Growth is Back on the Restaurant Menu

"We used to make a yearly anniversary trip to the Capital Grille downtown, but that feels too decadent," she said.

These days, Keller, 41, and friend Julia Bretey, 47, treat themselves to Friday lunches, including a Hot Flash martini, at the Edina Grill.

"This is still special, but the menu is reasonably priced," she said. "We can walk away without a huge tab."

With consumers eating at home more and corporations cutting back on travel and entertainment expenses, the recession has meant lean times for restaurants.

More than 5,000 have closed nationwide in the past year, leading to the first net decline in more than a decade, according to NPD Group.

In the Twin Cities, the industry is far from being out of the woods. Yet in certain pockets of town, restaurateurs are starting to get their appetite for growth back: 50th and France in Edina, the West End development in St. Louis Park, Nicollet Avenue and Minneapolis' Uptown, among them.

"It's been a killer year," said Andrea Christensen, a commercial realtor and vice president at Cassidy Turley in Minneapolis. "I made more money in June than in all of last year. And it's all restaurants."

And with loans still tough to get, many of the new entries are being opened by established restaurateurs.

The restaurant group Parasole has been leading the local push. The Edina-based company, with nine restaurant brands that include Manny's, Salut and the Good Earth, has invested about $10 million in Uptown alone in the past two years.

It spent about $4 million to open the Uptown Cafeteria & Support Group in June, and revamped the Figlio space at Calhoun Square into Il Gatto for $3 million. It also added a new private dining room to Chino Latino and opened Burger Jones in a former Applebee's near Lake Calhoun in 2009.

"Chains have cut back on developments, which has provided opportunities for independents," said Dennis Monroe, CEO of Parasole Restaurant Holdings. "We have strong growth and profitability, which gives us access to capital and credit that others don't have."

As the largest multi-restaurant owner in the country, Monroe said Parasole has built a relationship with bankers and private investors that has helped as the recession has ground on. Mom-and-pops are turning to the Small Business Administration, savings accounts and friends and family.

Banks, already wary of restaurants, aren't doing much lending even to established players, Christensen said. But private investors remain interested in backing those with a good concept or a good track record.

"Everybody out there seems to have multiple investors," she said. "People are looking for places to put their money, and people like to say they own a restaurant. But [they] want to share the risks. You don't want to be the one holding the bag."

The food business started getting sluggish in 2007, an early warning of the recession to come.

Fast food has fared the best with its promotions and value meals. Fine dining had a brief rebound earlier this year, but began taking on water again when the stock market plunged in June. Casual dining and mid-scale restaurants, on the other hand, have seen traffic double in the past year.

"We think they're poaching a lot of business from full service, especially with the economy still being stagnant," said Mike Berry, director of industry research with MasterCard Advisors SpendingPulse, which follows consumer spending from cash and credit cards.

"People can still get upscale food but in a less expensive environment," he said of the growth of casual dining category. "They can feed the tip jar instead of filling out the tip line on the credit card bill."

The National Restaurant Association projected at the beginning of the year that Minnesota restaurants would see sales increase 2.4 percent over last year, with revenue of $7.9 billion. But retailers nationwide have seen same-store sales losses for four straight months, and the once-sunny industry forecast may still face some dark clouds.

Dave Siegel of the Minnesota Restaurant Association said he's not seeing anything close to a resurgence.

"There are pockets that are doing well, and certain restaurants that are doing well, but folks are still pretty tight with their discretionary dollar," he said. "We may have bounced off the bottom, but we haven't bounced very far. It looks like a long, straight line instead of a path upward."

One pocket of strength is Edina's 50th and France retail node, where restaurants are replacing retail and other businesses.

Rice Paper is moving from cramped quarters in nearby Linden Hills into a former flower shop. Raku, a Japanese restaurant, opened last winter in a former children's clothing store. Cocina del Barrio, a more food-centric concept from Barrio Tequila Bar is scheduled to open this fall in the former Edina Realty, in the Coldwell Banker building.

Parasole is scheduled to open a pizza place, Mazzo Mia, in the old Tejas location in mid-November.

"We're on the upswing," said Rachel Hubbard, executive director of the 50th & France Business and Professional Association. The area will soon have more than a dozen eateries and coffee shops, buttressed by desirable demographics. Within a mile of the intersection, about 6,800 households have incomes more than $132,000.

"People are wanting to shop again and support local community neighborhoods," Hubbard said. "With the additional restaurants, there's more choices and it's more of a destination."

CRAVE, Cooper and Ringo are helping bring traffic to the West End development, which opened in 2009 in St. Louis Park. But since then, new construction has been mostly at a standstill.

Much of the new restaurant growth in the Twin Cities is coming from second-generation locations. Owners can reduce construction costs by half or more by going into an existing restaurant space, said Christensen of Cassidy Turley.

Nonna Rosa's went into the Thistle's in Robbinsdale. Pizza Lucé has opened at a former Bakers Square on Blake Road in Hopkins. Darbar India Grill will inhabit the former Indio in Uptown. And after Heartland Restaurant moved to the St. Paul Farmer's Market in July, Blue Plate Restaurant Co. snapped up the space. Blue Plate operates Three Squares in Maple Grove, the Edina Grill, the Longfellow Grill in Minneapolis and two other St. Paul restaurants: Groveland Tap and Highland Grill.

While waiting on her Hot Flash martini to arrive, Bretey said the new restaurants around 50th and France will be good for all the businesses in the area. She owns the hair salon across the street.

"I think it'll be wonderful," she said. "It's tough for some of these small boutiques. Restaurants attract people to the area."