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Top 100 Independents

Independents staying on top

You could sum up indies’ stability in the market by noting that New York City’s iconic Carnegie Deli closed on 2016’s final day after nearly 80 years of mammoth pastrami sandwiches. That capped a year that also saw the loss of such stalwarts as The Four Seasons, Spice Market and Colicchio & Sons in New York City; Cape Cod Room at Chicago’s Drake Hotel; the 15-year-old Grill on the Alley in Los Angeles; and many more. Researcher and RB’s sister company Technomic shaved 1.4 percentage points off its initial growth prediction for 2016, and ultimately forecast only 0.8% in real growth for the restaurant industry in 2017. 

But the independent space has also been the epitome of “on the other hand…” phrasings, and the amount of encouraging news is significant. While this year’s Top 100 independent restaurants’ aggregate food and beverage revenues of $1.8 billion in 2016 were not significantly changed from 2015, the list does include five that are less than 18 months old, and one (The Smith/NoMad in Manhattan) that wasn’t open until March 2016 and still did enough volume to qualify.

There was research indicating the number of independent restaurants declining last year. Still, studies showed independents faring better financially in a difficult market than chains. “This really seems to be the dawning of the era of the independent,” industry expert Darren Tristano told Bloomberg this spring. “The independents and small chains are now outperforming. The big chains are now lagging.”

Turbulent times

Alan Rosen, who just opened his fifth Junior’s Cheesecake, says, “Rents have been rising. Leases that predated the softness that’s coming are up. Labor and insurance costs are rising. Restaurants that can’t raise prices to compensate for that are going to have trouble. If you’re already high priced, it’s tough to go higher. Luckily, we’re moderately priced.” He notes that Junior’s average check is only about $20, providing a buffer.

Still, some surprising gains were also logged in the face of unfriendly fixed costs. St. Elmo Steak House in Indianapolis was up 15.4% in 2016. The Midtown location of The Smith was up 14.7%. And in Nashville, TomKats Hospitality’s Southern Steak & Oyster rose 18.7%, and Acme Feed & Seed’s sales jumped 21.6% despite an average dinner check of just $16.

TomKats’ founder and owner Tom Morales is rightly proud of those gains, but doesn’t downplay the particular difficulties the 2016-2017 marketplace has presented. “I think we’re all fighting a slowdown in the economy,” he says. “There’s a pall over America. I think there’s so much divisiveness and uncertainty that people, though many of them have the money, aren’t spending it. They’re closed, it seems, waiting to see how this all shakes out. Across the country, everyone’s dealing with that.” 

“We certainly have felt an increase in competition [in Nashville, one of the nation’s fastest-growing markets],” Morales says. “But I think our strategies of 1) real hospitality and 2) being local is our insurance against a down market.”

Full steam ahead

On the other hand, there is no shortage of either optimism or ambition among top independents. The number of new projects—often new concepts—under construction or consideration is impressive. Consider the 300-seat Buckman Public House, planned for what had been Washington High School in Portland, Ore., or Danny Meyer and Union Square Hospitality Group’s plans for a $30 million restaurant/bar—total capacity: 800 people—on the 60th floor of an office in Manhattan.

TomKats’ Morales opened Southern-seafood restaurant Fin & Pearl in Nashville last year. Now he’s working to complete Woolworth on 5th, filling two floors of a building that once held the Woolworths department store where civil rights activists held lunch-counter sit-ins during the 1960s.

 “The Woolworth project is not motivated by a business plan as much as it is the right thing to do,” Morales says. “It’s more from the heart—it’s historic, authentic; it’s real. We’ve been successful at taking a space that has historical significance and creating economic viability. The lunch counter and upscale soul food and funk music [concept] provides something not in the marketplace.”

Dan Simons is co-owner of Farmers Restaurant Group, a Washington, D.C.-based multiconcept operator that has opened three Founding Farmers locations (two of which appear for the first time in this year’s Top 100) as well as Farmers Fishers Bakers (which just missed the cut with $12 million in sales), and the latest, Farmers & Distillers, with its in-house Founding Spirits Distillery. “I have two restaurants under construction,” Simons says. “My answer is only the strong will survive. I don’t mind the downturn. We are super cautious with our deals. And I’m fine with slightly lower sales, because we don’t have a ton of debt; we’re not betting on sales for next month’s bills or betting that things will always be better.”

Tao Group—which occupies the No. 1, No. 3, No. 7, No. 12, No. 14, No. 50 and No. 55 positions on this year’s Top 100—has hardly slowed its growth. The company that Eater.com dubbed the “Clubstaurant King” opened a Beauty & Essex location in Las Vegas in 2016, and has 2017 projects that include The Highlight Room and Luchini Pizzeria & Bar in Los Angeles, Fishbowl in New York City, an unnamed project in Chicago and more.

Madison Square Garden showed its faith in the market by paying $181 million for a 62.5% stake in Tao Group this year. Landry’s Inc. acquired BR Guest Hospitality (Blue Fin, Blue Water Grill) in November 2016.

Gibsons Restaurant Group will open an Italian steakhouse, now called Gibsons Italia, this year. Patina Group will open a mammoth steampunk restaurant called The Edison in the Disney Springs complex near Orlando, Fla.’s Disney World. Morimoto Asia opened there in late 2015. Levy Group-managed Fulton’s Crab House in Disney Springs has been reconcepted as Paddlefish and likely will make next year’s Top 100. Clyde’s Restaurant Group is reconcepting its Tomato Palace restaurant for a reopening next year.

David Grutman, who opened Komodo in Miami at the end of 2015 (he already had Liv and Story) and saw it do better than $16 million in food and bev sales in 2016, plans to open three new concepts over the next three years. Expect them to be big. “I can’t open a small place and just test the market. For me, it’s easier to go big than it is to go small,” he says. “My places have a lot of energy. They’re big and shiny and glamorous. To do that I need a big place. There’s a sexiness in volume that people love to see. I get more scared about doing a little boutiquey place. I’m cooler when I’m bigger.”

The right size

Michael Stillman, whose Quality Branded MCO branched out of New York City to open a Quality Italian in Denver this year, sees a future for that concept and the smaller (70 seats) “neighborhood steak joint” concept Quality Eats it opened this year on Manhattan’s Upper East Side. Stillman will open a total of four restaurants this year.

“Smaller is a trend, and it is for us,” Stillman says. “With these super big-box restaurants, it’s harder and harder to find the right market.” Rather than do a 300-seat store, he’d like to do two 150-seat restaurants and understand different parts of a market that may have different demands.

 “The efficiency of these big-box stores is huge, and when they’re successful it’s fantastic,” Stillman adds. “But the tougher and tougher competition and better and better restaurants I see around the country means that you have to be more specific, and more demanding and understanding of what customers want.”

Like so many other Top 100 restaurateurs, Stillman sees marketplace challenges—but on the other hand, he chooses to view them as providing room for growth. “People are making food and dining a bigger part of their lives,” he says. “They are more interested in making it central to their lives than last year and the year before, which says to me that if you do smart things, there’s opportunity out there.”

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