Restaurateurs are getting it from all sides as food, labour, rent and utility costs are up, up, up. Here’s one chef/owner’s take on the challenge
JUN 27 14 – 10:35 AM — Restaurateurs on the higher end of the food chain are feeling squeezed not just as the costs of doing business keep rising, but as customers in uncertain economic times circle the wagons and, more than ever, seek value for their discretionary coin.
Sure, there will always be a market for pizza, burgers and the Grand Slam breakfast, but the paradox seems the same folks who don’t bat an eye at lattes on the way to work will do a double-take as soon as a dinner cheque crosses the $50 threshold. (That’s one reason I think the new Lowertown Brewery on York Street should do very well, nestled in the tourist-saturated ByWard Market with excellent yet simple food priced at less than $15, as reported in this blog on June 18).
As I’ve said, the economics of serving food can be brutal when wages typically amount to roughly 35 per cent of gross sales, food and beverage costs can be the same, while occupancy costs including rent, hydro, gas and heat leave a successful restaurateur with a profit margin of something like five per cent on sales — a tight squeeze indeed, especially if the operator suffers two or three horrible months as many did last winter.
Worse is the restaurateur who pays the same fixed rent in good times and bad. More fortunate are those whose rent is tied to a percentage of sales, which tends to mitigate the pain during really bad months.
I’m very much intrigued by the economics of the restaurant business, which involves far more than watching a talented chef go forth into the fields to procure the best ingredients to showcase his culinary cleverness. These days a chef has to be more than an artist — the business demands keen accounting acumen to make the bottom line work, and if the chef doesn’t have it then he needs a partner who does.
The restaurateur must be nimble enough to adapt to changing tastes and consumer demands.
I caught up with chefs and co-owners Norm Aitken and Peter Robblee the other day at Juniper Kitchen & Wine Bar in Westboro, who talked candidly about changes in their business, consumer expectations, the proliferation of competitors, all of which prompted a rethink in their new menu launched earlier this month that completely does away with the usual appetizers, starters and main distinctions, in favour of a more streamlined approached and a tasting menu.
And guess what? Much to the owners’ surprise, sales actually went up. That would be a clue.
Juniper has about 70-per-cent occupancy on Thursday, Friday and Saturday nights. It originally opened in the Wellington West area in 1996, then moved to Westboro in 2006. It’s style and craftsmanship is definitely above-average, although the owners wince at the term ‘fine dining.’
Below is my chat with Aitken, edited for brevity and clarity.
Ron Eade: We’ve seen two high-profile restaurant closings in late May, the first being the popular ZenKitchen on Somerset Street after five years, then Domus Café in the ByWard Market after 19 years. Both owners said their businesses suffered through a brutal winter from which they were not able to recover.
What has been your experience?
Norm Aitken: We got hit a little last winter but what carried us through is our events. When I was with Domus chef/owner John Taylor in March at the Niagara Culinary Institute, where a group of chefs put on a special Ottawa-theme menu, he mentioned to me he wanted to expand a little [into space vacated by the housewares store next door] because it’s about having 80 seats in your restaurant. At our old place, before moving to Westboro in 2006, we had 55 or 60 seats on Wellington Street.
Eighty or 85 seats is the magic number. It’s a number you can work with efficiently. Anything more means extra staff, which means more costs. Right now we have about 120 seats, with room for 200 people standing cocktail-style.
Eade: Fewer seats means what?
Aitken: When you’re in fine dining you can’t flip your tables as much as a quick service restaurant. So when you’re paying rent and having your margins as tight as they are, if you only have 40 or 50 seats that’s a hard push. You need to do more volume.
Eade: Typically in Ottawa you’ll see reservations for tables for two at 7 p.m., which means it’s very difficult to get in a second seating as is the norm in Montreal and Toronto.
Aitken: That doesn’t help. As far as demographics, I think the Ottawa foodie scene has definitely changed, I think there is a value perception people have in their mind, and then there’s the quality. When you go to dinner and you see main courses sitting at $40, plus a couple of appetizers, a couple of drinks, then you’re pushing $150 a head and a table for two isn’t going to walk away for much under $300. That’s a really hard sell. We’re in a government town here, with cutbacks and recession.
Eade: Higher-end dining is a more difficult sell than it was maybe two years ago?
Aitken: I think so. The market has been saturated with restaurants and in the next few years I think you’re going to see a big shakedown. For those people who can’t do it, who can’t adapt, who can’t sustain the quality or maintain the perception of value for money, you’re gone because people are going to move on.
Eade: Who is not as hard-hit these days?
Aitken: I’d say the branded chains. Why? Their prices are right, they’re quick …
Eade: So what’s the magic price point a restaurateur should aim for?
Aitken: For appetizers I’d say the price point is somewhere between $8 and $14 or $15 – no more. For mains, I’d say anywhere between $15 and no more than $28. I can’t sustain this business having only people coming for birthdays and anniversaries, not a hope in hell. We’d have been bankrupt long ago, plain and simple. I need to have turnover.
I now have guests in here four and five times a week either for lunch and/or dinner. The average lunch cheque is probably around $35 to $45 each, with drink. As for dinner, when we changed our menu about two weeks ago and simplified it, my biggest fear was I couldn’t have my revenues sink. But my cheque average didn’t go down, instead it went up by about $10.
Eade: Typically, you’re making five per cent profit on gross sales?
Aitken: I think I’m sitting around the eight-per-cent point. It doesn’t give you much wiggle room at all. If I have a cook on the weekend who serves too-large portion sizes then I’m screwed for the weekend. Or if I have servers breaking glassware, it’s all part of the bottom line. Those are the costs that really bite you.
Eade: So what’s the driving force behind the change that confronts you?
Aitken: It would be the saturation of restaurants. You know what? I don’t even want to be classified as fine dining because that’s not what I’m shooting for. Fine dining to me right now is Le Baccara. In my eyes fine dining is white-glove service; you don’t get that anywhere any more. Me and my partner, Pete Robblee, sat down and told ourselves, listen, we cook good food. So let’s just cook. I don’t want to be classified as fine dining, we’re a restaurant in Westboro, our focus is on Canadian product and ingredients, and that’s what we do. We cook food.
That’s how our whole new menu came about. We said, let’s just do two pages of food and we’ll start with small plates at the top and work our way through to the bigger plates.
Before, we had the menu broken down into starters, maybe four of them like a soup, a salad, an oyster dish and maybe a small cheese priced anywhere between $6 and $15. For appetizers, I was running five starting at $12 and going to $18 for a charcuterie plate. And six main courses would start at $22 or $24 for a vegetarian or pasta dish and go right up to $40 for Black Angus beef.
Pete and I looked at Gezellig down the street, I see Savoy down the street, we saw Clocktower that is always packed. We see all these restaurants moving in and taking a little chunk from the pie, but the pie really isn’t growing that quickly. Most of the people moving into the neighbourhood are either house-poor because they just paid $500,000 for their condo, or they’re feeling uncertain about the economy so they can’t really go out and eat as much any more.
We figured, if we can sustain the quality and value, maintain service to our standard, then we’re going to capture people before they go elsewhere.
Eade: How did you shake up your menu? How did it change two weeks ago?
Aitken: There are no more starters, there are no more appetizers, there’s no more main course. Of 20 items on the menu, 12 are completely new and each has about three elements per plate compared to as many as eight or nine touches before. Having many elements on a plate is fine dining, and it represents a lot of labour, a lot of work. Fewer touches means efficiency and faster service.
Since we’ve streamlined it to 20 plates total, we’ve added some new ones like pulled pork grilled cheese, onion rings, pork jus dip, or crab and chorizo stuffed squid with cress salad, avocado lime tequila, or Cornish game hen with grilled Thai curry, rice noodle.
We still have popular mainstay items that we just can’t remove like P.E.I. oysters, crispy short rib nibs, steak tartare, Rochon Farms greens with rhubarb dress, a daily charcuterie selection, Alberta Black Angus striploin, and Aux Champs D’Elise sous vide duck breast …
Eade: So, what’s unique?
Aitken: I knew I wanted a lamb item, and that’s our lamb dumplings. I’m now sourcing new seafood from Atlantic Canada, getting on board with Fogo Island Fishing Co-Op in Newfoundland thanks to a friend of mine out there, executive chef Murray McDonald, who graduated with me from Canadian Culinary Institute in P.E.I. This is really huge because no one can get seafood out of Newfoundland, period. Japan and China are buying it all, and it’s done by fishing co-ops. He put me in touch with the guys at the fish co-op so I can get turbot, I can get crab from three different zones on the Grand Banks and I can pick which zone I want. Then there’s shrimp from Newfoundland, which you normally cannot get anywhere – but I can. That is unique.
We’re not bringing anything in from the Pacific Ocean because of [possible contamination] from the Fukushima nuclear disaster in 2011. I’m not touching it and risk finding out five years later that we’re screwed. I’m no nuclear scientist, but from what I’ve read I think there’s more to the nuclear contamination going on …
Aitken: Know what? I don’t think they want the whole conformist appetizer, starter and main thing. In the last year, we’ve paid attention to what people are ordering – many have backed off from the large main course and are more interested in, say, four courses of appetizers. So, Pete and I looked at that and thought, well, why not just get rid of the whole starter and appetizer and just do a food menu?
Now, people are going through and picking five courses of just appetizers, and they’re sharing. It’s inter-active. Where before our dinner cheque average was between $50 and $55 each, now we’re pushing it toward $60 or $62. I didn’t expect that – I was hoping for a flat-line or, at least, no decline in sales. But it’s been up eight points, and that’s significant.
I added a tasting menu and all it says is, try the Chef’s Pick with five courses for $60 for the whole table only. Everybody at the table gets the same. Some of the stuff is on the menu, some of it isn’t. And it’s selling like crazy – it’s 40 per cent of what I sell on the weekends. And I didn’t think that was going to happen because I thought people would say, well, I don’t want this or that. With the chef’s pick, if you don’t want seafood then the whole table doesn’t get seafood. But we will accommodate allergies.
Eade: We’re not talking about diners, delis and dives here …
Aitken: No, we’re talking about kind of upper-scale food. Actually I don’t like the term ‘fine dining’ any more, I’m a restaurant. Period. We are what we are, but I like to think we’re a cut above.
Before when it was starters, appetizers and mains, the chit would come in to the kitchen and the starter and appetizer guys would make a move while the hot line would stand there and wait for the main course orders to come in. Now, when a chit comes in everybody in the kitchen makes a move. It makes things faster, and we can put out food quickly.
People are looking for variety, and they don’t want it to cost $20 a plate for an appetizer. It’s not going to happen. I’ll make my margins on the alcohol with more wine activity at the table, more wines by the glass. Variety is key.
Eade: Other factors challenging the restaurant business these days?
Aitken: A number of things, one being minimum wage at $11 now. I have to cut staff like crazy. I have to make sure my kitchen is running efficiently so now I have fewer cooks. Two years ago we had nine cooks; now we’re down to five. That’s it.
Utilities in the last few years have skyrocketed. Rents — not so bad right now but I’m coming up on a lease renewal …
Inventory is another huge factor, where you can’t afford to have $12,000 of food sitting on the shelf. We run inventory hovering around the $5,500 mark, and then we move it because you don’t want cash sitting on the shelf.
There are months when you’re just scraping by. March and April are brutal, so you try to pick it up with private bookings. August is slow, because everyone is on vacation and the tourists are downtown. These days you have to realize people out for dinner are looking for interaction and value. The more, the better.