restaurants. Many diners are more focused on finding good food in places convenient and close to their homes, he said.

“So as people come out of the slow economy and price points loosen, we see people eating out more. And they’re looking for places that serve good food and tend to be in neighborhood locations,” Anton said.

Neighborhood-friendly is the way Marsha Loiacono and her daughter Erin Rauth describe their business, the Flying Pig, which opened in the summer at 1822 E. Sprague Ave. The breakfast-and-lunch shop sits smack-dab in the middle of the emerging East Sprague Business District, near downtown Spokane.

Rauth said the two women were eager to open a restaurant after working together for several years at the Great Harvest Bread Co. on the South Hill. A friend told them of a space on East Sprague. They eventually arranged a lease with the property owner.

It took a $55,000 credit union business loan to get the doors open, Rauth said. SNAP, a Spokane nonprofit that supports area residents trying to open businesses, worked with them to complete a business plan. SNAP played a big part in helping them meet the loan requirements, Rauth added.

The women see the Flying Pig as both a business and a way to boost the appeal and image of the East Sprague area. Their business attracts downtown lunch-goers and a lot of workers from nearby East Sprague businesses.

“Our neighbors are extremely supportive of us,” Loiacono said. “Mainly, they support us and they know they’re also supporting themselves.”

Borrowers line up

The applicants coming into banks to open a restaurant are a mix of people with experience and others who have never worked in a food business, said Kelley Groth, the Spokane Small Business Administration loan manager for Mountain West Bank’s Spokane Valley branch.

People who have no experience at all keep coming in, but they’re the ones who are least likely to receive a business loan. Without some background in the food industry, those applicants have to find funding from friends, family members and willing investors ready to roll the dice, Groth said.

“We’re now probably getting three calls a week on opening a new restaurant,” she said.

The bank sits down with all applicants, experienced or not, she added. And sometimes loans are given to those who can make a strong case that their business plan works.

At the same time, a fair number are applicants looking to find an economic option after being laid off or seeing limited options in an existing line of work.

“In a down economy and with a high unemployment rate, people start looking for ways to buy themselves a job” by starting a restaurant, Groth said.

Of all area financial companies, Mountain West underwrites the most SBA loans, said Bob Beck, the senior vice president at the bank’s Coeur d’Alene office.

Last year the Coeur d’Alene bank signed deals for 15 North Idaho restaurants. So far this year, Beck said, there are none.

“People are just not qualifying” for SBA loans for restaurants because of a lack of operations experience, Beck said.

The default rate nationally for new restaurants is about 28 percent, Beck noted. “That’s about what it is for local businesses, if not a bit more,” he said.

Signs of growth

The number of bank and SBA loan applications on both sides of the Washington-Idaho border could well increase over the next three months, thanks to the Small Business Jobs Act signed earlier this fall.

That program guarantees 90 percent of the bank’s investment in an SBA-approved loan, said Ted Schinzel, director of Spokane’s SBA office. The new law continues through the rest of the year or until the money set aside for the program is gone, he said.

Tami Kennedy, general manager for the Spokane office of Bargreen Ellingson, said she’s seeing the same uptick in new restaurants. To her, the growth signals that the worst part of the downturn is over and people are moving forward.

Bargreen Ellingson sees that activity firsthand. It’s a large regional and national designer and seller of restaurant supplies. Kennedy sees well-run restaurants seizing the opportunity now to expand, just as credit is becoming a bit looser.

Other new restaurants are capitalizing on business closures in the area.

“The common thread is that these are citizens who have a background in the industry,” Kennedy said.

“They are taking advantage of the deals to be had in real estate, construction and tax incentives.

“The good news is that people are starting to feel confident enough in our economy to move their money into investments that will create jobs.”


There is one comment on this story. Click here to view comment >>

Get stories like this in a free daily email