Weathering the NY restaurant storm


Nick surveys current problems for New York restaurateurs through the lens of two classic establishments. 

Restaurants have always been a game of chance, my host at breakfast explained, but today here in New York they have become a game of percentages. And these percentages are getting smaller. 

This comment came from someone who knows the restaurant business well. My host was Richard Corraine, Danny Meyer’s right-hand man for the past 20 years and whose job title is chief of staff at Union Square Hospitality Group (USHG). The reason that this analysis stuck in my mind was that it so closely echoed the sentiments of someone who has been an integral part of the New York restaurant scene for even longer.

This was a conversation that had taken place 48 hours earlier over lunch with Drew Nieporent at Nobu Downtown, where the place was humming when we arrived for our 1 pm reservation. The place was full of young people, many of them female, in contrast to our meal here a year ago when the restaurant had been considerably quieter. I was reminded of the quote from former president Bill Clinton, ‘It’s the economy, stupid’.

Drew has always had a tendency to reminisce, an attitude perhaps accentuated by a bout of ill health, skin cancer and then a stroke from which he has, fortunately, made an excellent recovery but one that has forced him to lose 50 lbs in the past few months. He was quite precise in his analysis of how the restaurant business has changed over his time, an era in which he has successfully run Tribeca Grill, Bâtard, and several outposts of Nobu, for almost 30 years.

‘There used to be', Nieporent explained, ‘three areas which an enterprising restaurateur could successfully turn to their advantage to generate profits. The first was the property. The second was in the restaurant’s cost of labour. And the third was in the cost of raw ingredients, the food cost that the kitchen produced as well as the cost of the wine and spirits. There has been such a significant rise in all three that a restaurant’s profitability nowadays is wafer-thin.’

It is the first two areas that have seen the biggest increase. The cost of rent and the cost of labour have risen to such a degree that they have almost met at a dangerous intersection in Corraine’s opinion. And this is one reason that he steadfastly acts as a heartfelt naysayer to those, predominantly British, companies who cleverly seek his advice about whether to open in his city. ‘I don’t want them to appear as a pawn in the real estate game', Corraine explained.

This situation has been exacerbated by the rise in the cost of labour. USHG has tried to absorb this – or at least to make their customers aware of this – via the switch on their menu prices to a policy of ‘hospitality included’, a change to all-inclusive prices that, as in France, include the service charge. This is also USHG’s method, it is hoped, for generating extra funds with which to reward their kitchen staff as well as the waiting staff who continue to be well paid in their busy restaurants. This should lure more cooking enthusiasts into working in their professional kitchens.

Nieporent disagrees with this approach, not because of its stated aim but rather because in an environment where landlords are increasingly looking to maximise their income by insisting on rents being topped up with a share of the income from any restaurant’s sales, this is likely to cost the restaurateur more once adopted. If USHG’s ‘hospitality included’ approach leads to a 15–20% increase in income, this will in turn lead to a higher percentage being paid to landlords via this mechanism.

This dilemma that affects all who operate in Manhattan has one other disturbing side effect – the rise in the state’s minimum wage that from 1 January 2019 rises to US$15 per hour, a significant rise from the US$10.50 rate that applied at the end of December 2015. All this will put pressure on New York restaurateurs, although this may in turn lead to greater efficiency and staffing levels closer to those which have applied for some time in London. This is perhaps why both Meyer and Nieporent’s companies have decided to enter the fast-food market. It was as a small division of USHG that the now extremely successful Shake Shack opened, while Drew has also probably made more money from selling burgers, this time at Madison Square Gardens.

The other factor that makes this situation so extraordinary is that in restaurants belonging to both these restaurateurs, we had the best food in a week during which restaurant bills accounted for most of our expenses.

Lunch on a sunny Saturday in USHG’s The Modern was a delight, kicking off with a dish described as ‘eggs on eggs on eggs’ which comprised the runny yolks of chicken’s eggs topped with a generous layer of caviar, their softness cleverly offset by crisp sticks of fried bread and the thinnest slices of shallots. This was followed by a slice of a tart of rich foie gras, an ingredient seemingly wildly popular on top New York menus, topped with thin slices of Concord grapes, the best use to date for this fruit.

Lunch at Nobu Downtown showed off the sharp knives of a bank of talented Japanese chefs. We began with a small circle of salmon tartare, next to which was a delicate Japanese plum. Then came a plate of yellowtail, its firm flesh highlighted by thin slices of jalapeno pepper (top right). This was followed by a plate of sushi and then, finally, by a small serving of Nobu’s famous blackened cod.

These two meals only served to underline one of my longest-held beliefs when it comes to recommending restaurants, that it is not always the new that generate the best food, service or overall experience for the person seeking my recommendation. Neither The Modern nor Nobu Downtown are new but they do serve excellent food. And their service is first class; in both, the waiters were (unusually) slow to interrupt our conversation. Their acoustics are excellent – you can hear yourself think and you can hear what is being said around the table. Each is in a good position to weather the storm of rising rents and rising labour costs.

As my late mother, who sadly never ate at either of these two restaurants, would have said, ‘So, what’s not to like?’

The Modern MoMA, 9 W 53rd Street, New York, NY 10019; tel +1 212 333 1220

Nobu Downtown 195 Broadway, New York, NY 10007; tel +1 212 219 0500