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October 2008

September REVENUE (in millions): SALES TAX: $1,687.5 OIL PRODUCTION: $143.4 NATURAL GAS: $326.2
MOTOR FUELS: $255.5 MOTOR VEHICLE SALES: $260.8 TOBACCO: $132.7


A Word From the Comptroller

As the state’s chief tax collector, accountant, revenue estimator and treasurer, the Texas Comptroller’s office manages the multi-billion dollar business of state government. We track a variety of economic indicators that reflect the health of the Texas economy. I think it’s important, particularly in these tumultuous economic times, to share these numbers with all Texans.

Although our Texas real estate market remains strong, sales activity has begun to soften, though not as sharply as experienced in other regions of the country. We expect the growth rate for Texas taxable property value to moderate to 8.84 percent in tax year 2008, decelerating even further to 4.96 percent in 2009.

In light of the volatile events that our nation is currently experiencing in the finance, credit and national real estate markets, due diligence dictates that the current estimates – especially for 2009 – must be taken with considerable caution. This forecast could change significantly. As required by law, I shall provide an updated forecast of 2008 and 2009 taxable property value growth to the Texas Legislature by March 1, 2009.

I will continue to monitor the health of the Texas economy to ensure lawmakers’ deliberations are based on the most accurate and timely information available.

Susan Combs

Restaurants
Rev Up

Texas eateries gobble up sales and bite into higher costs.

by Karen Hudgins

Texas restaurants are cooking despite a slowing national economy. Just ask Russell Ybarra, president and CEO of Houston-based Gringo’s Mexican Kitchen, who says sales are on the rise at his chain of seven casual dining restaurants in Houston and San Antonio.

“For the most part, our same-store sales have increased slightly over the last year,” he says.

Rack of Lamb - Photo courtesy of Kevin Marple

Sales at Texas restaurants in 2008 are on track to surpass those of 2007 and ring up $33 billion, according to the Texas Restaurant Association (TRA). With more than 33,000 eating and drinking establishments in Texas, restaurants continue to add jobs and are a vital part of the state’s economy. In 2007, the Texas restaurant industry employed an estimated 939,800 workers. That number is expected to grow 23 percent by 2017, when the industry will employ an estimated 1.15 million Texans.

Eating at Texas restaurants delivers a big economic punch. Every $1 spent in Texas restaurants generates an additional $1.52 in sales for other industries in the state, according to the TRA. Each additional $1 million spent in eating and drinking places in Texas generates an additional 41.5 jobs in the state.

Nationally, restaurant industry sales are expected to reach $558 billion, a 4.4 percent increase over 2007.

Egg Rolls to Enchiladas

The majority of Texas restaurants are clustered in the state’s largest cities. Houston leads with 5,298 restaurants, followed by Dallas with 2,618 and San Antonio with 2,566. (See “Restaurant Cities” chart).

Topping the list of the most popular restaurants in Texas are those featuring American cuisine. American restaurants, which offer items ranging from chicken fried steak to meatloaf to roast, raked in $3.8 billion in sales in 2005, according to the Texas Market Segmentation Report produced by the TRA and The Virtue Group. Mexican restaurants were the second most popular in Texas, ringing in $3.5 billion in sales.

Restaurant
Cities

City Number of
Restaurants
Houston5,298
Dallas2,618
San Antonio2,566
Austin1,789
Fort Worth1,117
El Paso1,049

Source: 2005 Texas Market Segmentation Report produced by the Texas Restaurant Association and The Virtue Group

Mexican and Chinese restaurants are popular with Houston resident Elise Acuña, who says she, her husband Daniel and their 5-year-old daughter Angelina eat dinner out about three times a week.

“We primarily eat foods that we are unable to prepare at home,” Acuña says. “We go out to eat Chinese, Mexican or Vietnamese a lot.”

Rising Costs

Texas restaurants are experiencing challenges, however, primarily due to rising food and energy costs. Still, the industry continues to prosper as Texas restaurateurs adjust their business models in response.

Restaurant owners like Ybarra are seeing costs rise on everything from paper products to oil.

“The cost of tortilla chips we serve our guests has risen 28 percent in just the last year,” Ybarra says. “The oil we prepare them in has also risen as much as 50 percent over the last year. Paper goods are up as much as 25 percent, depending on the item.”

Dave Hermann co-owns The Range at Barton House in Salado with his wife, Katie. Hermann, who is also executive chef, says the Range’s cuisine rivals that of any large city.

“We are being hit with surcharges on many of our deliveries, which in turn is forcing us to modify our purchasing practices and reduce the number of deliveries we accept,” Hermann says.

“With the cost of goods increasing so rapidly, it reinforces the priority of cash flow management and forecasting. These factors can very easily cause a cash flow crunch.”

Both Ybarra and Hermann say they are cutting costs in other areas to prevent having to raise prices.

“What we are trying to do in order to offset this trend is simply manage, manage, manage like never before,” Ybarra says. “We are constantly evaluating all areas of our operation in order to eliminate unnecessary waste so that we can prevent having to raise menu prices. We’ve been very fortunate.”

Elise Acuña says rising gas prices and other expenses have changed the way her family dines out.

“We’re ordering in more,” she says. “We’re not in the car and not using our gas to get there.

“Also, before we go out to eat, we agree we’re not going to order drinks. That would be either alcoholic drinks or sodas. That’s one way we’re trying to save. A few years ago it was about $1 or $1.25 to get an iced tea. The other day we went out and it was $2.50. We’re reading the menus more and paying a lot more attention to them. We’re not getting the extras. No more appetizers, no more desserts.”

Chefs Chime in on What’s Hot

Mini portions are hot with America’s top chefs.

Bite-sized desserts and small plates of hors d’oeuvres top the list of hot food trends nationwide, according to a 2007 survey of more than 1,200 members of the American Culinary Federation conducted by the National Restaurant Association in the second annual “What’s Hot … What’s Not” survey.

For full survey results and other consumer and menu trends, visit the National Restaurant Association’s Web site at www.restaurant.org.

What’s Hot Percentage of chefs rating item as “hot”Percentage of chefs rating item as “passé”
Bite-size desserts83%11%
Locally grown produce81%5%
Organic produce75%16%
Small plates/tapas73%20%
Specialty sandwiches71%14%
Craft/artisan/microbrew beer70%17%
Sustainable seafood65%21%
Grass-fed items65%26%
Energy drink cocktails64%31%
Salts (sea, smoked, colored, kosher)64%20%
What’s Not Percentage of chefs rating item as “hot”Percentage of chefs rating item as “passé”
Soda/carbonated drinks12%46%
Vermouth12%55%
Grapes14%40%
Cakes/layered cakes14%45%
Deep-fried/pan fried17%44%
Cheesecake18%33%
Caesar salad entree19%30%
Rice19%26%
Kosher wine20%59%

Source: National Restaurant Association

Brown-Bagging It

Packed lunches are increasingly popular in the work place, according to market research firm the NPD Group. Weekday lunches carried from home reached a new high in 2007, increasing from 35 bagged lunches per capita in 2006 to 38 in 2007. That translates to 8.5 billion brown-bag lunches a year for U.S. adults.

Among consumers who typically visit restaurants for their weekday lunch, nearly half of survey respondents say they are visiting less often, a pattern that applies to quick-service and full-service restaurants. Brown-baggers cite financial concerns as the top reason for carrying their lunch from home more often, according to the NPD survey. They cited health and nutrition as key reasons they are cutting back on lunch at fast-food restaurants.

Brown-bagging may be gaining in popularity as the costs of fast-food rises. Acuña says she has noticed that the price gap is narrowing between casual and fast-food restaurants.

“When we go out to a full-service restaurant, it averages around $27 for two adult meals and a kid’s meal,” she says. “If we go to McDonald’s, it’s going to be about $14 or $15.”

Restaurant Night, at Home

In 2007, The Range restaurant owner Hermann and his wife launched a side business, Mealtime Mastered, catering to families who want to enjoy an economical, healthy, chef-designed meal at home.

Participants can sign up for a two-hour program, where under the direction of chefs they can prepare six complete meals for $150 or 12 meals for $275. Each meal provides four to six servings, and the average price is less than $3.50 a person. Mealtime Mastered chefs assemble the ingredients, chop and prepare all items and do the clean-up.

“We try to make it a simple, easy 1-2 process that families can follow to get an economical meal on the table,” Hermann says. “We’ve been offering this program for a year and a half. It’s been very successful.”

In September, Ybarra opened a quick-casual restaurant concept called Bullritos in La Porte. The restaurant serves fresh burritos (Bullritos), tacos and margaritas. Guests can customize their Bullrito by placing orders at a counter using order bags to check off their choices from a variety of seasoned meats, fresh vegetables, beans, rice and cheeses.

“It’s to address the customer who still wants a restaurant-quality type product in a casual setting,” Ybarra says. FN


For more information on Texas restaurant trends, visit the Texas Restaurant Association at www.restaurantville.com.

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