Determining a restaurant's value

[glenn]

Hi Danny, my questions are somewhat personal - if you feel uncomfortable answering it in a public forum I understand.

What factors did you look at when you were searching for a locale for Blue Smoke? I imagine a space that could accomodate the specialized equipment was a large factor. As a restaurant accountant, the method of valuing a restaurant (for purchase or sale) has always been of interest to me, not to mention somewhat mystifying. Other than the obvious factors such as amount and length of lease, location and existing equipment, can you tell us some of the major criteria you used in determining what to pay for 27 Standard? Other venues? Did Blue Smoke "break the mold" since it was something completely different than its predecessor? Since you have quite a bit of experience at this sort of thing, have you developed a template when you look to buy or sell a restaurant? When developing a financial plan, what is the minimum acceptable net profit (%)? Many thanks!

[Danny Meyer]

My choice to do Blue Smoke in the old 27 Standard/Jazz Standard space was complex, but logical -- at least to me.

Having opened Eleven Madison Park and Tabla in late 1998, within 4 weeks of each other, I remember saying to myself: "I'll never again open 2 restaurants at the same time, and if I ever do open another restaurant, it's going to be a non-white table cloth joint.

About that same time, my first cousin, James Polsky, began to ask me whether I'd have any interest in collaborating with him on his restaurant and jazz club. He was a jazz fanatic and Jazz Standard was doing pretty well, but inspite of its 2-star Ruth Reichl review, 27 Standard was sort of floundering. I grew up in St. Louis loving ribs and always thought that barbecue and jazz (a coupling which Kansas City made famous) was a natural fit. I also was eager to preserve Jazz Standard, being a jazz buff myself. (I was a jazz DJ while in college and used to drive down to NYC just to go to jazz clubs.) My cousin had had a lot of offers on the space (this was 1999, after all) but everyone interested would've demolished the club.

So that's why I picked the 27 Standard space. As for the retrofit, it went way, way beyond what we had hoped or imagined. And that was mostly driven by the engineering requirements to vent the smoke from our two pits. In fact, the only thing we were able to keep from the original space was the cozy little bar downstairs at Jazz Standard. From an accountant's standpoint, building Blue Smoke was not like most joints.