Weekly sales at Ark Restaurants’ 1,080-seat Bryant Park restaurant in New York City would routinely hit $800,000 during the peak tourist season and drop down to more than $120,000 on average the rest of the year. Now, CEO Michael Weinstein told Wall Street on Tuesday, the place might generate $30,000 over a seven-day stretch.
Yet sky-high labor costs haven’t dropped accordingly because the company doesn’t want to drive away staff by cutting hours. “In New York, we used to pay hostesses around $16, $17 an hour. We can't find them at $24, $25 an hour right now,” Weinstein said.
Instead, he noted, servers’ stations have often been expanded to include, say, nine tables instead of six, giving them a lift in tips. “But they're working too hard. They're exhausted,” said Weinstein. “And when I say exhausted, I really mean exhausted.”
His comments counter the notion held by some investors and politicians that normalcy is right around the corner for restaurants now that the omicron spike is flattening. As he attested, recent weeks have been a far stretch from normal for Ark’s very mixed collection of restaurant concepts. The New York City-based company operates about 34 restaurants ranging from high-end places like Blue Moon Fish Co. in Florida to fast-food stations in the food court at the New York, New York casino-hotel in Las Vegas.
Weinstein said the company’s locations in New York City and Washington, D.C., continue to suffer from white-collar employees working from home instead of commuting to office buildings near the restaurants. A high-end place like Bryant Park or Washington’s Sequoia might still get executives using their expense accounts, but they’re not getting the secretaries who treat themselves to lunch, he explained.
“That's who my eye is on,” he continued. “If I lose them, I'm losing 10%, 15% of my customer counts. I'm not going to lose them. I'm going to make every effort to keep them.”
Yet that challenge is complicated by soaring food costs. The cost of king crab legs has soared from $23 to $55 a pound over the last 18 months, prompting Ark to raise the cost of its signature crab entree by 66%.
“We've gone from $75 in five steps to now where we get $125,” Weinstein said. With a food cost of $106 for the 2-pound crab leg serving, Ark is still profiting. But “we're about at the point where half [the] customer base, if we raised [it] another $1.50, would leave. I mean we're really pushing it.”
About a year ago, the company tried to hedge against further increases in the cost of crabs by spending $1 million to stock its freezers with the delicacy at a price of $43 a pound. “We just did it again,” said Weinstein.
Fortunately, he continued, “we see some normalization of food prices. They're not going up anymore. For us, they're pretty much stable or, in some cases, coming down a little bit. But they're still much higher than they were two years ago.”
Labor expenses have yet to plateau, he indicated, and the continuing rise in wages hasn’t alleviated the shortage of new hires. Ark’s New York, New York operations are short about 50 people, and that “seems to be continuous. We just can't find people,” the CEO commented.
Ark’s Robert restaurant in New York City has cut its hours to six days a week because the company lacks enough staff to operate for a seventh day.
He mentioned that Ark is renegotiating the wages right now of line cooks at one of its Florida restaurants. The back-of-house workers have been offered $3 an hour more to join a restaurant literally next door. “So we're negotiating with three guys to stay,” said Weinstein. “If they leave, we have no one else.”
“We've been managing chaos every day. I mean, every day,” Weinstein said.
“I think we're doing well with chaos and in very difficult times,” the industry veteran asserted. “I'm just hoping that there's no further COVID interruptions, and then I think you're going to see this company fly in terms of what we bring down to the bottom line.”
For the first quarter ended Jan. 1, Ark posted a net income of $2.2 million, compared with a year-ago loss of $763,000, on revenues of $44 million, up 117%.
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