To Make It Big In NYC, Restaurants Need To Be Smart, Weird

Restaurants have always been a penny-profit business, but with higher regulations, rising rents and labor costs and the fiercest competition the market's ever seen, restaurants have to make sure they're using every penny, second and square foot to the highest efficiency.

But even then, the panelists of Bisnow’s third annual Restaurant Development Forum this week made it clear that restaurateurs need to deliver their A-game before the doors even open, and make sure it's an A-game that no one’s seen before.

No one captured the balance of quality and innovation more than Dream Hotel Group CEO Jay Stein (left). Hotels have been notorious for boring, bland food for decades, Jay said, until Ian Schrager changed the game with Studio 54 and other hotspots.

“He told people it was OK to be stylized and for a niche,” Jay said, and joked that while it took most hotels more than 30 years to catch up with Ian, Dream Hotels was an early adopter, opening one of the first lifestyle hotels in 1999.

TAO Group COO Bill Bonbrest (center) described when he set up shop in Las Vegas’ Venetian casino, a baffling move at the time. Bill says the club was designed to be a destination spot, rather than a second-thought, bringing in guests from all over the Strip with its separation of open club space and intimate dining rooms. This combo is also found at TAO's Vandal club, where patrons can leave the open dance space and "get away like vandals" to private booths.

Jay said tapping into the "cool factor" requires a combination of smart business practices and a recognition of your real estate. The Electric Room in Dream Downtown, for example, is not only a small, intimate space, but had a "tough door" for its opening months, only allowing in high-caliber patrons, not high spenders. And both use paid promoters to add fun energy to the room, make the restaurants feel more full and even give patrons the sense that they need to spend more to match that energy.

''It's no different than Disney World," Jay said.

“You need to be idiosyncratic and create experiences you can’t find elsewhere, and even take advantage of the local economics,” moderator and Windels Marx Lane & Mittendorf partner Bruce Bronster (right) said, using Brooklyn's Lilia's Pizzaria, a former auto-body shop, as an example.

One way to be unique, Piora owner Simon Kim (center) and 5 Napkin Burger CEO Robert Guarino (right) said, is to use a celebrity chef, but this comes with its own headaches. The chef must keep to his or her contract and cook, Simon said, rather than spend so much time building a brand. For Piora, it was essential that the chef was there to drive and tailor the brand.

Or, the two restaurateurs mused, you can create a next-generation environment balancing cost and feel, as 5 Napkin has.

You can also position yourself as a "farm-to-table" establishment, but Simon found that the term was meaningless without any way to prove where food came.

"Blue Hill, who really started this trend," he said, "had an actual farm feet away from where people would sit."

Red tape operational questions were frequent throughout the morning. NYC Hospitality Alliance executive director Andrew Rigie (right) was ardent on his insistence that the government should be doing everything it can to reduce the logistical burden and streamline the licensing process. 

This is harder than one would think. While Mayor Bloomberg focused on efficiency and supporting businesses, Andrew believes Mayor Bill de Blasio's platform is more focused on social justice.

iDEKO principal Cristin Burtis (left) pointed out the government was so behind the times when she started iDEKO that some forms required completion via typewriter and had to be submitted to departments that didn’t exist anymore. Even with better technology, trying to bring about any change in the way government does business is a grueling, convoluted process. 

“A majority of the administration don’t know what it takes to open a business or what businesses are dealing with,” Cristin said. 

Manhattan Chamber of Commerce president Jessica Walker (center) couldn’t deny this, pointing out that only two people on the council have experience running businesses, and not successful ones at that. Still, she was insistent that little changes will help keep things improving, such as her work against the commercial rent tax, improvements to the cure periods where restaurants can fix issues before being fined and the ongoing debate over service surcharge option. Interestingly, she and Andrew agreed that the option was only common sense.

Even with a perfectly streamlined government, Hospitality House head of strategy and development Shane Davis (second from left) was quick to note that only 5% of restaurants open on time due to real estate ignorance. Both he and Shawmut Design and Construction director Matt Tripp (far right) said many restaurateurs don’t know what they need, often taking more space than they can afford and slowing down leasing and construction.

The most common issue, he said, is that restaurateurs don't understand the length of delivery times for finishings and more "exotic" equipment like HVAC or tiling, so they frequently stall construction with their lack of planned phases.

Crown Architecture & Consulting principal Anthony Milano (second from right) advised restaurateurs to find diligent attorneys with strong reading comprehension to prevent any delays or future costs, while Gotham Organization COO Chris Jaskiewicz (center) added that restaurateurs should know their landlords' rent flexibility and profitability expectations. They may need to be reminded, he said, that restaurants aren’t the most profitable business.

Another party that needs reminding? Investors. Robert and Simon consulted close friends and family when starting their ventures, but Cole Schotz member and moderator David Rubenstein (left) pointed to the common conception that working with friends is poisonous.

“You need to avoid people who need day-to-day funds,” Robert retorted. “They need to understand that restaurants are risky.”

Otherwise, Simon advises expanding your investor pool by looking for strategic partners valuable for their expertise as well as their cash flow.

With the right mindset and strategy, Jay joked “you’d have to be an idiot to not make a profit off food and beverage,” but it’s clearly much harder than he lets on.