How do high-end restaurants make money?

[CFO999]

The amazing mis-management outways most rates of return expected on a typical restaurant model.

If you were given the opportunity to see the lack of controls and lack of depth in most managemnt teams, you would clearly understand why Wall Street has traditionally converted restaurant investment into a real estate model.

Ask yourself a question.

Why is there no 4-star public restaurant companies?

The delicate balance may be best described as "How much do they leave on the table"........In most of my experience as much as 10% is wasted or ignored though lack of knowledge or resources.

[townsend]

The amazing mis-management outways most rates of return expected on a typical restaurant model.

If you were given the opportunity to see the lack of controls and lack of depth in most managemnt teams, you would clearly understand why Wall Street has traditionally converted restaurant investment into a real estate model.

Ask yourself a question.

Why is there no 4-star public restaurant companies?

The delicate balance may be best described as "How much do they leave on the table"........In most of my experience as much as 10% is wasted or ignored though lack of knowledge or resources.

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And that 10% is usually the profit, or puts the biz in the red. There are no 4-star public companies because the market for fine-dining is smaller than the market for mid or low level chains. High end has a foot in style, art, and fashion...all of which are very volatile...the corporate structure does not lend itself to rapidly(and I mean once or twice a day) adjusting to the changes that occur in the high end restaurant business. Most chains rely on training, which is the first thing to go in poorly run restaurants. The other reason is skilled labor. You don't need top tier cooks in mid level chains, so they are not difficult to train (low investment) and pay is low to mid. Corporate investment will not choose high risk, low return over medium risk, medium return.

[CFO999]

Well said Townsend

The real question here should be, WHY?

Is it time to change the traditional restaurant model.

By the way! The real reason there are no 4-star public restaurants is that the present management at these culinary temples are not structured to answer to shareholder pressure or be proactive to revenue shifts and changes in the public eye.

You are correct.......first the service goes, then the product, then the management.

[Spike L]

Hah, finally realised why this was confusing me so much - this is in the NY forum, not a general forum =)

Just to put things into a more international perspective - most high-end restaurants over this side of the ocean don't seem to have this horrible struggle to make ends meet. It doesn't make sense to me, as I know for a fact that a lot of business/management types are every bit as sharp in NY as they are over here, and in many cases not bound by tradition and a lot more willing to try new methods in the name of providing cutting edge experiences (and of course, making more money).

Many new high end restaurants over here have done very well since their opening, maybe due to the fact that new restaurants here receive high exposure due to England's distinct type of celebrity culture (!), or maybe because many chefs only seem to start restaurants if they can bill themselves as "[insert famous chef with successful restaurant]'s protege/successor". Or maybe the NY market is way too saturated, with a much smaller pool of very highly discerning customers and with the next tier down of customers prefering to eat at the next tier down of restaurants, as it is less risky and also cheaper

...thoughts?

[Nathan]

Hah, finally realised why this was confusing me so much - this is in the NY forum, not a general forum =)

Just to put things into a more international perspective - most high-end restaurants over this side of the ocean don't seem to have this horrible struggle to make ends meet. It doesn't make sense to me, as I know for a fact that a lot of business/management types are every bit as sharp in NY as they are over here, and in many cases not bound by tradition and a lot more willing to try new methods in the name of providing cutting edge experiences (and of course, making more money).

Many new high end restaurants over here have done very well since their opening, maybe due to the fact that new restaurants here receive high exposure due to England's distinct type of celebrity culture (!), or maybe because many chefs only seem to start restaurants if they can bill themselves as "[insert famous chef with successful restaurant]'s protege/successor". Or maybe the NY market is way too saturated, with a much smaller pool of very highly discerning customers and with the next tier down of customers prefering to eat at the next tier down of restaurants, as it is less risky and also cheaper

...thoughts?

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there is a very simple answer that explains 90% of it:

9/11...or 11/9 in your parlance.

[Mayur]

Maybe.

High-end English restaurants are also a heckuva lot more expensive on average, and have a clientele willing to pay. I spent my university years in London constantly wondering *why* I was paying so much for food that would cost half of what it did in NY, and that was for the budget places. The Michelin-anointed ones scale accordingly. I don't know whether COG for food items scales the same way.

[CFO999]

Hey Spike

It doesn't matter what side of the pond you are on.

I have walked into a dining room with 300 strong, giving the impression that all is well...........until you look at the books and find out the real story. (London)

By nature, the restaurant industry is a labor intensive,operations centric machine.

Most management teams when asked will constantly talk about a lack of skilled workers, long hours, and rising costs.

Add to that one very important fact........Most restaurantuers are not trained.

Revenue alone does not equal success.