It’s a midweek afternoon at Angelo’s Restaurant, and several members of the staff pass through the empty bar carrying equipment they’re moving from one part of the kitchen to another, preparing for the dinner crowd that will begin arriving in a few hours.
Not long ago, the wait staff would have been clearing tables from lunch in the adjacent dining room, but owner Michael Passalacqua ended his lunch service earlier this fall, citing a lack of business.
Sitting at the bar with a cup of coffee, Passalacqua, 48, who earlier this month became president of the Pennsylvania Restaurant Association, said the decision to become a dinner-only restaurant was due to a number of reasons.
“Angelo’s cut lunch service because of the economy, competition from the growing number of chain restaurants in the area, and the erosion of its traditional lunchtime customer base,” he said.
Passalacqua quickly rattles off the companies that have either moved from downtown or have curtailed operations here over the last several years. He noted that a large portion of that steady stream of repeat lunchtime customers came from businesses at Millcraft Center, several blocks up Chestnut Street, including Millcraft, Bailey Engineers, Polycom Huntsman and Fairmont Supply. Other faithful customers came from Allegheny Ludlum’s Jessop plant and the now-defunct Findlay Refractories.
While the challenges he faces in running a small, independent, “white tablecloth” restaurant stem primarily from his immediate service area, they also mirror those in other establishments and make him highly qualified to take on the leading role at PRA for the next year.
As head of the state’s largest food and beverage lobby, Passalacqua represents nearly 25,000 restaurants and directly serves 1,500 members of the 63-year-old organization. According to the PRA, the hospitality industry is the second-largest employer in Pennsylvania behind the health care industry. The food and beverage segment of the hospitality industry employs more than 326,000 people and projects 2002 sales of $12.9 billion.
“But it’s an ailing industry,” Passalacqua said, noting that many restaurants haven’t recovered from the aftermath of Sept. 11 and the slumping economy of the past year. While more Americans are spending more of their discretionary income on meals prepared outside the home, they also have a lot more choices, which in addition to local restaurants like Angelo’s, include fast-food franchises and theme-based chains.
Passalacqua said he doesn’t blame all of his problems on the growth of chain restaurants, adding that many of them are members of PRA. But with large national advertising budgets, they make formidable competitors for any locally based, independent restaurant operator.
“I think they’re an asset to the community here, but you have to fight for your own share of the turf,” he said.
On a regional and statewide level, he said, restaurants of all types share a number of challenges.
According to Passalacqua, restaurants account for 28 percent of the state’s sale of alcoholic beverages, which is regulated by the state Liquor Control Board. Restaurant operators who are licensed to sell liquor receive a 7 percent discount on their bulk purchases, but after the state adds its 6 percent sales tax, the discount is reduced to a nominal 1 percent, he said. In Allegheny and Philadelphia counties, which levy an additional 1 percent sales tax, the restaurant discount for liquor evaporates completely. What really rankles most restaurant owners, Passalacqua said, is the PLCB’s idea of service to its best customers. “As a business, you wouldn’t strike a deal with a purveyor who didn’t deliver, didn’t discount and offered no type of payment terms,” he said, adding that once a restaurateur places an order for liquor, it’s up to him to pick it up at the state store, which requires immediate payment. The PRA is behind a House bill that seeks to increase the discount rate for licensed restaurants from 7 to 18 percent. But with the state’s current budget deficit, Passalacqua said, “they probably won’t give us a big discount.” He added that the extra savings could become critical for his members in downtown Pittsburgh. Those operators could see their profit margins shrink further if the city moves ahead with a proposal to impose a 10 percent tax on drinks served in restaurants and bars. The city also is mulling an additional one-half percent “employer only” payroll tax on downtown businesses, many of which are restaurants, he said. A similar tax is already in effect in Philadelphia. With construction of the new David L. Lawrence Convention Center preventing the city from hosting conventions, the fallout from the Sept. 11 terrorist attacks and a weak economy, “it’s been a miserable two years for the restaurant industry,” Passalacqua said.
There is another way of achieving the liquor discount that wouldn’t come out of the PLCB’s coffers and could benefit both commercial and retail customers. It, too, would require legislative action.
Passalacqua noted that the state continues to impose an 18 percent tax on alcohol as a result of an emergency funding measure enacted in 1939 to help pay for the clean up of the Johnstown Flood.
Despite the discount issues, Passalacqua noted that the relationship between the PRA and PLCB has never been better. He noted that his group has begun holding monthly meetings with PLCB Chairman Jonathan Newman, “who’s trying to run the PLCB like a business.” He added that the restaurant association is backing a move to open some state stores on Sundays.
The Legislature could vote as early as Monday to open a limited number of stores on Sundays. The United Food and Commercial Workers Local 1776 in Philadelphia, representing 1,500 state store employees, is in favor of the move. However, Local 23 of the union, based in Canonsburg, and representing clerks in Southwestern Pennsylvania, opposes the idea.
Passalacqua said the association also is keeping an eye on an issue related to sanitation standards for the food service industry. He said a bill has surfaced “with a lot of support” that would exempt nonprofit entities like fire halls that serve food on an occasional basis from becoming certified in food sanitation.
Restaurant operators and many of their employees take a two-day training course in sanitation procedures administered by the state Department of Agriculture. After taking a test, the employees earn certification. He said the PRA believes that anyone serving food to the public should be required to earn the certification.