The Big Benefits for Restaurateurs Who Think Small

You start with meatballs, you end with an empire.

Opening and running a restaurant is very, very difficult: From a financial standpoint, the chance of failure is incredibly high. You have very little control over how much your raw supplies will cost, or how much people will willingly pay for the finished product. On a personal level, you trade your social life for years of long hours, little sleep, and almost no chance of a raise. But there is a way to eliminate many of these headaches: just sell one thing.

There's no shortage of restaurants that focus all of their attention on one item, or a very small handful of similar items. In New York alone there's Pommes Frites, Little Muenster, Macbar, Rice to Riches, Luke's Lobster, Porchetta, Puddin', the Meatball Shop, the Meatball Factory, Peanut Butter & Co, and many others — not to mention an endless list of dumpling, pizza, and cupcake places. Their proliferation is so great that I'm surprised nobody has coined a phrase for this type of restaurant yet. Let's just call them single-serving restaurants, or SSRs.

To understand the appeal of the SSR model, it's worth noting that all restaurants make money through what economists call the Value Chain: A restaurant takes raw ingredients, adds "value" to them by cooking them, then sells the finished dish at a markup. (Mario Batali put it more succinctly in Bill Buford's Heat: Restaurants "buy food, fix it up, and sell it at a profit.") A restaurateur can't do much about the nuts and bolts required to run a restaurant — rent, insurance, accountants, lawyers, the gas bill, all the other necessary but unglamorous stuff. Food is the value-added commodity, and it becomes a lot easier to add value when there's only one kind of food that needs to be fixed up.

The single-item focus serves an important signaling function for customers, as well. S'Mac (home of "New York's best Macaroni & Cheese") is tucked away in a storefront space on 12th Street, and the shop's owner, Sarita Ekya, says it needs to get noticed by passers-by to succeed: "We really do depend on volume, getting the numbers through the door." If there were a nondescript bistro in the space, most people could pass it a dozen times without noticing. But a bright-orange mac-and-cheese shop? People see that and remember it. And customers can assume that the mac and cheese is most likely going to be pretty good at the bright orange shop that only sells mac and cheese. They know intuitively that the place wouldn't exist if a lot of people didn't keep on going back there.

In other words, an SSR is already several steps ahead of the competition before a customer even sets foot inside, and the advantages don't stop there: Training staff is easier and cheaper, because there are fewer things for the staffers to do and remember. Dealing with a small number of vendors is much easier, too: S'Mac, for instance, has fewer than ten in all. Francis Garcia, co-owner of This Little Piggy Had Roast Beef (as well as of SSRs Artichoke Basille's Pizza and Led Zeppole), told me he gets great prices on beef because he buys so much of it. "And," he adds, "since we sell mostly roast beef at high volume, there is very little spoilage, if any."

The trick, of course, is finding a single item that customers will want again and again. Looking at the list of SSRs above, it's obvious that traditional comfort foods work best with this model: meatballs, sandwiches, French fries, etc. It's food that people grew up with and crave. (There's probably a real opportunity for someone who makes amazing meatloaf sandwiches, but not necessarily someone who specializes in liver-and-onions.)

Plus, once an SSR starts serving its better-than-all-the-others item to the public, that place becomes associated in customers' minds with the item it's selling. So, for example, when a customer who lives in the East Village is in the mood for a lobster roll, Luke's Lobster becomes the only place that customer even thinks about, creating a kind of snowball effect for the business.

Of course, the final, potentially most appealing advantage of opening an SSR over a traditional restaurant is that the businesses are more easily scalable: Once an owner has a success on his or her hands, it's not as complicated to reproduce the same restaurant. S'Mac opened a kiosk last year and is about to open its third outpost; Artichoke Basille's Pizza has three outlets and is opening more nationwide; and shops like the Hummus Place, the Meatball Shop, Mama's Empanadas, and Snack Dragon all have second or third branches.

To really see the advantages of SSRs versus traditional restaurants, look at Danny Meyer's Union Square Hospitality Group: There's only one Gramercy Tavern, even though it's one of the most successful restaurants in the country. And when Meyer expanded Union Square Cafe to Tokyo, it was the result of a licensing deal with a company called Wondertable. But Meyer's Shake Shack, which sells a pared down menu of burgers, hot dogs, and milkshakes, is already up to seven locations in New York, two in Washington, D.C., with others in Miami Beach, Westport, Saratoga Springs, Dubai, and Kuwait City.

The SSR business model is so compelling, in fact, that venture-capital firm Sequoia Capital has invested something north of $10 million in a grilled-cheese concept called the Melt, with plans to open 500 locations over the next five years.

As Francis Garcia told me, "There's a guy out in Coney Island who only sells hot dogs and makes a fortune. I think his name is Nathan."- Grubb Street

Take Tenant’s Use Abuse Seriously

Take Tenant’s Use Abuse Seriously

Mixed-use properties have become increasingly popular—and lucrative in recent years. If the office building you own can accommodate retail space, you may want to think about the possibility of leasing a portion or all of the ground floor space to a store. If you’re concerned that leasing to a retail store on the first floor may interfere with the business operations that go on directly above it, don’t worry. If done properly, using lease terms that limit the tenant’s use of the space can limit your risk.

The best way to get control over how a tenant makes use of the space is to specifically prohibit it from engaging in certain activities during certain hours. If the lease says only that the tenant can use and occupy the premises for whatever retail purpose the owner has in mind (for example, a clothing store), the owner may be giving the tenant more leeway than it wants to. A tenant limited to this use may be able to play disruptively loud music during business hours—as long as it still primarily operates as a clothing store.

To ensure that a retail tenant won’t engage in certain kinds of potentially disruptive behavior, its lease should list and specifically exclude this behavior. That way, the tenant will understand what’s expected of it before entering the space. And if the owner has a problem with the tenant’s use, a court will be more likely to rule in the building owner’s favor. For tips on drafting your use clause for a retail store in your office building and listing activities you want to exclude, check out “Negotiating Narrow Use Provisions” in the November 2011 issue of the Insider, and available on our Web site.

Controversial Restaurant Policies: When Is It Ok to Send Something Back?

by James Mulcahy and Kelly Dobkin
. Recently a Zagat editor sent back a dish at a NYC restaurant - not because it was burnt, cold or undercooked - but simply because she didn't like it. Well, some people would take issue with that one, in particular another Zagat editor who had some very strong opinions on the subject. Next up, witness these two editors having it out over IM about when it's ok and not ok to send something back in a restaurant. Who do you agree with? Take your stand in the comments.

Kelly: Hey, so I sent a dish back last night. Haven't done that in awhile.

James: What was the problem, was it not what you ordered?

Kelly: Oh no, it was what I ordered, it was just...nasty. Blegh. Got something else instead.

James: I didn't think nastiness was a reason to send a dish back. If it was undercooked, or not what you ordered maybe...

Kelly: I disagree. You're paying for what you're eating. If you don't like it after three bites I say it's fair game. If you've eaten most of it, then definitely not ok.

James: "Nastiness" is subjective, a lot of people in the restaurant probably love that dish. Besides - you never like anything.

Kelly: I mean you'd send back a drink that tasted funny, what's the difference?

James: Something has to be objectively wrong with it - if a beer tastes funny, it's because it's flat, or because the taps haven't been cleaned. I'd send that back. But not a beer that I'm ordering for the first time and just happened not to like.

Kelly: Yeah, but you have no idea how something is going to taste before you order it! The cheese in the dish tasted really foul. That's not my fault.

James: But you ordered it, if it is what it was described as on the menu, and prepared properly, then it's your fault for ordering wrong.

Kelly: Why do servers come over and ask: how is everything tasting? I mean they've gotta be ready for some people to tell the truth. Any restaurant worth returning to wants you to be fully satisfied anyway.

James: Restaurants are aiming to please, but it's a little unfair to make them eat the margin - it's not like a shirt, someone can't use that food again.

Kelly: Restaurants eat their mistakes all the time, it's just how it goes, part of the business. If they don't like it, they should quit and open a 7-11. Customer is always right, dude.

James: Customer is always right, except when they order the wrong thing.

Kelly: Next time we go out, you can order for me. Then you get to pay if it sucks!



Have something you want to add to this discussion? Chat with Zagat editors James Mulcahy and Kelly Dobkin live during our Google Hangout this Thursday, January 12th at 2:30 PM on our Google+ page!

.Posted on January 6, 2012 14:56