Diversifying Dining Options Downtown: What Are the Challenges?

Above: A couple enjoys slices of pizza at the recently-opened Lotsa Pizza downtown.

While City Planning staff continue to work with the Downtown Development Authority to try to figure out ways to attract more diverse and more fine dining options downtown, East Lansing’s City Council is set to discuss “the 50/50 rule” and its effect on downtown dining options at its meeting tonight. To help our readers understand the 50/50 rule and the challenges of improving downtown's dining scene, ELi recently spoke with local restauranteurs and foodies. We now bring you this report.

First, what is the 50/50 rule, and who must comply? In 1984, East Lansing’s City Council adopted a policy that requires that most establishments serving alcohol to show that not more than 50% of their sales are from alcohol. The rest has to come from food and non-alcoholic beverages. The policy is known as the 50/50 rule.

According to Planning Director Tim Dempsey, restaurants submit reporting forms with supporting records to the Planning Department and the program is managed with the assistance of the East Lansing Police Department.

Certain bars were grandfathered under the 50/50 rule, so they have not had to comply. These include Rick’s, The Riv, P.T. O’Malley’s, Harrison Road House, and the Peanut Barrel. The Downtown Development Authority (DDA) recently indicated they want to ensure that if one of these businesses moves from its original location to a new redevelopment, it can continue to be exempt from the rule. Council is expected to take up this grandfathering issue tonight.

In the course of discussion on the matter, the DDA went further, saying that they would like to see the 50/50 rule done away with altogether: “the Committee believes that the 50/50 reporting [rule] is an unnecessary restriction that is a detriment to investment and business attraction in the downtown.”

Has the 50/50 rule worked? The 50/50 rule was designed to prevent East Lansing from having lots of bars and not enough restaurants. The idea behind it was that bars would essentially be forced to be real restaurants, offering food options for people looking to dine, the idea being that this would push the market in the direction of restaurants.

Various people in the know over the years have told ELi (though not on the record) that bars find ways to circumvent the intent of the 50/50 rule. Some are said, for example, to offer “combo” deals of cheap beer with overpriced hamburgers. Others are said to engage in cash alcohol sales that are difficult to trace. Regardless of whether this is true, it would not appear that the 50/50 rule has worked to bring diverse and fine dining options downtown.

Several people have observed that the rule “favors” cheap alcohol, because serving expensive alcohol makes it hard for a business to meet the 50/50 rule. As a consequence, businesses like Red Cedar Spirits, which serves locally distilled liquors, may struggle to meet 50/50. Ellison Brewery and Spirits is located just outside the City limits, and might instead be located in downtown East Lansing if not for 50/50.

Additionally, some of the people interviewed for this article suggest that the 50/50 rule may actually be responsible for setting up what amounts to a bar-food culture. Because it has forced student-attracting bars to serve food, the food culture that has emerged centers around low-quality bar food.

This matters because finer dining options require a critical mass of establishments to survive. People seeking fine dining will not generally go to a higher-end establishment if it is embedded in a sea of low-cost bars. Several people interviewed suggested it can be a challenge for a place like Black Cat Bistro, which provides a relatively upscale dining experience, to exist where it does. Restaurant “districts” help, but right now downtown is seen more as a student-bar district.

So, some people posit that, rather than helping, the 50/50 rule may actually be hurting by creating a bad "dining environment." Others dislike the 50/50 rule because they say it is an attempt to micro-manage the market and interfere with businesses. Meanwhile, some believe the 50/50 rule has helped and is a reasonable intervention.

What are the other challenges to bringing more diverse and finer dining options to downtown East Lansing? Again, high among the concerns is the lack of critical mass, and that problem is exacerbated by the influx of big chains. Several people interviewed noted that this creates a sense that East Lansing’s downtown is where you go if you want a bar-and-food-court kind of experience. Turning that around is likely to be a challenge, especially in a culture where many diners only want to eat out where there are many television sets tuned into sports channels.

Another challenge named is the seasonality that disproportionately impacts East Lansing’s downtown because it is tied to MSU’s campus. Having “dead periods” all summer and during the holidays is a challenge to businesses in the whole area in and around East Lansing, but it is especially hard on smaller restaurants that depend on summer and the holidays as ordinarily being relatively peak times in Michigan for eating out. One reason the big chains can survive here? Because they can make it through the “dead periods.”

Downtown parking options have been named over and over again as an impediment to progress where dining is concerned in downtown. One restauranteur put it plainly: “nobody here wants to pay to park to go to lunch or dinner, and they don’t want to walk very far, either.” Parking garages are perceived as the worst option to offer diners because of the psychological barriers that exist to using a parking garage for lunch or dinner out. East Lansing’s downtown parking is therefore seen as a barrier to dining progress.

Given the challenges of parking downtown, many who work, live, and go to school on MSU’s campus opt to “eat on” for lunch, sapping a potential downtown dining audience. When people don’t visit a place for lunch, they’re less likely to visit it for dinner.

In our inquiries, MSU’s “food fortress” was specifically named as a problem to diversifying dining options. It isn’t just about the parking issue; MSU has tended to use only three businesses for catering (Morton’s in Lansing, Troppo’s in Lansing, and Cosi in East Lansing, with the last now closed) and to not allow food trucks from outside businesses onto campus. This means the MSU dining audience is not exposed to very many “outside-MSU” eating options, except occasionally as when Woody’s Oasis food is served at some Sparty Cafes.

Finally, restauranteurs named the high cost of being in East Lansing as an impediment to getting more and better dining options downtown. East Lansing’s property taxes are relatively high and that gets passed down through the cost of leasing space. East Lansing also has a “personal property tax” that can impact businesses’ bottom line.

Tackling the challenges: City Planning staff, City Council, and the DDA are expected to be working on this knotty problem in the next few months as they consider possible changes to the 50/50 rule, potential large-scale redevelopment, and how to manage the City’s revenue (including through taxes) and downtown. Whether the trend can be turned around remains to be seen, but it is worth noting that this problem has been the subject of marketing studies for decades, and is likely to continue to present a challenge.