Leases / Wine Tasting

I missed class on Monday, due to the extended weekend, a baby who endlessly fascinates, and an upended sleep schedule. The two subjects were restaurant design, including an exercise in putting the pieces together on a sheet of graph paper, and business structure. The former, I'm not too upset about missing, as I feel I have a handle on design and the logic of flow, but think I may have to go into the book and see just what kind of company I want to run in the future and why -- a Limited Liability Company? A sole proprietorship? Etc?

Today, we reviewed leases, briefly looked at layout, and then tasted a wide variety of red wines. Leases: you gotta read 'em before you sign 'em. Residential leases have lots of government regulation -- even if you don't read it carefully, you're relatively protected. With a commercial lease, however, what you sign is what you're in for, with some reasonable exceptions.

Never sign a commercial lease without professional oversight. Not necessarily an attorney, but someone with experience who ca tell you how a lease will effect you -- effect you with what is there, and effect you with what is NOT there.

If the business owns it's building, that obviously is an asset that can be sold along with the business. In the case of renting a space, length of lease determines the value of a business. You can have the most fabulously successful restaurant, but if you have 1 year left on your lease, no one in their right mind would buy it from you until a new lease is negotiated. If you're rocking and you have 15 years left on your lease, then you're in the money.

Landlords tend not to like restaurants -- it's not uncommon to see available storefronts with a sign that says, "no restaurants". Though restaurants close pretty much as often as any other kind of business -- but there is the perception of volatility. Then there is the garbage, the smells, the pests, drunk customers, late hours, fire hazards, etc.

The lease is made up of clauses. Though not exhaustive, these are the big guns:

• Rent Structure: How you pay. Typically a fixed lease, where rent is determined by a schedule or formula, increasing from beginning to end. There are percentage leases, where rent is a percentage of gross sales, which means it will be in the interest of the landlord to drive traffic to the business, like in a mall. A Consumer Price Index lease ties rent to inflation (or, as the case may be nowadays, deflation.)
• Taxes: Percent of real estate taxes that the tenant is responsible door. This is pretty straightforward, but what if the government reassess the real estate tax and doubles it? Could be a business killer. In the lease, the clause could establish a sliding scale over time for whatever increase (or decrease) happens.
• Conditional Liquor License: Lease is only valid if a liquor license can be procured. If you sign a lease to open a bar, then the bureaucracy denies you a license, well...
• Construction: Will you be allowed to do what you want to do? Landlord may require specific approvals, or his own approvals, Time frame: typically there is a rent abatement period for construction. Access: while building out, you and your crew needs to be able to get in. Also, ownership -- who will own what is constructed, that is attached to the building?
• Utilities: You want individual metering, so you pay for only what you use. However, if there are common areas, a percentage based on traffic projections may be in order.
• Quality Standards: If you propose a pizzeria, a landlord can write into the lease that you will be a pizzeria, going so far as to define how much you sell of what. On the other hand, the leasee can get 'exclusivity' -- if in a mall, here you can assure that the landlord will not open another pizzeria in the complex.
• Time Standards: Times the operation is required to be open or closed. In a mall situation, this is pretty stringent.
• Insurance: Liability. Landlord will want you to carry some.
• Duties of Repair: Who is responsible for fixing what, in what time frame?
• Demolition / Eminent Domain: What if the government clears the land and forces the landlord to sell? This clause can assure that the renter gets a cut.
• Union: If the building is unionized, it'll probably require the business that come in to also be unionized.
• Code Violation: If the building is not up to code, who is responsible? The codes change all the time...
• Assignment/Sublease: The right to either assign the lease to another party, removing your own name from the lease. Or subleasing, where you are still on the lease and bear responsibility, and the subleasee pays you. With assignment, the onus is on you to find someone to take over your lease. At the same time, the landlord can restrict who you can assign to.
• Personal Guarantee: You promise to pay, no matter what.

The last couple of hours of class were dedicated to tasting eight red wines, sniffing, discussing what fruits it smells like, food matching, etc. I'm still of the belief that wine by itself is not very appealing, but when drank with rich food, it comes into it's own, becoming a flavor enhancer. As with every class, I'm amazed how gross the thick sweet stuff like port tastes, but when matched with something savory or stinky, the layers of squiggly flavors race across each other making the most wonderful new flavors. But to serve a flight of 8 dishes for eight wines would probably push the school's budget.

In the News / Costing Beverage / Architect

Class started with a short In the News. The NY Times had a stunningly boring article detailing the details of a superior hamburger, but didn't really add much to the canon.

There was a cool article, however, on the recent state of NYC food carts. Up until the downturn in the economy, there was peace upon the streets of NYC. Food cart permits were cheap and few and far between. They were handed down within families, as well as locations and street corners. The city was not much involved -- it only gave out 3000 licenses, and the licenses can be renewed by mail every two years, forever and ever. Because of lax enforcement, many carts are not inspected, or have expired licenses, or no licenses at all.

Now people who are being laid off from white-collar jobs and speak English as a first language are investing in food carts to deliver a different level of food to the streets. They get their permits, and then go wherever they are legally allowed to go...and into direct conflict with the underground economy of the long established immigrant class. When a new truck rolls up on a corner that has been claimed by a cart family without challenge for 20 years, there is going to be conflict. Used to be when two vendors got into a tiff, one would call the cops anonymously because everyone undoubtedly were doing something illegal. These food cart trucks tend to be on the up and up, and the old economic model is turning to intimidation and violence as leverage.

The sad thing is, because of the inadequate bureaucracy, the city is losing a ton of money and has little real power over the food carts. A vendor of a new fancy ice cream cart is quoted as scoffing that he pays a few hundred dollars for a permit, when his business model would allow him to pay $5000 a month during the warm season and still be profitable.

There were small pieces on the food shows -- the Fancy Food Show had a 25% rise in attendance, while the tone of the piece on the Unfancy Food Show as equal parts snobby and dorky -- why the NY Times sucks.

Next up was an exercise in costing out a mixed drink. Unlike a recipe card, each cost card is per drink, not a batch of drinks. Most booze is in liters and recipes in ounces, which is annoying, but even more annoying is perusing the price sheets for booze vendors. For a bottle of Bombay Gin, you have about 10 different prices. Half are for NYC and half for NYS (different tax and control procedures), and within each category different prices on different size bottles and discounts depending on how many cases you purchase.

The second half of the class was a field trip to an architect's office to talk about how we, as restaurateurs, would communicate and deal with an architectural firm, from initial concept up through plans detailed enough for a contractor to build from with precision. The architect went around the room and asked each of us our concept, and teased out some details that would help a design firm get on track.

Some of us had pretty clear ideas of what we were going for, and when one didn't, the architect was pretty concise in trying to get clarity. One student kind of scattershot mentioned a lot of different things she liked that she would like to see in her operation (mosiac! bar in middle of room! stage! fountain!) and the architect basically asked what is the focus? Do you want a candyshop vibe, a restaurant vibe or something else?

I had a pretty concise statement of what I wanted (Jewish Italian Grandma style filtered through an Eames lense) and didn't get any appreciable feedback. Guess I can skip hiring a design firm and just get some hacks to have the plans drawn up and approved by the city?

Richard, a few students and I went to a pizzeria nearby the archictect's office afterwards, not very good pizza but fun to be snarky about the menu, decor and oddly-pacing owner with some like-minded fellows and fellowettes.

Fancy Food Show Recap / Restaurant Design / Wine Tasting

Class started with a discussion of the Fancy Food Show. The main issue attendees have is that it's really two shows in one. Some of the vendors there are showing off a product to sell to restaurants and food services right now, while others are there to find a distributor so they can sell at some point down the line. One of my classmates, who helps run a large family restaurant, spent a lot of time sampling wines, and when he found one that blew his mind, it turned out the wine is not available in this country yet, that they need a distributor to get them through the extensive legal hurdle of importation.

While the restaurant show during the winter was more about equipment, hardware and stuff, this show was all about the look, taste and marketability of food stuffs. Fellow students marvelled at sheer quantity in certain food categories -- how many soy-based vinaigrettes do people need? Why are there so many flavored cheddars? And how often does one have a craving for lemongrass water? The person working the booth for an Austrian sports drink (BIG on taurine, which rhymes with urine for a reason) admitted, when confronted, that it indeed did taste like ass.

We introduced ourselves to restaurant design. One has to take into consideration level of concept (fast food/pub, casual, luxury) and location (urban, non-urban) to really determine how many square feet per customer one will need to provide. Urban fast food, 8squft no prob, non-urban luxury, you can start at 25 sqft and go up. Based on the size and concept, one can work out budgets for monthly rent as well as how much it will cost to build out.

Building out a restaurant depends on a variety of factors, whether it's a raw space or an old restaurant, depends on what equipment is needed to cook everything on the menu, and, well, real estate markets.

At the restaurant I've been working at, the build out was from raw space, and quite ornate. As time has gone on, the corners cut came into strong contrast. For example, there is a stage for a piano and there has been live music played...but no more. The neighbors in the condo upstairs complained. Why did they hear it enough to complain? Because no sound proofing was installed between the ceiling and the bottom of the floor foundation of the apartments directly above. To install sound proofing after the fact would be a huge job that would shut the restaurant down, so the music is out.

The final part of the class was a wine tasting, preceded by a short documentary about the history of Burgundy, home of the vineyards that make the most expensive wines in the world. The monks of the medieval ages owned all the land and studied it, tailoring the wine to the soil. When Napoleon came in and took the land away, it got broken up into many different plots with many different owners. Unlike some regions, the local government decided instead of trying to make a standardized, blended product to stand in for the region, in Burgundy only one grape would be planted everywhere (pinot noir), and each vineyard would have a product which reflected it's own soil. Now the wines of the region can be priced out practically by where the vineyard lays in the valley. Towards the top, the good whites, the middle the good reds, and the bottom the 2ndary reds where the drainage isn't too hot.

The tasting was a wide variety of whites, from a tepid young pinot grigio to a sweet, thick Sauternes. Richard clearly gets off on this stuff, and the class ran 30 minutes long for the first time.

Fancy Food Show

What I ate, between 10-11:30am this morning: various chocolates, cookies, small moz and tomato panini, brownies, 5 shots of various Manhattan Special products, 2 little cheese cake cups, a bit of duck sausage, 2 little wedges of Batali pizza, some things I forget...

Spent the morning at the Fancy Food Show at Jacob Javits, officially on school business for the second year, but I hope to be able to swing this every year -- all the new products, some established products, different countries showing off their culture, all on overload, most wanting you to taste a sample or talk about what they do.

Highlights: Manhattan Special had a booth, a company really hard to wrangle as a product buyer at the restaurant. I had some words with them, they promise to make some calls. Low and behold they have a whole line of different sodas, but I would of never known because no one ever tried to sell me on them.

Then there was the Metromint people from last year, which was quite shocking -- various mint-flavored mildly-sweetened waters. I almost barfed last year when I tried it, because I thought I was drinking someones toothpaste backwash. I was sure they would be out of business by now.

Batali's brand was hawking a new pizza sauce, which tasted exactly like a thousand other jarred sauces. They were making pizzas on soft pita-like shells and baking them in a toaster oven. The only good thing about the sample is that it was heavy on the sauce, usually shitty pizza is heavy on the cheese.

In other pizza-related things there, there was a booth for a horrible nightmare some company is trying to bring to the freezer aisle:

Pizza in a cone, baked in your microwave in a box that keeps it upright. In the literature, one of the selling points is "acceptable taste and aroma", I kid you not. Yikes!

It was nice to see a booth/pavilion for Fage yogurt, what I call the "good" yogurt. I was happy to see it, and felt compelled to take a picture not because I'm a huge fan, but because it's one of the few foods me and B eat and love (though she eats the crappy fat-free version), and I remember when I was wooing her, we'd go food shopping in her neighborhood, like a trial run as a real couple. When ever we'd go, we'd always end up buying some Fage, and also talking about the prices of the stuff in various markets in the neighborhood. The foundation of my marriage was cemented thanks to Fage!

In the News / Break Even / Cash Flow Statement

In the news rolled along nicely. Dave was excited about this French restaurant, Relais de Venise, famous for a menu that has only one dish - steak frites (which reminds me of the original concept of Kentucky Fried Chicken) They're opening a new location in NYC, and we're all a bit skeptical that it will make it here. How often do you have 4 people going out to dinner together who ALL want steak frites?

L.I. Jenni was featured in this week's LI Newsday in a feature about the best places in L.I. to get iced coffee. Spice Market, a monstrous and pretentious restaurant in the Meat Packing district, went from 3 to 1 star in a recent review in the NY Times. In optimistic news, in the "Off the Menu" section of Dining in the paper, there were no closings listed.

Since the bebe, I grabbed one quick meal at McDonalds and one quick meal at Burger King, and was impressed by how superior the former one was (but still not that good over all.) Unsurprisingly, fo the best half decade, McD's has been clobbering King, and the horrible ad campaigns that BK has been waging has not helped. Recently, a smutty BK ad from the Hong Kong market has been making it's way around the internet, which certainly doesn't help their case.

As bizarre as the gross burgers of McD's and BK are, you can always get stranger over seas. Most beverages don't involve meat and animal product, but it doesn't have to be like that....Swine placenta soda from Japan, Eel essence flavored beverages, garnishes of penis, etc...

The next part of class was working out a P&L statement and calculating various cost percents and break even points.

Dave, while working on his business plan, tracked down a quote from a contractor who is installing a restaurant kitchen from scratch. Going through the $400K item by item comparing to prices on the internet, the whole thing was outrageously padded. If one were to just buy the stuff themselves, it would probably knock a solid $100K off the bill.

The last thing we looked at was a cash flow statement: where the cash comes from, and where it goes. Pre-opening, cash comes from personal funds, loans, investors, etc, because there is no income from the business. As you move across time across the statement, business income is accounted for, but the outflow is, too. It shows in stark detail why many restaurants fail: the outflow overwhelms the inflow early on because it takes a few months minimum to get to a point where you can start paying off the debts. If you don't have a reserve to get you through the opening months, don't bother.

Break Even Point / Bar Design

To be perfectly honest, I wasn't very awake in class today. The first part of the day was spent manipulating the break even point, to see what information can be gleaned out of the equation.

A straight break-even statement will show you how much business you need to do to neither lose or make money, but if you have investors who want a return on investment (ROI), you can do a break-even calculation that doesn't go for zero, but goes for a dollar amount that would be an attractive ROI for investors.

The second part of the class was a discussion of the physical design and equipment needs of a bar. Behind the bar you need a lot more than just booze. Storage both dry and cold, compartment sinks, ice (various forms depending on the biz), glassware, tap systems, beverage guns, trash areas, all arranged in a way for maximum flow and hygiene. Various equipment, from blenders and mixers to bar spoons and muddlers all make up the specialized tool of the bartender, which in a serious bar can be regarded as a "liquid chef".

We spent some time looking at business plans of past classes, which all had a wide variety in the choices of information given and level of design, but all the competent ones had a minimum level of financial reports .

Break Even Point, Budget, Spirits

We started the morning off with odds n' ends. Dave visited a new restaurant in his neighborhood in New Jersey. An 8000 square foot casual Italian eatery took 5 years to open, spent 600K for it's liquor license. There are only 7 liquor licenses in the whole town, so while the disadvantage of the license is the price, it also limits the competition.

Maria's bar and restaurant in Queens had an unruly table on Father's Day, with a group of 3 kids at a 6-top running wild, upsetting many customers in the room. Thing is, the adults at the table were regulars of the last 15 years, Maria had gone to the woman's wedding, and other customers were yelling at them to control their kids. Not an easy spot.

Val and her husband went to Blue Hill and experienced some extremely over the top good service. When a piece of beet skin on a salad appeared to maybe be a bug, they took the salad back and brought out another app on the house. Then the waiter asked if the chef could change the vegetable component of their entree to match their wine, and THEN gave the a complimentary desert to smooth out the beet incident at the beginning of the meal.

On the other hand, Liz is working in a large Italian eatery by Yankee Stadium. A customer and his girlfriend/mother left their table after paying and the bussers cleaned the table, but then returned because he left his grillz (gold teeth) in a napkin. The manager basically said tough titties, but feel free to go through out garbage. The guy proceeded to pick through a few barrels of trash for an hour until he found the grills, but cursing and being loud and disorderly the entire time.

We looked at wine and beer last week, and today was a brief discussion of distilled spirits. Start with a sugar or starch and ferment. Something sugary like grapes becomes wine, grain becomes beer. Then distill by heating, which makes the alcohol evaporate first. It's captured, cooled, and collected.

No matter the source, at this point all distilled spirits are clear and neutral. They can be blended to make the product the same over large runs, or left to be unique. The spirit can now be aged in something like wood barrels for color and flavor (whiskey), or left alone (vodka), or infused with flavors (gin) or infused and sweetened (liqueur).

Next up was a practice example of a profit and loss statement with some predictions of the coming year, and we had to make the budget based on those predictions. A budget, after all, is just a profit & loss statement that is projected into the the future.

The balance of the class was dedicated to reviewing the concept of the break-even point, where you leave the land of loss and enter the utopia of profit. Remember there are two kinds of costs: fixed and variable. A fixed cost like rent is paid and then it is done -- it is independent of sales. A variable cost is incurred by sales. If there are no sales, there are no variable costs. But if you sell a burger, and it costs $2 to make, if you sell one or 10,000, it's still $2 a burger. So if you reach your break even point and you sell a burger for $5, your profit ain't $5. Sure, your fixed costs are done, but your variable costs are with you. So that first $5 burger after your break even point means a profit of $3.