Who’s coming to dinner?

The last time restaurateur Rob Fischer opened a new restaurant, the Palo Alto Creamery at Stanford Shopping Center, the dot-com bust hit.

Then came Sept. 11.

“They closed every mall on 9/11. It was hard. We had to buckle down and watch every penny,” he said.

Now Fischer is about to open a new Mexican restaurant — Reposado — in place of the old Caffe Verona at 236 Hamilton Ave. in downtown Palo Alto.

The food-industry veteran is hardly one to shrink from a challenge.

Working at break-neck speed, Fischer presided over a crew of nearly a dozen laborers who were sawing, hammering and laying cement last Friday. He plans to open the two-story restaurant, complete with two Margarita bars, this weekend.

“By Tuesday this place will look very different,” he said a week ago, indicating the painting would be completed during the weekend and the tables and chairs would be delivered early in the week.

Fischer has been in the restaurant business for 43 years. He is confident he’ll succeed, despite opening smack-dab in the middle of an economic crisis, he said. The ominous predictions just mean he’ll keep a tighter rein on management.

“We’ll have to be very careful. … You don’t just curl up and hide. You have to react to what’s happening. It’s always changing,” he said.

According to downtown restaurant owners and managers, business has slipped dramatically in the past year, sparking concern over what the next few months will bring.

Timmie Cheng, a 28-year restaurant veteran and owner of Mandarin Gourmet at 420 Ramona St., said this time last year, bookings for holiday parties were down about one to two percent. But that drop increased to 10 to 12 percent starting in April or May when gas prices went up.

If things don’t pick up after the holidays, Cheng will have to start rethinking her business strategy. After Christmas, she might have to lower her prices, she said.

“Everybody’s in the same boat. I have asked around. Everybody’s waiting to see what will happen after the New Year,” she said.

Elisa Hernandez, manager at Andale Mexican Restaurant at 209 University Ave., said she hasn’t seen anything like this downturn in her 12 years with the restaurant.

“It’s very slow. It’s busy at lunch, but dinner is dead. (Sometimes) there is nothing,” she said.

Cameron Boos, manager at Nola Restaurant and Bar at 535 Ramona St., agreed.

“There’s a definite 10-percent decrease from last year, across the board. A lot of companies cancelled their holiday parties,” she said.

It’s not just the restaurateurs who are noticing. Palo Alto developer and landlord Jim Baer was able to book a private room at a restaurant with only two weeks’ notice — something unheard of at this time of year, where it is usually necessary to book six weeks in advance, he said.

The economic troubles are being felt by restaurants throughout the state, and by all types of establishments, according to Dan Conway, spokesman for the California Restaurant Association.

Restaurants that rely on tourist dollars, such as in San Francisco, began suffering during the summer. Other types of eateries are feeling the impact now.

And the recession is hitting every sector of the industry, from fast food to casual dining to high-end, white-tablecloth establishments. That’s because eating out is one of the first places where people cut back, he said. In addition, restaurants are facing higher costs of doing business, due to rising commodities prices, higher cost of fuel and shipping, he added.

“In the last two months this recession has truly set in. … (Earlier in spring) the higher-end and fast-food restaurants were doing better longer. Their incomes and spending tended to be less tied to the business cycle. But I do think in both segments there is starting to be as decline,” he said.

Real problems have hit the Central Valley, where unemployment has reached 15 to 20 percent in some sectors, he said.

“Palo Alto is an economically unique and distinct region” — thus far, he said.

But that relative immunity could change. A report by Forrester Research, an independent technology and market-research company, indicates that Silicon Valley will see a reduction in spending and layoffs next year, Conway noted.

“Go talk to them after the first quarter,” he said, referring to Palo Alto restaurants.

Despite the dire predictions, some restaurateurs say they are doing well and they expect to continue to thrive, regardless of what lies ahead.

At the Old Pro on Ramona Street, business has been brisk.

“Basically, when people are depressed, they drink, and when they are happy, they drink,” Mehran Hafezi, general manager, said.

He pointed to the 19 big-screen televisions around the bar-restaurant’s walls.

“Sports are something that people turn to. It’s an excuse for everybody to keep going. We have a big and strong fan base,” he said.

In most restaurants, the ratio of food to alcohol sales is 60-40, but at the Old Pro, the numbers are reversed, according to Hafezi.

Fischer’s two Palo Alto Creamery restaurants are still doing well, offering comfort food and good value, he said.

Baer said his renters who are restaurateurs are doing well, and he thinks downtown’s icons will continue to remain strong.

“Some, such as Il Fornaio and Evvia have such a fine business and are so well-managed they will sustain in the slowing economy,” he said.

Panos Gogonas, Evvia’s general manager, said the restaurant is having one of its best years.

“Thank God. You hear so many things. … I still believe they will come. People won’t stop eating,” he said.

But Gogonas acknowledged that changing times means adaptation — and carefully watching the bottom line. Deliveries of goods now come with service charges, something that didn’t exist until about a year ago. Business owners and managers now examine invoices for hidden charges, Gogonas said.

“We try to limit deliveries to two times a week rather than every day or we go out and get the produce ourselves. … There have been a lot of changes in the last few months,” Gogonas said.

“We used to serve four lamb chops, now we serve three, and we’ve dropped the price,” he said.

Restaurants are more likely to offer incentives these days, and more and more sandwich boards are popping up outside of downtown restaurants, offering everything from two-for-one executive power lunches to a “Celebratory Hour as Prelude to the Holiday Season. A three-course prix fixe early dinner at lower prices.”

One window sign advertised: “Refer someone who uses our catering ($200 minimum) and get a free meal and a cocktail.”

Paul Zumot, owner of Da Coffee Spot at 235 University Ave., has brought in a marketing manager to help drum up business. He wants to capitalize on having University Avenue frontage. Free samples of holiday drinks have been handed out to passers-by, and a new breakfast menu is getting a good reception. One Monday each month may become a free coffee day, and his marketer is looking at e-mail blasts and other Internet tools to generate presence. Sales have risen 10 percent since adding the new incentives, he said.

Zumot also owns Da Hookah Spot, a cafe that opens up on the side of the building and serves up 30 to 40 flavors of low-nicotine, fruit-flavored tobaccos mixed with molasses smoked through water pipes. It’s a popular spot with the college crowd.

Zumot makes most of his money through his four Bay Area hookah shops, which serve Turkish coffee and Moroccan teas. Despite the popular belief that people drink and smoke more during hard times, business has dropped 30 to 40 percent overall, he said. But the Palo Alto is doing better than the other stores. Zumot surmised that’s because Stanford students have more discretionary income than their less-well-heeled counterparts at San Jose State.

Not all downtown restaurants will be able to ride out the recession. Some have already failed.

The Mint Leaf Asian Noodle House, a Thai and Vietnamese restaurant on University Avenue, closed in early November after relocating from Middlefield Road. It had moved into the former site of Palermo and the short-lived Chicken Ranch, adjacent to Borders Books & Music.

A few blocks away, on Bryant Street, an eviction notice was taped to the door of Zucca Restaurant in early December, after the restaurant’s two-year stint.

Piles of stainless-steel shelving were stacked outside in the alleyway. All that remained on the terracotta-colored walls was the outline of lettering that had spelled out the restaurant’s name.

The space is empty, cavernous.

Jim Nunan, the building’s landlord, is familiar with the comings and goings of restaurants. His mother, Annie Nunan, owned Nouveau Trattoria and Chez Annie, both located at the Zucca site. Before those places, the building housed Trattoria Romana.

“In the restaurant business, if you can’t make a go of it in three to six months, you won’t succeed,” Jim Nunan said.

Zucca has another location in Mountain View, but owner Praveen Singh did not return phone calls for an interview.

Other restaurateurs have moved away from downtown.

Fred Maddalena had owned Maddalena’s Restaurant and Café Fino on Emerson Street, two longtime downtown fixtures. After closing Maddalena’s, he had planned to revamp Café Fino, but two situations arose: first, the place needed seismic retrofitting; second, the landlord decided not to renew the lease, he said.

Maddalena couldn’t stay out of the business, though. He would have preferred to stay downtown, but has since opened Maddalena’s Cabaret Club in the Crowne Plaza Cabana Hotel and Resort at 4290 El Camino Real. The clientele are loyalists and are more mature than in most bars — 40 and older, he said.

For Maddalena, the move brings him full circle. He started working there when Doris Day still owned the place in the 1950s. When he was invited to open the cabaret, he couldn’t resist, he said.

Maddalena started in the restaurant business at age 16 when he had to take care of his parents in Toronto, Canada, he said. Now pushing 80, he has seen many downturns, and he doesn’t worry, he said.

“It’s the same, the same,” he said, comparing the present situation to the past.

“You have to work very hard to keep it going — to keep people pleased. But I say ‘Yesterday’s history, tomorrow’s a mystery. Today’s the present. Enjoy today.'”

For every departure comes a new opportunity — a cycle that is familiar to downtown restaurant watchers, recession or no. Last week, Melt Ultra Lounge opened in the space formerly occupied by Maddalena’s. Billed as a bar and restaurant, Melt offers “self indulgence, delectable food, electrifying music and heavenly cocktails.”

Next door, Café Fino remains shuttered, its windows covered in brown paper, awaiting the next restaurateur ready to try his luck.

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• What it takes to open a restaurant