“No change has floored me as much as [this]. It’s something I never thought I’d see in my lifetime,” Union Square Hospitality Group CEO Danny Meyer said during a TEDx event last March in New York City. “That is the convergence of fine dining and casual dining.”
That dramatic, unexpected convergence of uptown and downtown, formal and laid back, has transformed the American dining scene. It is about the evolution of old paradigms and the fresh breath of new ideas. And it is key to understanding the results of Restaurant Business’2015 Top 100 Independents ranking.
Our list spotlights the country’s top-grossing restaurants with no more than five locations. Their aggregate food-and-beverage revenues totaled nearly $1.7 billion in 2014 (the full year of sales upon which the rankings are based). So in a sense, the Top 100 is a measure of success.
But it may be a better measure of survival skills. These are the venerable spots, such as Joe’s Stone Crab and Sparks Steak House, that have adapted to customers’ changing demands. And they’re the newer concepts, like Starr Restaurants’ Makoto, that capitalize on today’s dining dynamics.
Redefining 'fine'
“For decades, fine dining didn’t change much, and it was stuffy—the same menus, the same wines, jacket and tie. And it was a somewhat pretentious affair you did for special occasions,” says Tom Meyer, president of Washington, D.C.-based Clyde’s Restaurant Group, which operates Old Ebbitt Grill (No. 6 in the ranking) and The Hamilton (No. 20).
“[Today] there are a lot of interesting sidebars to a meal from the minute you sit down: the wonderful breads you get and the cocktail lists. There’s a whole mini industry of interesting spirits being produced in this country now. And it’s just an interesting, wonderful way to spend an evening,” he says. “There are more courses, the food is fresher and the portions are not so big. You feel better coming out after. You’re not getting a 20-ounce slab of meat and obligatory vegetables. That kind of dining is dead.”
The Clyde’s president adds, “It’s no longer true that you can only get a good meal in the big cities. There are great young chefs everywhere, doing wonderful things with food.”
One such chef, Atlanta’s 33-year-old Kevin Gillespie, described the dining evolution this way to fastcompany.com: “It is a great time to be a chef because we now have more creativity than ever. We’re no longer constrained by the rules of fine dining; we can literally create any kind of restaurant that we want—upmarket, down-market, a food truck or maybe even something in between that hasn’t been invented yet.”
Of course, fresh ideas alone never guarantee success. The restaurant industry—especially at its high end—is slowly recovering from the Great Recession that threatened to wipe out fine dining. “That was a difficult time. I saw a lot of places go under,” says Marty Gutilla, owner of Chicago’s Tavern on Rush (No. 89), a 45-year veteran of Chicago’s dining scene. Tavern’s sales dipped from nearly $13 million in 2007 to $11 million before they started inching back up, beginning in 2010. “Last year was the best year we’ve had: Sales went from $12 million to $12.7 million. It’s still tough, though,” he says.
New times bring new worries, and there are plenty of challenges that require continual honing of survival skills. Port Washington, N.Y.-based researcher NPD Group reported that the 61.1 billion Americans who dined away from home in the 12 months ended in May 2015 was the highest in six years, and yet customer traffic essentially was flat in the past year. And the recovery is not being especially kind to independent restaurants. NPD’s spring 2015 restaurant census finds that the number of full-service independent units was down 3% in the past year. However, much of that loss has come from the ranks of midscale and family restaurants. Fine dining (which NPD defines as having average checks of $40 or more) has recovered better than many other segments.
Courting diners
“Fine-dining restaurant operators are listening and responding to marketplace needs,” says Bonnie Riggs, NPD’s restaurant industry analyst. “There was a time when many of these restaurants were in such high demand that they decided who could visit and what they would pay. The recession hit, and there was more supply than demand. Fine-dining operators responded by making the changes necessary to appeal to their customer base, and their customers have responded [in kind].”
Some things don’t change, says Myles Chefetz, whose Myles Restaurant Group owns Prime 112 (No. 9) in Miami Beach, Fla. “People want a great meal with great service and great ambiance at a fair price. They want quality with accessibility. No white tablecloths. There’s no secret: You listen to your guests.”
When Tavern on Rush’s Gutilla listened to female patrons at his Chicago Gold Coast establishment, he heard talk about shoes. “Every Monday, I [raffle] a pair of Christian Louboutin shoes. I average maybe 140 to 160 women—that’s a lot of women at 11 p.m. on a Monday,” he says. Specials entice the participants to stay and dine. “I have items on the menu reduced to $7. At first, they’d come late because they knew the shoe raffle was at 11. But if I can make it reasonable for them to eat, too, they come in now at 8 or 9 p.m. Little things like that work.”
Gutilla added brunch, too, as have several others. Portland City Grill (No. 66) says the addition of a Sunday brunch buffet helped boost sales; Starr Restaurants’ Le Diplomate (No. 41) extended brunch to holidays when it otherwise wouldn’t have been open.
Special events also do well to drive business. Gibsons Restaurant Group organizes an annual Gold Coast Grub Crawl with its Gibsons Bar & Steakhouse (No. 10), Hugo’s Frog Bar (No. 52) and Luxbar properties, plus Tavern on Rush, Carmine’s and Lou Malnati’s Pizzeria, all of them neighbors on one very competitive and profitable block in Chicago. Participants spend 30 minutes at each restaurant for a signature food item and cocktail before moving on. Proceeds benefit brain tumor research at nearby Northwestern Memorial Hospital.
Even the most successful restaurants can benefit from participating in citywide or local culinary festivals. Virgil’s Real Barbecue (No. 78) says participating in the Taste of Times Square event was a major sales booster last year. Morimoto (No. 96) was one of several eateries taking part in New York Restaurant Week.
Remixing menus
Research firm Technomic recently reported that fine-dining restaurants, pricier lodging establishments and other facilities that serve higher-income clientele fared well in 2014. And it expects them to continue to outperform other venues in alcoholic beverage sales growth this year, as well. Expanding bar selections and developing programs with brewers and distillers has helped for many in the Top 100. Clyde’s Restaurant Group’s Old Ebbitt Grill may date back to 1856, but it’s on top of 21st century bar trends. For the past three years, it has hosted Brewhaha, billed as “a celebration of craft beer, food and music.” Nine local breweries are sponsors this year.
At its Daniel’s Broiler, Prime Steaks & Chops in Bellevue, Wash. (No. 86 on last year’s Top 100 list), Schwartz Brothers Restaurants created Prime 21, a “spirits lounge” featuring rare bourbons, scotches and other spirits from around the world. The idea came not just from listening to customers but from watching competitors, says President and CEO Lindsey Schwartz. “Handcrafted cocktails was a movement we wanted to be part of. We saw it in smaller independent restaurants in hipper neighborhoods. Our restaurants tend to be in established neighborhoods. So we’re learning from the smaller guys and how they do it. Prime 21 is our version of a speakeasy,” he says.
Other Top 100 restaurants have used their menus as their best marketing tools. Harris Ranch Inn & Restaurant (No. 60), which raises the beef it serves, says it benefited from a focus on lesser-known cuts of beef, such as the bistro filet, a cut from the chuck tender. Rosie Davenport, director of sales and marketing, says the bistro filet with burrata and stone fruit salad proved to be its most successful addition last year.
Phillips Seafood (No. 97) challenged its chefs to create a new menu item that played to the concept’s strengths. The result was the Ultimate Crab Cake, a 6-ounce, all-lump crab cake served with macaroni and cheese and asparagus. “It started as a chef’s special, priced at $47, and we worried that it wouldn’t sell well,” says Michelle Torres, Phillips’ corporate director of marketing. “Well, it’s among our top five in sales. It went over so well that we added it at all Phillips locations.”
The problem of wages, commodity costs, staff training and retention will need to be faced, Top 100 operators say. But they’ve been there before. “All those challenges have always been challenges,” says Clyde’s Tom Meyer. “The real challenge is getting people in your restaurant on a regular basis. You need to be busy, or it all falls down,” he says. “When you’re expecting a $100 check average, you have to be perfect, and the challenge is firing on service, atmosphere and food. The challenge is being consistent; having the energy to be the best. You have to agonize over every plate.”
Chefetz sees it this way: “As margins shrink with higher labor costs, you’ll see higher prices and higher check averages in restaurants. I don’t know how else to do it,” he says. “It’s a changing of the times, as happens in any industry. Some diners will shift habits to more fast-casual food, but there will always be people with money who will spend to dine out in what others call fine dining and I call ‘casual-fine dining,’” Chefetz says. “There will always be a market for a great meal.”
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