"That business, more or less, stinks."
September 22, 2016 8:24 AM   Subscribe

There are 24,000 restaurants in New York City. Gary Sernovitz invested in one, wrote about why he did, and came to the conclusion that investing in a Manhattan restaurant brings with it only "The Thrill of Losing Money".
Yet I’ve come to conclude that the restaurants New York needs are doomed, financially, to fail. That’s because amateur capital backed by magical thinking and a desire for fun distorts the economics for everyone. New restaurants, with too-easy access to financing from people like me, invest too much in design, tableware, food, and service, driving up every customer’s expectations of every restaurant in a cyclone of unprofitability. Landlords, with enough dreamers to fill their spaces, can command nightmare rents. If restaurants had to be good business ideas, and attract sophisticated investors who mercilessly demanded a profit, there would be fewer restaurants. They would be less cool. The food would be less good.
posted by Etrigan (86 comments total) 24 users marked this as a favorite
 
Oh, how I wish FFFM were around because he knows the restaurant business super well.

To me--someone who would never dream of owning a restaurant, who got a little far with a catering business years ago, that restaurants exist at all due to the insanity/business of the cost, is more than a little magical and completely stunning.
posted by Kitteh at 8:36 AM on September 22, 2016 [8 favorites]


I mean, duh? I don't mean that in a mean way, either, just that I have a lot of restaurant experience and this is pretty plain to all of us who do.

But it's good that this will get some traction. I think everyone needs to know exactly what goes into opening and keeping open a restaurant.
posted by cooker girl at 8:43 AM on September 22, 2016 [4 favorites]


In my previous job, I worked with hundreds of restaurants. This is a conversation I had this week.

"What would be your advice to a person opening their own restaurant?"
"Don't."
"Don't what?"
"Don't open a restaurant. That's my advice."
posted by DirtyOldTown at 8:44 AM on September 22, 2016 [24 favorites]


The article the story links to about amateur capital is eye opening
posted by lalochezia at 8:47 AM on September 22, 2016 [3 favorites]


Want to make money running a restaurant? Open a Subway franchise.

Want to ensure that creative, enthusiastic restaurateurs can thrive in the future? Imprison the landlords.
posted by Faint of Butt at 8:48 AM on September 22, 2016 [15 favorites]




oh so that's what this emoji 🤑 is for
posted by roger ackroyd at 8:54 AM on September 22, 2016 [1 favorite]


Restaurants are a horrible investment anywhere, of course, and people desperately want to own them. Even the local pizza shop I order from in my small suburban town keeps going out of business, gets bought by some really nice, really excited people, and then goes out of business again. It's like a delicious way of throwing away all your money.
posted by xingcat at 8:57 AM on September 22, 2016 [7 favorites]


Most people don't want to do the work of owning a restaurant, they just want to be a Restaurant Owner. Arguing with a purveyor to save six cents a pound on tomatoes? Retraining your prep cook to make sure he's not blowing your money by overshooting the portions for shrimp? Nah. They just want to skip forward to the part where they're at the bar drinking a nice adult beverage and people come in and hug them and are excited to see them, and they get to send those people something for free to show off.
posted by DirtyOldTown at 9:04 AM on September 22, 2016 [38 favorites]


(from the amateur capital article)
“Walk into a restaurant that seems like it’s not doing well, where on Friday and Saturday night they’re only 20, 25 percent full,” Holzman said. “You think, ‘These guys are definitely not doing that well. Maybe I can buy their lease from them.’
The problem with that, as xingcat touches on, is that you have to have enough knowledge (and luck) to understand which spaces actually have the potential to succeed and which ones are just doomed to failure no matter what the new proprietor does. I've known people that happened to get lucky with their first and maybe second restaurant who did the above and lost their shirts by taking over a money pit because they didn't understand how much of their earlier success was just luck.

My experiences with restaurants is in locations nowhere near as glamorous as NYC, but the big secret I learned to running a successful restaurant that I know is to have a money laundering deal with local crime, especially in states that require a 1:1 ratio of food to alcohol sales.
posted by Candleman at 9:07 AM on September 22, 2016 [8 favorites]


They just want to skip forward to the part where they're at the bar drinking a nice adult beverage

same
posted by beerperson at 9:08 AM on September 22, 2016 [16 favorites]


Open a Subway franchise.

Really? The ones I've been in around here are always empty, staffed by one person who doesn't speak English well. I worry that some unsuspecting immigrants have been taken in by slick people who get a bonus for every new franchisee. Maybe that's just in this area though.
posted by Melismata at 9:11 AM on September 22, 2016


You actually need to own like, several subway stores before you can really pass the cost to the managers and staff. Like everything else, it's just another pyramid scheme. (And yes, why are t they doing the traditional way to stay afloat by laundering money?)
posted by The Whelk at 9:13 AM on September 22, 2016 [1 favorite]


Candleman, like this one ?
posted by k5.user at 9:13 AM on September 22, 2016 [1 favorite]


Every time I go to a decent restaurant it blows my mind how expensive the food is, and yet how unlikely it is that the business is more than marginally profitable. I manage to simultaneously feel ripped-off and ashamed at not ordering high-margin items like alcohol or dessert.
posted by skewed at 9:13 AM on September 22, 2016 [4 favorites]




So owning a restaurant is like owning a sports team--you do it for other reasons than making money in many cases. They are both great ways to show off and be a big shot.
posted by Bee'sWing at 9:15 AM on September 22, 2016


but the big secret I learned to running a successful restaurant that I know is to have a money laundering deal with local crime, especially in states that require a 1:1 ratio of food to alcohol sales.

Yes, especially after reading Tony Bourdain's "Kitchen Confidnetial", I have just assumed that most "fancy" restaurants are just elaborate money laundering operations.
posted by briank at 9:15 AM on September 22, 2016 [5 favorites]


I've made my fortune printing Going Out Of Business signs for Orange Leaf and other pour your own frozen yogurt shops. Being a canny investor, I also invested in a business that makes Going Out Of Business signs for business that make Going Out Of Business signs for yogurt shops.

Ima gonna ride this bubble all the way down like Slim Pickens.
posted by robocop is bleeding at 9:15 AM on September 22, 2016 [28 favorites]


Oh god, the froyo shops. At this point, they're like cupcake shops. I see them open and I think, "Awwwwwww.... there goes someone's life savings."
posted by DirtyOldTown at 9:19 AM on September 22, 2016 [23 favorites]


Aren't most frodo shps fronts tho? They require so little overhead and operating costs and frequently look like a public bathroom that I assume someone is hiding money in them.
posted by The Whelk at 9:21 AM on September 22, 2016 [2 favorites]


Really? The ones I've been in around here are always empty, staffed by one person who doesn't speak English well. I worry that some unsuspecting immigrants have been taken in by slick people who get a bonus for every new franchisee. Maybe that's just in this area though.

I once knew a Subway franchise owner. Subway are incredibly strict about who gets a franchise. You need to do a LOT of personal training as a franchisee owner before you can open a store. That's if you can even get a franchise. Some cities may have new store openings reserved for existing franchisees only (don't want a newbie fucking things up) which means you need to buy into an existing franchise. Subway also 100% controls those so you might not even be able to buy from a willing seller.
posted by Talez at 9:21 AM on September 22, 2016 [1 favorite]


Here's an idea that can't miss: a froyo shop that also sells cupcakes. People like froyo, they like cupcakes. Put 'em together ... printing money.

(If you do this, let me know how it goes ...)
posted by theorique at 9:22 AM on September 22, 2016 [1 favorite]


A friend of mine is part-owner (I think it's a fifty-fifty split, but I don't know the details) and manager of a local pub and restaurant. They've been in business for six or seven years now. We're about an hour outside of NYC in a village that used to have a vibrant Main Street, but really took a hit in the 90s and early 2000s. He was one of the first "new" businesses to come in, and he did pretty well for a while.

Now Main Street is making a big comeback, at least in terms of restaurants and bars, which ought to be good, but what he's finding is that every time a new restaurant opens (and there have been three pretty big openings this year alone), he takes a pretty big hit. He's not sure yet whether things will rebound. I used to see him waiting tables occasionally, when the place was packed, but now I'm catching him doing it more and more.

The saving grace is that he owns the building, which is helping to keep him in business.
posted by uncleozzy at 9:24 AM on September 22, 2016 [2 favorites]


Isn't there a franchise that injects froyo into the center of the cupcake? Golden.
posted by sammyo at 9:27 AM on September 22, 2016 [1 favorite]


Maybe the most frustrating thing for me when I worked with restaurants was how many of the owners don't actually have much interest in food or recipes. They end up spending their energy and money on things like flat-screen tvs, the marble on the countertops, or what kind of uniforms staff will wear. They let a food distributor rep plan their menus, only to find out later that no matter how many tvs they have, no matter how nice the marble is, no matter how slick their staff shirts are, the world did not have a burning need for a new place to get potato skins and mozzarella sticks.
posted by DirtyOldTown at 9:28 AM on September 22, 2016 [18 favorites]


Two big mistakes lottery winners are known to make is opening either a bar or a restaurant, and then losing all their lottery money down those holes.
posted by King Sky Prawn at 9:35 AM on September 22, 2016 [3 favorites]


I get that the world is unfair etc. but when a long term business finds that the gain on value of its real estate exceeds the cumulative profits of years of being in business I feel like something is broken.
posted by Pembquist at 9:35 AM on September 22, 2016 [13 favorites]


I used to think there was some tipping point when the artificially engorged real estate market would come crashing down to earth.

I no longer think that.
posted by The Whelk at 9:39 AM on September 22, 2016 [11 favorites]


They end up spending their energy and money on things like flat-screen tvs, the marble on the countertops, or what kind of uniforms staff will wear.

When I was a kid I wanted to be a hotel manager because I thought they got to pick out the furnishings.
posted by AFABulous at 9:40 AM on September 22, 2016 [3 favorites]


Two big mistakes lottery winners are known to make is opening either a bar or a restaurant, and then losing all their lottery money down those holes.

When the Powerball was up near a billion dollars, I was talking about it with my mother and told her that one of the things I'd do if I won was buy a bar. She seemed surprised as my entire life has led her to believe that "not working" was forever my end goal. I let her know that it would not at all be intended in Running a Successful Bar, just Being a Bar Owner. This made more sense to her.
posted by MCMikeNamara at 9:41 AM on September 22, 2016 [19 favorites]


Isn't there a franchise that injects froyo into the center of the cupcake? Golden.

I'm thinking FroCakes -- frozen cupcakes! Because what people hate about cupcakes is that they aren't cold and hard.
posted by GenjiandProust at 9:43 AM on September 22, 2016 [5 favorites]


I'm thinking FroCakes -- frozen cupcakes! Because what people hate about cupcakes is that they aren't cold and hard.

You could take freshly baked cupcakes still warm, inject them with Froyo and get them out to the customer.
posted by Talez at 9:44 AM on September 22, 2016 [2 favorites]


Losing all of your money on a restaurant is so passé anyway.

These days, the hip thing is to lose all your dough owning a vape shop.
posted by DirtyOldTown at 9:45 AM on September 22, 2016 [10 favorites]


I let her know that it would not at all be intended in Running a Successful Bar, just Being a Bar Owner. This made more sense to her.

I already have the local place picked out to become the Won The Lottery Bar And Grill, motto: "We're open when I feel like it. Fuck you."
posted by Etrigan at 9:45 AM on September 22, 2016 [15 favorites]


These days, the hip thing is to lose all your dough owning a vape shop.

Or a bottle shop (a small store that both sells bottled beer and acts as a bar, for people not familiar with them).

At least the vape shop lends itself to being a front/money laundering location for selling pot.
posted by Candleman at 9:49 AM on September 22, 2016 [1 favorite]


I spent a little over 15 years in the restaurant business. I worked at my fair share of small restaurants, and after a while it was usually pretty easy to tell which ones were doomed from the start, usually due to a combination of easy access to someone else's money and a total misunderstanding of what the actual business of running a restaurant was like (hint: it's an actual business, and has to be run like one..). The joke they told us in culinary school was something like this - "Know how to make a small fortune in the restaurant industry? Start with a large fortune..."

On preview, what DirtyOldTown says is very true - a lot of people want to the Restaurant Owner sitting at the bar, not the Restaurant Manager sitting at a desk in the store room working out the food costs, making the schedule, and tracking prices week to week to see if the price of an entree needs to be adjusted because the price of eggs have gone up 30 cents in the last two months.

It's possible to be successful, and every restaurant I've worked in that did well was always run by someone who was obsessively numbers driven. They may have gotten into the business because they loved it, but the ones who quickly learned how to actually run the business often did pretty well. I worked for a few years for a woman who is probably the most astute business person I've ever known in any industry, and she's managed to take a small place in a then up-and-coming area of Atlanta and turn it into a local favorite. She's been able to keep the food quality high by watching prices and talking to vendors and getting the best ingredients for the best value, so that she can offer great food at reasonable prices. She can tell you at any given moment what her food costs are, what her payroll costs are, and how much she needs to make on a weekly, monthly, and yearly basis in order to stay in business. Every truly successful restaurant I ever worked in (truly successful meaning turning a profit and in business for a number of years) had someone like that as an owner. She pays her employees well, and treats them well, so that some of her staff have been there over a decade. She also was able to buy her own building a few years back, and I know that's been a huge plus for her. When I worked for her she was in a storefront in a small row of shops, and the building kept changing owners who would jack up the rents.

Generally, though, a lot of the places I worked at were probably doomed even before they opened the doors. I think the stats are that three out of five restaurants that open in any given year won't survive their first year in business, and in my observation that's because they're opened by people who don't understand how a business works - not specifically the restaurant business, but business in general. I think if I was going to invest in a restaurant, and lord knows I wouldn't, not even with your money, I'd want to know how business-savvy the owners were, not really how food-savvy they were. You can always hire a good cook, but someone who can understand the numbers is harder to find.
posted by ralan at 9:50 AM on September 22, 2016 [30 favorites]


I already have the local place picked out to become the Won The Lottery Bar And Grill, motto: "We're open when I feel like it. Fuck you."

As someone who worked as a waiter for a few years, I can tell you in all honesty that you only need the last two words.
posted by Mooski at 9:50 AM on September 22, 2016 [5 favorites]


I'm still (sort-of) convinced there is a niche market in rural Iowa for a small place selling only deep-fried vegetables (on sticks, or natural). When I get rich from lucrative librarianship, I may yet open such an establishment.

Deep-fried vegetables: the ultimate fusion of nature and the midwest. 20% discount for MeFites.
posted by Wordshore at 9:51 AM on September 22, 2016 [3 favorites]


If you suddenly come into a vast sum of money and just want to open a cool place for you and your friends to hang out (which is totally a legit thing to do, by the way), check your local laws about "private clubs." It's likely to be much easier and more cost-effective than opening a real public venue.
posted by Faint of Butt at 9:51 AM on September 22, 2016 [7 favorites]


It's possible to be successful, and every restaurant I've worked in that did well was always run by someone who was obsessively numbers driven.

This reminds me of the Kitchen Confidential anecdote about the purchaser who figured out that his fish purveyor was scamming him. The way the character was portrayed in the memoir, he was pretty scary, and obsessively quantitative. It seems like you need an ornery, obsessive, combative numbers-n-measurements guy like this in order to make sure you don't get clipped by your suppliers in the restaurant business.
posted by theorique at 9:53 AM on September 22, 2016 [2 favorites]


Maybe the most impressive restaurateur I ever met was a woman in her late 30s who'd come up in an Italian-American family full of natural chefs. She went to culinary school, refined her family recipes for the market, secured a lovely space, decorated it tastefully, and had come up with a delicious menu of terrific but reasonably priced entrees, paired with a thoughtful but economical wine list. The place was great. And it lost money hand over fist.

And so, she closed down for a week and went on a road trip. She visited all kinds of restaurants during the day, and at night, she studied Google map views of her restaurant's surrounding area.

When she came back, she tore out all of the lovely HGTV decor, ditched the tasty Italian regional menu, and turned her place into a sports bar and grill with Cubs, Bears, and Blackhawks paraphernalia and a shitload of flat screen tvs. She'd learned from her review of the area that the neighborhood was positively lousy with apartments within walking distance, but had no neighborhood bar. Despite the fact that she gave precisely zero fucks about sports, she also noted that the socioeconomic character of her neighborhood meant there were a ton of sports fans.

Deciding that she'd rather be the successful owner of the sports bar the neighborhood needed than the former owner of a lovely Italian place the neighborhood treated with indifference, she swallowed her pride and gave the people what they wanted. She gave up trying to make the perfect osso bucco and learned how to take advantage of fluctuations in food supplier pricing to have a steady stream of bar food specials. She stopped looking for the best under $15 a bottle Aglianico and started learning how to negotiate better rates for Bud Light kegs.

She's loaded now, you guys. For real. She had to stop being a chef and learn to be a business owner, though.
posted by DirtyOldTown at 10:05 AM on September 22, 2016 [66 favorites]


I agree with the above, but even more fascinating to me are the shitty restaurants that seem to defy logic and remain open and seemingly profitable for decades. What are the economics there?
posted by Keith Talent at 10:08 AM on September 22, 2016 [4 favorites]


Don't get me wrong: the first version of the place was a better restaurant, even though I do love some sports bars from time to time. But there is something to be said for not being precious and doing what you have to do to succeed.
posted by DirtyOldTown at 10:09 AM on September 22, 2016 [7 favorites]


I don't recall exactly how she calculated this, theorique, but she took the total costs of her utility bills over a multi-year period, and divided by the total number of guests she served in that time frame, and was able to work out a number to add to the cost of each menu item so that her utility bills were factored in to the prices. As I recall the number may been only a few cents per menu item, but that's an example of how she watched her numbers.

On the other hand, it's possible to be numbers driven but in a totally shady way. I worked at a place in Tulsa where the owners would make the servers separate out their credit card receipts (this was back in the day when you got your CC receipt as a carbon copy), and deduct the processing costs from their tips and pay that back to the restaurant. For example, if you had 10 Amex receipts, and Amex charged 25 cents each to process those transactions, you had to pay $2.50 back to the restaurant. The restaurant was very well known and very busy, so the servers didn't lose too much money and were willing to put up with it. This same place would also inventory their plates, stemware, and flatware every few months and then deduct the cost of replacements from everyone's paycheck. So that's an example of being numbers driven, but in the wrong way.
posted by ralan at 10:09 AM on September 22, 2016 [4 favorites]


I think most people who want to open a restaurant aren't interested in the business, but just a part of it. Some like just the idea of being a owner, others want the social aspect, cook, invest, or coming up with ideas. I mean, there are restaurants and coffeeshops here that have lasted (although sometimes with different long-lasting owners) for as long as I remember. But one opened and closed in the space of five weeks I've went downtown. One restaurant never opened, and the place was left half-furnished. I've worked in a place that lasted a bit over a year because the owners were complete tools who thought buying stuff like they were making their kitchen qualified as a bar.

I mean, I've daydreamed about opening a small noodle bar, but other than decoration ("80s japanese-influenced cyberpunk", obv) and cooking, I don't find the rest of the stuff appealing at all - bargaining with suppliers, dealing permits and health inspections, staff management, day-to-day operations, hosting costumers and so on.
posted by lmfsilva at 10:11 AM on September 22, 2016 [2 favorites]


Wordshore: I'm still (sort-of) convinced there is a niche market in rural Iowa for a small place selling only deep-fried vegetables (on sticks, or natural).

I was at the 100th-anniversary Eastern States Exposition last weekend and there was a stand selling exactly this. Do a little industrial espionage and you might get yourself a ready-made business plan!

(For anyone who hasn't been, it's in Springfield, Massachusetts and runs until October 2nd... relatives who have been going since the 1960s say it's disappointingly gotten less potluck and more commercial over the years, but it's still enough fun to keep them coming back annually.)
posted by XMLicious at 10:11 AM on September 22, 2016 [2 favorites]


Deep-fried vegetables: the ultimate fusion of nature and the midwest. 20% discount for MeFites.

The first rule of running a successful business: understand your customers. Deep fried taters, and deep fried beans (by the plate)
posted by Mayor West at 10:17 AM on September 22, 2016


Aren't most frodo shps fronts tho? They require so little overhead and operating costs and frequently look like a public bathroom that I assume someone is hiding money in them.

I was once a Bag End for the mob.
posted by hal9k at 10:20 AM on September 22, 2016 [13 favorites]


Isn't there some kind of statistic about how most restaurants do not stay open beyond the first year? 60% or higher I believe.

Pizza places seem to have a longer shelf life than restaurants. But every town or city seems to have that one place that is perpetually changing hands. It's right out of that horribly racist Seinfeld episode, “The Cafe”, where Jerry tells Babu to change his cuisine and then the restaurant fails horribly.
posted by Fizz at 10:28 AM on September 22, 2016


hal9k: I was once a Bag End for the mob.

(not sure if mildly funny joke or prompt for truly awesome story. waiting/hoping to find out.)
posted by DirtyOldTown at 10:33 AM on September 22, 2016 [1 favorite]


I agree with the above, but even more fascinating to me are the shitty restaurants that seem to defy logic and remain open and seemingly profitable for decades. What are the economics there?

Having a loaded spouse willing to finance your vanity business, and often, being loaded before you got into it as well. Like people who spent their 20s and 30s just banking it and have a ton of stock in $SucessfulCompany they got back when it was $1 a share for employees or whatever.

A lot of these places, anecdotally, were started by couples(or sometimes siblings, or close friends) who were both/all high income. One starts it with a big stack of their cash, the other invests heavily.

And especially in the spouse case... they just keep propping it up because it's the other persons(or all the friends) "dream".

There was a fucking twee vintage polaroid camera store in my neighborhood for YEARS. They seriously sold nothing else. The interior was incredibly nicely remodeled and decorated and looked expensive as all hell(and i have some construction/design experience directly and family wise).

Stuff like that screams vanity business to me.

For example, i know a high powered partner in a law firm and his lawyer buddies who started a vintage video game store chain. It pissed money for over a decade, and now they sold it to my friend for peanuts. How did it stay open? Scrooge McDuck money vault. Like, the guy bought a former rockstars mansion while owning it.
posted by emptythought at 10:33 AM on September 22, 2016 [8 favorites]


Profit margins in food, in general, are incredibly slim - usually around 2-5% (at the high end), if the business is well run. Alcohol is critical to providing a cushion (and reasonable profit).

That said, the principles that a few others stated earlier apply to just about every business I have interacted with over the years: the owner needs to run the business by the numbers.

As someone else mentioned: if you're not capable of tracking your input costs and negotiating fiercely on a regular basis, you're dead. If you don't have the knowledge or ability to outsource things like tax, P&L, regulatory, or a chart of accounts, you're dead.

As cynical as it sounds, those people who go into business thinking that their "passion" will make them successful are delusional. Focus and stamina and core business skills are far more critical to building a successful business than passion, any day of the week.

Passion isn't going to help you run the business. It might help you start the business, but it's going to be stamina, research, and a little bit of good luck that makes it sustainable.
posted by tgrundke at 10:40 AM on September 22, 2016 [7 favorites]


The restaurant survived seven years on a competitive stretch of NoHo, in Manhattan, and it looks as if I’ll lose only a third to half of my investment.

So, a successful restaurant.

How did it stay open? Scrooge McDuck money vault.

But other people think it must be a viable business and are encouraged.
posted by bongo_x at 10:41 AM on September 22, 2016 [3 favorites]


Ha! You think investing in a NYC restaurant is hard now? Just wait until next year. We've been living through peak restaurant (for better and worse), and there are strong signs that it's about to be over. As far as I can tell, the rise of mass restaurant culture -- not to mention the ridiculous, escalating standards for "service" (see: every Yelp review ever) -- are directly tied to wage stagnation that's been worsening since the 70s. Payroll is 30-45% of the average restaurant's sales, so even small changes to payroll have a huge effect on profitability.

After all, what makes it possible to have these value-added, hand-crafted, labor-intensive luxury experiences available cheaply to the masses? How can a restaurant afford to have someone at your elbow filling your glass before you even notice it's empty? How can they possibly make a profit on a plate that requires so much time and skilled labor to produce? The answer is cheap labor.

There are plenty of restaurants out there that depend on salaried managers working 60-70 hours/week for 40 hours of pay. That's over as of December 1, 2016, when the Obama administration's new overtime rules go into effect. And the vast majority of restaurants pay the vast majority of their workers something close to minimum wage (or even less, if they're being tipped). That is about to go away too -- as of January 1, 2017, the minimum wage in NYC is jumping to $11/hour (a 22% increase). By 2019, it'll be up to $15/hr. There's no question that these changes are good, fair, and much overdue. There's also no question that they're going to drive up prices -- most restaurants don't make enough profit to absorb these costs. The only way they've been able to make any profits at all in the past 30 years or so is because wages have been artificially low.

It seems to me that eating out at a nice restaurant used to be a rare luxury for middle-class people, and that cheap diners were much more the norm. I'm pretty sure that's the world we're about to be headed back to. So -- farewell, hipster brunch! Farewell, hypercritical Yelp reviews! Farewell, Guy Fieri's Times Square Donkey Punch Experience! Farewell to $12 avocado toast and welcome to the new world of $25 avocado toast, or no avocado toast at all! And hello again to home cooking, mass-production (read: "low labor cost"), and whatever else the world has in store for us next. Robo-baristas? Community kitchens? Who knows? I'll be interested to find out.
posted by ourobouros at 10:45 AM on September 22, 2016 [22 favorites]


The skill set required to run a successful business is very different, and complete unrelated to the skill set required to be good at a thing the business does. Chef, Carpenter, Whatever. You will fail unless you learn how to be good at business. Once you've got that part down, you can be successful in any industry.
posted by blue_beetle at 10:49 AM on September 22, 2016 [3 favorites]


Guy Fieri's Times Square Donkey Punch Experience

I'm meeting a friend who works at Rockefeller Center for a show at Radio City soon and we were discussing which terrible tourist trap we should have dinner at. I'm seriously considering this.
posted by uncleozzy at 10:50 AM on September 22, 2016 [2 favorites]


I'm seriously considering this.

Get it while it lasts. And definitely check out the liveblog from the Guy Fieri Metafilter field trip.
posted by ourobouros at 10:52 AM on September 22, 2016 [2 favorites]


...yeah I was thinking how I eat less and less at proper restaurants and more and more at quasi private 'dining clubs' set up in residential buildings which is an odd little backward turn for the concept of the restaurant in general.
posted by The Whelk at 10:57 AM on September 22, 2016


And definitely check out the liveblog from the Guy Fieri Metafilter field trip.

Yeah, the more I think about it, the less resolve I actually have to wander into any of these places. Even sufficiently pre-lubracated.
posted by uncleozzy at 10:59 AM on September 22, 2016


Wasn't there a FPP about a couple who bought a coffee shop because they loved coffee and almost divorced over it?
posted by AFABulous at 11:06 AM on September 22, 2016 [1 favorite]


It seems to me that eating out at a nice restaurant used to be a rare luxury for middle-class people, and that cheap diners were much more the norm. I'm pretty sure that's the world we're about to be headed back to.

Thank God. Not everyone has a sophisticated hipster foodie palate. Give me diner food all day, every day. I should have been born 70 years ago.
posted by Melismata at 11:08 AM on September 22, 2016 [3 favorites]


I get that the world is unfair etc. but when a long term business finds that the gain on value of its real estate exceeds the cumulative profits of years of being in business I feel like something is broken.

That's the thing, a huge part of the value of the real estate is the cumulative contribution to the region's livability. A terrible restaurant won't survive the years, one that survived the years is likely part of why people moved there in the first place (or more accurately, an absence of services keeps people away, preventing the rise in real estate value).

This value flows bidirectionally, but oh, it does flow.

What I think people are missing is that, for a lot of people, the ability to make food is their most creative, most practiced expression. We all have to eat, after all. And I think it's gotten easier to make better food at smaller restaurants -- Sysco backs a lot of places.

People are looking for more meaningful, more fulfilling work. Restaurants may fail but you know, shaving pennies on commodities (or dollars on regulatory capture) might be a better business. Is it a better life? You sure about that?
posted by effugas at 11:10 AM on September 22, 2016 [2 favorites]


Yeah what's the best part about America? Tho part where there's no margin for error whatever .
posted by The Whelk at 11:43 AM on September 22, 2016 [12 favorites]


I worked at a successful, small, chef-owned restaurant in Philadelphia, where in addition to front-of-house, I also did some office work - accounts payable/receivable, that kind of thing. Not including any labor costs whatsoever, the expenses (rent, utilities, the actual ingredients, pest control, etc) were easily about $30-$40k a month. The restaurant was open Tuesday through Saturday, and because it was critically-acclaimed, generally did at least two full seatings on Tuesday, Wednesday, Thursday, and three full seatings on Fridays and Saturdays.

This restaurant was also a BYOB (like many restaurants in PA, due to the idiotic liquor laws), so the ability to recoup costs on high alcohol margin was nonexistent. Generally, the revenue generated on Tuesday, Wednesday, and Thursday, if everything went as it should, was what made the restaurant break even. Fridays and Saturdays represented any actual net revenue.

The owner has been sufficiently successful so as to open a few other restaurants in Philadelphia. How did he do it?

1. make your establishments cash-only. Save on, uh, credit card processing fees.

2. as a corrollary to 1., don't pay your servers anything, at all. Keep one or two of them on the books to avoid the appearance of impropriety, but otherwise, they are on their own. They will make enough money in cash every night to put up with this arrangement. I was the hostess, so myself, the busser, and the food runner did actually get a flat rate from him ($60/day), plus we would get tipped out by the servers. Of course, there were no benefits whatsoever to speak of.

3. avoid any complications caused by points 1 and 2 by virtue of your close relations who work in law enforcement, and your close friendship with a well-known individual with well-known mob ties. The former will also come in handy given that you are an alcoholic who lives in a suburb 45 minutes away from the restaurant (the chef liked to recount how on one of his many drunk drives home, he was pulled over for running a stop sign. He explained to the officer that he did so because "ABBA came on the radio." That satisfied the officer, and he continued on his merry way).

We also always knew, days in advance, the date that we could expect the "random" city health inspection. This was actually true of every restaurant I worked in. For a couple days before the totally unexpected, random visit, we would be told to start doing the things we should have been doing the whole time, until the inspection came and went and we could go back to business as usual.
posted by Aubergine at 11:44 AM on September 22, 2016 [15 favorites]


I've owned several restaurants in different parts of the world. Currently own two with bars attached and one stand alone bar. The only thing that makes them work? Alcohol sales. Either as part of the meal, or in an attached bar. A couple of the restaurants were (or are) a requirement of the liquor license (i.e. this license let's you have a bar as long as there is a restaurant attached). They can work well - I'm happy if the restaurant portion of the business breaks even or makes a small loss, as long as it let's me keep the bar open, that's where I make the money. I'd never do a stand alone restaurant again, the profit margins are just too small and the market (anywhere) is too fickle.
I'm always persuading people not to open restaurants. Friends, relatives, customers. It's a fool's game, unless it's a vanity project where money doesn't matter. I don't know if my blandishments work, people have this dream of owning restaurants. Which is fine, but don't expect to make a living at it. Of if you do, realize that you're going to be working 18 hour days EVERY day, no joke. I've done it and it's no life.
For some reason (probably high pressure and low pay!), cooks seem to be more difficult employees even than bar staff. I've had them too drunk to work, steal booze, not show up, steal food, work out deals with suppliers where they were getting a cut, cook bad food on purpose, you name it. Bar staff, not so much.
With bars too, but especially with food, the margins are so slim that you have to be on the numbers ALL the time. That doesn't mean having a once-over at the end of the week, that means being deep in them every day. There's no other way to keep a handle on things.
posted by conifer at 11:47 AM on September 22, 2016 [12 favorites]


The only thing that makes them work? Alcohol sales. Either as part of the meal, or in an attached bar.

That's one of the things that make Chinese restaurants so fascinating, virtually zero liquor sales, at least to Cantonese here in Vancouver.
posted by Keith Talent at 11:59 AM on September 22, 2016 [4 favorites]


As was mentioned above, lots of restaurants in PA have no liquor sales because of the difficulty getting a license. It makes for a cheaper meal but you have to remember to hit the state store on your way to dinner.

Getting a license puts you hundreds of thousands of dollars in debt so you really need to make money to pay that off.
posted by octothorpe at 12:29 PM on September 22, 2016


The only thing that makes them work? Alcohol sales. Either as part of the meal, or in an attached bar.

I have found this to be increasingly true for a wide variety of businesses. I know some stand-up comedians who work the local cubs. These clubs make little off tickets. The comedians are there to get people to go to the bar and order alcohol.

One of my best friends is a talent booker for a music venue. Touring musicians, with their up-front guarantee, usually end up getting almost all of the money from the door. The musicians are there to get people to go to the bar and order alcohol.

Restaurants, as people have pointed out, are a whopping success if they are making five percent profit on the food. The restaurant is there to get people to go the bar or otherwise, order alcohol.

If you don't sell alcohol another option is being cash-only to skirt taxes, or be a front of some kind. But otherwise, want to make money in the restaurant biz? Sell a bunch of booze.

Also, as an aside, I worked as a cook off and on for a decade. Owners who are not on top of their shit are, without a doubt, getting robbed blind by the staff. Cooks like free liquor and bartenders like free food and they always develop a symbiosis.
posted by joechip at 12:43 PM on September 22, 2016 [4 favorites]


That's one of the things that make Chinese restaurants so fascinating, virtually zero liquor sales, at least to Cantonese here in Vancouver.


In Toronto, it's an open secret that the profitability of Chinese restaurants downtown is heavily reliant on labour that is either related to the owners, undocumented, or both. Occasionally, a few of them die in a boarding-house fire.


Of course, a number of Chinese restaurants in Toronto also used to (and may still) sell booze after-hours, so there's that, too.
posted by TheWhiteSkull at 1:10 PM on September 22, 2016 [5 favorites]


Listening to restaurant-owner fantasies reminds me a lot of bookstore-owning fantasies and being-a-writer fantasies. I once led a weekend workshop for aspiring writers during which I asked them to think about the future of their writing. I was looking for, and framed the prompts for, thoughts about their writerly aspirations. Did they want to write a book that would help parents of kids newly diagnosed with a certain disease better navigate the days right after the diagnosis? Did they want to write a literary novel about a family in Northern Michigan? Did they want to write a science fiction short-story about a race whose youngsters have no gender or sex-linked characteristics, but who have to irretrievably choose from three available genders at the age of 14? Etc.

Not one of them had anything to say about what they wanted to write. They all wrote things like this:
In the morning, I sit at a beautiful little writing desk in a window overlooking a winding stream. I have a hot cup of tea, a beautiful leather-bound journal, and a fountain pen with purple ink...
None of them came to the workshop to examine their work and where it might be headed. They came there to live that fantasy for a few days. It's a good fantasy, about relaxation, reflection, and being surrounded by beautiful things. But it's not about doing work.

It's like how everyone I've ever met who wanted to open a bookstore has a fantasy bookstore in mind: they'd sell only the very best books, perhaps in some kind of niche market, and eschew anything that smacked of crass commercialism. There'd be a cat, beautiful bookshelves, knowledgeable staff, a little corner dedicated to a shop selling tea and cakes. There would be no toy section, no movie tie-ins or bad novelization, no trashy books.

I just read three disappointing books in a row from one of my favorite queer romance publishers. It reminded me that, to keep their press going, they have to publish a certain number of books, and those books can't all be as good as the very best ones. Some are going to be simply good enough, in a way that pleases enough of their readers that they'll buy. This press publishes several of my favorite writers, who are writing very good books, and their weakest books are still competently written, well-edited, and proofread, which sets them apart in the industry. But they still have to consider "will this sell?" as well as "is this good?" and that means they will not publish some good books, and they will publish some merely OK books that their readers will enjoy, and pay for.
posted by not that girl at 1:17 PM on September 22, 2016 [18 favorites]


That's one of the things that make Chinese restaurants so fascinating, virtually zero liquor sales, at least to Cantonese here in Vancouver.

Now that so many Chinese places around here are mainly take-out, the ones that have dining rooms all seem to have a full bar, and for many of them that is the ONLY thing bringing in patrons.
posted by briank at 1:19 PM on September 22, 2016


not at all be intended in Running a Successful Bar, just Being a Bar Owner

Oh God, me too. I really just want to drink beer, listen to the Pogues, and host wakes with the body on the pool table.
posted by The Hamms Bear at 3:00 PM on September 22, 2016 [10 favorites]


I was at the 100th-anniversary Eastern States Exposition last weekend

THE BIG E!!!
posted by The Underpants Monster at 3:04 PM on September 22, 2016 [2 favorites]


I miss fffm.
posted by Dashy at 3:58 PM on September 22, 2016 [5 favorites]


Businesses for which the main customers are the investors!
posted by grobstein at 4:22 PM on September 22, 2016


I've already got my lottery winnings hole picked out. I'm gonna buy and re-open my favorite bar, which closed suddenly and without warning because it was losing money hand over fist.

Ironically, the exact combination of amazing fancy cocktails at low prices in a room where you could actually carry on a conversation with the people you went with because it was always mostly empty that made it my favorite bar maaaaaaay have had something to do with why it went out of business...
posted by Itaxpica at 5:01 PM on September 22, 2016 [2 favorites]


Aren't most froyo shops fronts tho? They require so little overhead and operating costs and frequently look like a public bathroom that I assume someone is hiding money in them.

I don't think they're fronts. I recall a Planet Money (which I can't seem to find) that basically pointed out that they're very cheap franchises, with low capital equipment demands, and negligible training required. That particular mix means they're sort of a crutch for landlords needing to fill a lease -- dial up a couple local froyos, find the owner, and ask if they're interested in your location. But because they're so easy to set up, they're also easy to relocate, and thus raising rents is difficult.

If that's your business model, I imagine there's not a lot of incentive to fix up a strip mall.
posted by pwnguin at 5:36 PM on September 22, 2016 [3 favorites]


Inject the espresso into the froyo
Inject the froyo into the cupcake
Inject the cupcake into me
posted by um at 10:42 PM on September 22, 2016 [2 favorites]


Here in Barcelona, when a frozen yogurt or bubble tea place opens, you know it's only weeks away from closing down.
posted by conifer at 10:55 PM on September 22, 2016 [1 favorite]


The first thing that came to mind...

I opened a charming neighborhood coffee shop. Then it destroyed my life.
The psychological gap between working in a cafe because it's fun and romantic and doing the exact same thing because you have to is enormous. Within weeks, Lily and I—previously ensconced in an enviably stress-free marriage—were at each other's throats.
posted by Monochrome at 1:27 AM on September 23, 2016 [3 favorites]


Listening to restaurant-owner fantasies reminds me a lot of bookstore-owning fantasies and being-a-writer fantasies.

The cool factor is a hell of a drug. If you're in a business that rich people don't mind losing money in, because it's "cool", that increases your competition to a great degree. Effectively, it is a subsidy to competitors from owners who are playing a game other than "run successful business that produces more than it spends". (The "being a writer" fantasy is the professional career parallel to the "run a cool business and give my friends free drinks" fantasy. )

Coffee shop: cool.
Nightclub: cool.
Restaurant: cool.
Bookstore: cool.

Nobody starts an HVAC and duct cleaning business because they want to be the cool guy hanging out at the counter of the duct cleaning business office ("Lenny! How ya doing? Hey Marsha, lemme introduce you to Lenny, one of my oldest friends. We gotta hook him up with a free heating system tune up. This guy is THE MAN!")
posted by theorique at 5:32 AM on September 23, 2016 [13 favorites]


when a long term business finds that the gain on value of its real estate exceeds the cumulative profits of years of being in business I feel like something is broken

real estate has been lumped in with capital in modern economics, but I think this was a mistake, as natural wealth is quite a different class of wealth, and the locational wealth component of real estate even more so.

The value of a plot of land is driven by all that is outside the lot lines -- landowners profit from what they do not own.

This thesis was first developed in boomtown San Francisco, in the mid-1800s. What goes around comes around.
posted by Heywood Mogroot III at 6:20 AM on September 23, 2016 [3 favorites]


I'm a home cook who's gotten pretty attached to cooking as a means of creativity and expression. I don't know if I could survive the churn and exploitation of the food sector. In a better world, more people could align their inclinations with means to a livelihood. It's weird because I've thought about working for a restaurant; but what would that teach me about the status quo that we haven't already heard from critiques of the industry?
posted by polymodus at 2:54 PM on September 23, 2016 [1 favorite]


My brother, who's always thought "I'd really like to get out of this IT thing and own a bar", is also a very successful businessman and anal retentive with the financials. He probably runs the number on owning a bar in the area once every couple of years and always comes up with "why would anyone do that". Tangentially, we're also friends with a number of restaurant owners, including a number of very successful "celebrity chefs", and without exception when we ask them what it takes to be successful, the first thing they call out is having a first rate, obsessive with the books, operations manager.
posted by kjs3 at 11:32 AM on September 26, 2016 [1 favorite]


What I was young I work for two different independently-owned restaurants in small towns. They were both successful for a lot of reasons that wouldn't work everywhere.
  • Cash only, two sets of books, as much staff under the table as possible.
  • Fooling the health and safety inspectors and greasing the wheels so they don't mind being fooled. One time the owner was told he needed to install an exhaust hood over the grill and oven area. He went to an auction, got the shell of one with no machinery inside, and nailed it to the ceiling. We passed that inspection.
  • Making no improvements to anything that didn't show to the customers. A hole developed in the kitchen floor, and a board was placed over it. It eventually got more or less cemented in place with layers of grease and dirt, but you still had to tread carefully.
  • Free meals and drinks to the influential people in Town, like the head of the zoning board.
  • Serving food that was old to the point of not being safe, and covering up the taste with extra spices.
  • Constantly pitting staff against each other so that they wouldn't band together against the owners.
  • Charging extra for drinks to the seasonal migrant workers, who mostly didn't speak English.
  • equipping the bathrooms with standard home toilets and sinks instead of industrial ones.
These were in poor towns where there weren't other jobs available, so most of the staff had to just make the best they could of it. And the waitresses and bartenders made good tips, so I don't know if I can blame them.
posted by The Underpants Monster at 6:58 PM on September 26, 2016 [2 favorites]


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