Even in today's economy, growth is on the table for multiconcept operators, and new restaurants aren't the only avenue for expansion.
This article first appeared in the 1 December 2008 issue of Restaurants & Institutions (R&I).
R&I is the USA's leading source of food and business-trend information and exclusive research on operators and restaurant patrons. Editorial coverage spans the entire foodservice industry, including chains, independent restaurants, hotels and institutions. Visit the R&I website to find out more about the magazine or to search its recipe database.
By Allison Perlik, Senior Editor
Anticipating the bounce back, Lettuce Entertain You and other MCOs-companies that own a variety of mainly nonchain restaurant brands-want to be ready. A considerable number have opened one or more restaurants in the past six months, and more new concepts are set to launch in 2009.
Even more interesting are the growth opportunities MCOs are finding beyond restaurants' four walls. Some have opened retail wine shops, among them New York City-based Charlie Palmer Group's Next Vintage and Myriad Restaurant Group's Crush Wine & Spirits. Nightclubs and lounges round out several other companies' portfolios, including those of Las Vegas-based The Light Group and Los Angeles-based Innovative Dining Group.
Still others, such as Philadelphia's Starr Restaurant Organization and Los Angeles-based Patina Restaurant Group, have branched out with off-site catering operations. And this summer, New York City's Union Square Hospitality Group (USHG) expanded its catering division, Hudson Yards, to include Hudson Yards Sports & Entertainment, which will bring its brands to stadiums and arenas across the country.
It might seem that these operators are merely hedging their bets, protecting themselves from the notoriously fickle, low-margin restaurant game by diversifying their businesses. But David Swinghamer, president of growth business for USHG, offers another explanation. "[The demand] is coming from our guests," he says. "They're saying, ‘It would be great if I had your quality of food and service when I go to this sports stadium or this airport or this kind of venue.' It's the public really saying, ‘We want more, we want better and we're willing, within reason, to pay for it.'"
Wine and Dine
Customer feedback was Charlie Palmer's motivation to launch Next Vintage, the retail wine concept located alongside Palmer's restaurants in Costa Mesa, Calif., and Dallas.
"So many times customers will drink a bottle or glass of wine, and the next thing out of their mouth is, ‘Where can I buy this?'" he says. "A lot of times you can't really even tell them where to find it, because retailers don't have a lot of the wines we get."
Capitalizing on his relationships with vintners-his operations spend more than $4 million a year on wine-Palmer persuaded the wine purveyors to let him sell their labels in his own retail outlets. The synergy between the restaurant and retail sides of the business has multiple benefits. Sommeliers can act as salespeople in the dining room, answering questions and offering suggestions, and can supplement the staff in the wine shops as well.
Creating even more buzz around the new business, restaurant guests are able to peruse the wine selection using Palmer's proprietary eWinebook tablet computers (touch-screen wall units are located in the shops), which let them search by grape, price and other criteria. Diners' wine orders are packaged and delivered to their tables; if guests want to drink one of the wines with dinner, they pay the retail price plus a $25 corkage fee.
Night and Day
Las Vegas-based The Light Group's growth strategy is built around opening a variety of venues to draw its target demographic-25- to- 45-year-olds with discretionary cash to spend and a penchant for late nights. "We opened up Light [Nightclub at Bellagio Hotel & Casino] and saw a need for something to happen between 10 p.m. and midnight before our customers came in, so we opened Caramel [Bar & Lounge at Bellagio]. Then we had them for the cocktail before the club and at the club, but had nowhere for them to eat, so we opened FIX [Restaurant & Bar, also at Bellagio]," says Light Group CEO and partner Andy Masi.
The multitiered approach proved so successful that The Light Group since has launched four more restaurants, another nightclub and another lounge at three Las Vegas resort-casinos: The Mirage, Treasure Island and Monte Carlo. To capture daytime customers, the company also opened Bare Pool Lounge last year at The Mirage, serving poolside food and drinks to DJ-spun music from 11 a.m. to 7 p.m.
Spanning both the nightlife and restaurant arenas serves the company as well as customers. Cash flow from clubs and bars, which tend to be more profitable than restaurants because of low food costs and high markups on alcohol, helps keep The Light Group's profit margins healthy, says Masi.
Taking the Field
Foodservice at sports arenas and stadiums has long been the domain of contractor giants such as Philadelphia's Aramark Corp. and Buffalo, N.Y.-based Delaware North Cos. But with local brands and regional foods making inroads into these venues, the time is ripe for MCOs such as Union Square Hospitality Group to change the game.
Next spring, USHG will open four brands in Citi Field, the new home of the New York Mets, through its new Hudson Yards Sports & Entertainment division. The lineup includes current USHG concepts Shake Shack and Blue Smoke as well as newcomers El Verano Taqueria and Box Frites (serving Belgian-style fries with a variety of dipping sauces). The company also will provide food-and-beverage services for premium seating behind home plate.
"What you eat and drink has become a major part of the ballpark experience," Swinghamer says. "Team owners are starting to understand that."
Cater to You
Off-premise catering is an attractive opportunity for foodservice operators of all kinds, and competition is growing. Yet Starr Restaurant Organization believes it brings something different to the table with its recently launched Starr Catering division.
The company's extensive catering menus capitalize on top-selling staples from its 18 restaurants in Philadelphia, New York City and Atlantic City. Customers can choose from Barclay Prime's Kobe Beef Sliders, Alma de Cuba's Marlin Malanga Tacos and Buddakan's edamame ravioli, or from buffet stations with sushi from Pod and Morimoto and mezze such as Tangerine's baba ghanoush and hummus.
"Catering clients are looking to get away from mass feeding and want to bring in the restaurant experience from a food and service standpoint. So we see a tremendous opportunity," says Simon Powles, president of Starr Catering.
Besides the mix-and-match appeal of its menu, the company's cachet as a top-tier local restaurateur is a selling point for event venues, Powles says. Starr has already won its first contract as an exclusive catering provider for The Hub, a meeting-and-event center with three Philadelphia locations, and is in talks with other venues around the city to get on their preferred-caterer lists as well.
Supply and Demand
The drive behind nontraditional expansion initiatives at San Francisco's Bacchus Management Group, stems from the company's longheld belief that the best way to control food quality going out of the kitchen is to exert as much control as possible over the items coming in. That's why Bacchus Group has operated its own farm providing produce for its six restaurants since 2001 and why this past summer it opened a roasting facility for coffee.
Next up for founder and co-owner Tim Stannard and his partners is Mayfield Bakery & Café, set to open in early 2009. The concept will play a dual role as a retail bake shop and wholesaler, supplying fresh-baked bread daily for all Bacchus Group restaurants.
Revenue isn't the motivator for the ancillary businesses-Stannard says the farm and roastery typically only break even-but future financial gain isn't out of the question. Bacchus' roastery now provides coffee to two outside clients and is considering adding more; the same potential exists for the bakery and farm.
"It's one thing to do it for yourself; it's another to wholesale out," Stannard says. "So we're dipping our toes in the water. There's certainly a window of opportunity."
Las Vegas' Ultimate MCO
Even the glitzy Las Vegas Strip has never seen anything like CityCenter, MGM Mirage's soaring city-within-a-city slated to open late in 2009 on 67 acres between the Bellagio and Monte Carlo resorts. The 18-million-square-foot hotel, retail, dining and entertainment complex will boast four hotels with more than 6,000 guest rooms and a large casino-plus the greatest number of multiconcept operators ever to join forces in a single development.
Most of the nearly one dozen marquee MCOs taking part in the project-among them Michael Mina, Sirio Maccioni, Jean-Georges Vongerichten, Todd English and Wolfgang Puck-will set up shop at ARIA, a 4,000-room resort and casino. "We asked our partner chefs to create something new for us," says Bart Mahoney, vice president of food and beverage for ARIA. "We wanted them to focus on the details that make them great, but also to do something different in style and cuisine [from their current restaurants]."
Mina, for example, will open a seafood restaurant inspired by American lakes, rivers and oceans. Vongerichten is creating a hip, high-energy steakhouse with a chic lounge and bar, while Maccioni will helm an Italian restaurant inspired by his Tuscan roots. The chefs won't reside at the property full-time, but Mahoney expects most to hand-pick their executive chefs and general managers and says they will be directly involved in making seasonal menu changes, refining wine and beverage offerings and overseeing service standards.
Multiconcept operators-many of whom signed off on deals well before the economy took a dive and others who are taking advantage of real-estate opportunities brought about by the downturn-are launching new concepts all over the country. Here's a sampling of the latest entrants.
Who: Mina Group, San Francisco and SBE, Los Angeles
What: Two of the trendiest names in West-Coast dining have teamed up in West Hollywood to open XIV, a contemporary American restaurant helmed by Chef Michael Mina. Diners build tasting menus by selecting individual portions of dishes such as Black Truffle Risotto, Sake & Maple-Cured Kanpachi and Saffron-Braised Veal Cheeks.
Who: Here to Serve, Atlanta
What: Aja, Tom Catherall's ninth see-and-be-seen spot, debuts in the tony Buckhead neighborhood. Executive Chef William Sigley oversees a modern-Asian menu of dim sum and main plates in the two-story space that features a 150-seat patio.
Who: Passion Food Hospitality, Washington, D.C.
What: Global-seafood spot PassionFish, created and co-owned by Executive Chef Jeff Tunks, is located 40 minutes from downtown D.C. in Reston, Va. An elaborate chilled seafood station is the centerpiece of the dramatic dining room.
Who: Heavy Restaurant Group, Seattle
What: Managing partners Larry and Tabitha Kurofsky have three Purple Café and Wine Bar units in and around Seattle and are on track to open Mexican-inspired Barrio in December.
Multiconcept operators: case studies
In an unforgiving economic climate, nursing a tired or ailing restaurant just isn't feasible. Many multiconcept restaurant operators-a group that has built its businesses by taking entrepreneurial risks-have demonstrated that reworking sluggish concepts is a smart move that allows them to keep up with evolving consumer tastes and stay afloat.
Myriad Restaurant Group: Montrachet to Corton, New York City >>
Lettuce Entertain You Enterprises: Tucci Benucch to Frankie's Scaloppine and Frankie's 5th Floor Pizzeria, Chicago >>
Urban food group: South to Coquette Brasserie, Raleigh, N.C. >>
Fox Restaurant Concepts: Bistro Zin to Zinburger, Tucson, Ariz.>>
Fifth Group Restaurants: Sala to The Original El Taco, Atlanta >>
Multiconcept Operators: Room To Grow >> Multiconcept Operators: Second Acts >>