Economic headwinds add to challenge of restaurant ownership in the Fort Smith area

Good food, good service and a cash cushion are a must to have a shot at restaurant success in the Fort Smith area. But even then, a slow-growing population and sluggish regional economy make it tough to turn a menu into money, say three restaurateurs.

In any city, large or small, the come and go of restaurants captures headlines and social media buzz. New Fort Smith restaurants in recent years include Hideaway Pizza, Raising Cane’s, Slim Chickens, Uncork’d and the Links at Chaffee Crossing. Restaurants closing their doors in recent years includes Western Sizzlin on Rogers, Logan’s Roadhouse, Savoy Tea Co. in downtown Fort Smith, The Movie Lounge, and Grub’s.

Jeff Gosey, the owner of AJ’s Oyster House in downtown Fort Smith, said the business requires a strong constitution.

“It’s a tough business. If you’re going to get in it, you better put on your big boy pants,” said Gosey, who has operated AJ’s for almost seven years and also owns Harry’s, a live music venue in downtown Fort Smith. He’s been involved in some aspect of the hospitality business in downtown Fort Smith for 30 years.

‘LONG, HARD HOURS’
Gosey said those entering the business, whether for the first time or a veteran restaurateur, must focus on food quality and service. And the quality and service, he said, must be consistent, with the key to providing consistent service being “finding and keeping” a well-trained staff.

“Fort Smith can be cruel. So when you open those doors, you better get it right the first time. And with social media, that can be a two-edged sword. A couple of bad posts can really affect your business. I’ve been really lucky to have some great people working there (AJ’s),” Gosey said. “If you can make it the first two years, you are probably good.”

Ralph Taylor agrees that good food is essential to have success in the business. Oversight is also a necessity.

“First, you have to have good food. You can’t start with mediocre food. You do that, and you’re dead. And the owner, especially in a small place, the owner has got to be there as much as possible. And that means a lot of long, hard hours,” said Taylor, who has for 12 years owned and operated Pink Flamingo in Fort Smith.

Taylor and his son Jeff also operate Jeff’s Clubhouse, a restaurant open for almost three years.

Before selling barbecue, Taylor spent more than 21 years in the banking business, with 6.5 years of that in private banking for one individual. Taylor had zero experience when he opened the Pink Flamingo.

“My first day to open that door,” Taylor said, pointing to the restaurant’s public entrance, “was my first day to do this.”

Another key to long-term success is cash. Taylor said too many restaurant owners spend almost all their money opening the restaurant, and then when lean times hit or a pricy piece of equipment must be replaced, they don’t have a cushion.

“And as a banker, I can tell you, when you’re not making money, that’s not the time to go to the bank asking for money.”

THE ECONOMIC FACTOR
Taylor believes the loss of jobs and slow population growth in the area are a factor in the effort to keep a restaurant open. He said the manufacturing jobs that have been lost resulted in the loss of associated white collar jobs – human resource managers, shift managers, engineers, quality control, etc. – who had the disposable income to make frequent restaurant visits.

“I think we’ve seen our middle class shrink,” Taylor said.

Indeed, the regional economy has struggled to return to where it was in 2006, before the close of Whirlpool and any number of its suppliers. At its height, Whirlpool employed 4,600 at its Fort Smith plant.

Recent U.S. Bureau of Labor Statistics data showed 114,723 jobs in the metro area in October, down 0.1% compared with the 114,840 jobs in October 2018. More to Taylor’s point, the October employment is down 10,703 jobs from peak employment of 125,426 in June 2006, a drop of 8.5%. Manufacturing jobs were an estimated 17,800 in October, above the 17,600 in October 2018. Manufacturing jobs reached a high of 31,200 jobs in June 1999, a loss of 13,400 jobs, or 43%, as of October.

Metro population growth has been flat between 2010 and 2018. Since 2010, Fort Smith metro population has risen 0.6% from 280,532 to 282,318. Sebastian County, the largest in the metro, has seen population grow 1.6% (2,009) between 2010 (125,744) and 2018. Crawford County population is up 2.35% (1,458) since 2010, LeFlore County population is down 0.8% (404) since 2010, and Sequoyah County population is down 2.85% (1,212) since 2010.

By way of comparison, the Northwest Arkansas metro area population is up 18.6% since 2010, central Arkansas metro population is up 5.9%, and the Jonesboro metro is up 9.5%.

MORE RESTAURANTS TO CLOSE
Taylor said the 2019 summer and “several weeks” entering fall “were the worst I’ve seen in 12 years,” adding that he talks to area restaurant vendors, and “they all tell me that the others are also slow. So it’s just not me.” The environment is improving, Taylor believes, but at a cost.

“It’s starting to correct itself because you see so many (restaurants) close. The sad thing about it is that it’s the mom-and-pops that close first. The franchises, you know, they can use the good stores to keep the others going,” he said.

Taylor said the holiday catering business is good and is helping to make up for the previous slow months. But the problem is January.

“It’s looking better, and we’ve got some really nice catering on the books, but then,” Taylor said before pausing for a few seconds. “There is January. January is always a bad month because you have three things you are up against: They (customers) are broke from Christmas, they go on a diet from all the holiday eating, or you have bad weather.”

Restaurants surviving January are not out of the woods. Taylor believes more restaurants will close in 2020 as the sector seeks equilibrium.

“I think there is going to be quite a bit more,” Taylor said when asked about the pace of future closures. “I’m predicting six more in the next six months. That’s what I see coming.”

‘DISCRETIONARY DOLLARS’
More closures would not surprise Lance Beaty, who, as the owner of Temple Live! in downtown Fort Smith, operates a restaurant that also caters to groups meeting in the former Masonic Temple. Like Taylor, he believes job realities and slow population growth make the area restaurant business tough. Beaty, who also develops property in Northwest Arkansas and owns and operates the Masonic Temple entertainment venue near downtown Cleveland, said wages and income could also be a headwind for Fort Smith area restaurant owners.

“Per capita, there’s just not a lot of discretionary dollars here (in the Fort Smith metro),” Beaty said. “I mean, you still have significant corporate input … that supports the Marriott and DoubleTree (hotels), and I think that is one benefit for downtown Fort Smith. But in Northwest Arkansas, for example, that (corporate support) is exponential.”

Regional wages are less than in other areas. BLS data shows average weekly wages in the Fort Smith metro are $867, below the $1,175 in Northwest Arkansas and $930 in central Arkansas. The U.S. average is $1,184.

Beaty said the lack of discretionary dollars means discounts and coupons drive consumer behavior in the Fort Smith metro. Taylor also said Fort Smith customers are price-sensitive, noting, “In Fort Smith, price is going to come into play. So much so that I think fine dining in Fort Smith is a tough sell.”

Price point flexibility is a big difference between the Fort Smith area and the Northwest Arkansas restaurant industries.

“So on a $28 plate, that 10% discount doesn’t mean anything up there (in NWA). You know, if you’re working on maintaining a $50 million account with Walmart, you’re not going to be worried about spending a few extra dollars to do that (keep that account),” he said.

Gosey, even with a lackluster economy and slow population growth, likes the area restaurant industry and is optimistic about its future. Demographic diversity, he believes, brings unique tastes to the region.

“We have an abundance of choices. Fort Smith is lucky in that aspect in that there are so many ethnicities to choose from,” he said.

Later in the interview, Gosey said he sees more energy in downtown Fort Smith.

“I think downtown has more options and more foot traffic than I’ve ever seen in my 30 years of doing something down here. … Are we there yet? No. There is still a lot of work left to do, but I like what I’m seeing.”