“Unbeknownst to diners Wall Street may be paying you a
Dividend ….well sort of.
In this era of the food boom restaurants open and close with breathtaking speed. An entire subculture of food enthusiasts “like ourselves” are over exposed to a daily barrage of on-line food “journalism”. There are restaurant reviews, ratings, news of restaurant openings and closings, best rankings, staff gossip from such sources as Eater, Grub Street, The Feast, Bon Appétit, Food and Wine magazine, The Daily Meal, and of course the food and restaurant sections the major newspapers. In New York City, for example, there are more than 24,000 restaurants and there is news of openings and closings and rankings daily. Much of this news are for restaurants generally in “mainline” places like lower Manhattan, Williamsburg, Park Slope, and other gentrified neighborhoods throughout Brooklyn which have become the epicenters of hip new dining places.
There are of course hundreds of openings and closings in the outlying areas each month that we never hear about. So why are there so many new restaurants constantly opening in the epicenters of not only in New York, but, also Chicago, LA, San Francisco and most of the major cities?
The answer may come from Gary Sernovitz a Wall St Hedge fund manager, author and writer who says in a recent article in the New Yorker that “ amateur capital backed by magical thinking and a desire for fun distorts the economics for everyone. So in a way it’s good for us foodies that talented young chefs and entrepreneurs get bankrolled by ” the funny money” of the very wealthy to start restaurants that statistics and logic say should never open. In NYC alone the bonuses paid by the financial industry were more than $25 billion.
Anyone who has thought about opening a restaurant has faced the daunting economic model that shows that most restaurants are doomed to failure. The ones that succeed often have a bottom line that represents a piddling 2 to 10% of sales. In many cases this profit margin is less than 2%. Depending on the total volume of sales, these stats show that most often a profitable restaurant provides nothing more than a job for its owners and very little return to investors.
There are however a lot of exceptions especially involving the celebrity chef /owners. Among this celestial class, restaurant failures are less frequent and profitability may generally be greater than the norm. Celeb restaurants can even operate at a loss to support the celeb’s overall brand, which these days includes cookbooks, kitchen ware, appliances videos, prepared food items and condiments and what else tours ! You know the buy a ticket kind of tour where you pay to see a food idol, like Bourdain who muses and cracks a lot of jokes about his experiences.(Tony’s tix can go for more than $200 each btw)
So thanks Wall St and all the hedge funds for making so much dough
and passing it out to so many restaurant start-ups, which fill the galaxy of dining out with so much diversity. What fun! Here is a list of some never happen places, that happened and we will soon try to enjoy.