The CulinaryWoman Newsletter, 1/16/22

What investors want from restaurants

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What Restaurant Investors Want

Last week, I was startled to see this news story out of Toronto. Crosley, an acclaimed new restaurant known for its multi-course menu and wine pairings, announced Jan. 12 that it had closed.

“Because of the Covid impact on the business our financial partners have decided not to continue to finance the operation," the restaurant wrote in an Instagram post.

How could investors do that to a brand-new place, I wondered?

For answers, I turned to David Silver, the Chicago attorney who has been involved in numerous restaurant deals. I met David through Zachary Engel, the James Beard Award winning chef who opened Galit there in 2019. (You can see dishes from Galit above.) David put together the investor group that seeded Zach’s restaurant.

Galit got off to a fantastic start, winning all kinds of attention for its modern Middle Eastern food. Then came Covid, and like so many places, Galit had to pivot numerous times during the pandemic.

Initially, Covid stalled the opening of some new places, while numerous restaurants closed or went on hiatus. But, there is money available again, despite the uncertainties that the pandemic has caused.

David explained that he puts chefs, prospective owners and investors together, with the expectation that investors will be repaid 100% of what they put up. He writes deals calling for that to happen in three, four or five years. When repayment is achieved, it triggers what David calls “the flip event.”

At that point, profits are shared between the investor and the owner. The length of time required to repay the investment determines the split between them.

Through the pandemic, David says he has not rewritten a single deal. None of the places in his deals have closed, although there have been requests to landlords to restructure lease agreements.

Location — with a twist

The real estate mantra, “Location, location, location” is vitally important in restaurant deals. But not in the way you might think.

Rather than base a decision on the neighborhood itself, David is most interested these days in whether the restaurant’s staff can easily reach the place. “You can’t put yourself in an outpost now, and expect to get staff,” he says.

Ideally, staff should live in surrounding areas, or have an easy commute to reach their jobs. That could mean traveling on one El line, rather than having to change trains, or a quick trip by bike, walking or car.

Another factor is the time it will take to build out a location, once a chef or owner signs a lease. Prior to Covid, landlords wanted a new place to open within six months of signing a lease. “Now, we have to ask for more time, instead of six months, maybe eight or nine months,” he says.

He estimates that build out is taking 30 percent to 40 percent longer than three years ago. “Kitchen equipment is (taking) months and months, rather than a few weeks. Raw materials are significantly more expensive.” Add the time required for permits to that, and it’s a wonder that anyone is brave or determined enough to open a restaurant right now.

Only for the motivated

But, David says that gumption is a defining characteristic of many restaurant owners. “For the most part, restaurateurs have had that (in their) make up,” he says. “Restaurants are such a risky business. They need to have that to start.”

David says the same investors who were backing restaurants pre-pandemic - a variety of attorneys, wealth managers, and community leaders — are still willing to put up money now. But before turning to outsiders, he first wants to see the resources that prospective owners have available.

“My first question (is): who are your immediate contacts that you can reach out to invest in your business? If they tell me they don’t have any, that makes things even more difficult,” he says.

Right before Covid struck, David staged an event to introduce investors to a chef’s concept, which he estimated would cost $900,000. The chef had $300,000 of their own money available; another $300,000 was pledged at the event. That left $300,000 to raise — not insurmountable, in his world..

David says that investors’ excitement is crucial. “You get a couple of investors in, and they know other people who want to invest,” he says.

Despite all the problems that restaurants now face, David has several deals bubbling, and he’s optimistic that all the places will open. One thing sets apart the success stories from the failures. “My folks who survived are all savvy business people,” he says.

If you’d like to hear David discuss some basics of restaurant investing, listen to this podcast interview from Crain’s Chicago Business.

The CulinaryWoman Podcast Returns!

Speaking of podcasts, the CulinaryWoman Podcast is back. In the first episode of Season Two, I share five things you should know about my upcoming book Satisfaction Guaranteed.

You can find the podcast at our production home, Anchor, and on all the big podcast platforms like Spotify, Google, Radio Public and Breaker.

The CulinaryWoman Podcast will be back regularly throughout the winter and spring, and I’m always interested in what you’d like me to discuss.

Fabulous Desserts In Paris

Last week, my social media was full of beautiful photos of desserts from Paris patisseries and cafes. In her newsletter, Dorie Greenspan featured a roundup from Paris By Mouth, the wonderful food tour company run by Meg Zimbeck.

I envy people who’ve been able to go overseas for lengthy stays, like Dorie, or who could get there for vacations, like my friend Blair, who you recently met.

So, enjoy seeing these sweets and beautiful scenery.

Chicken Broth As A Magic Weapon

Last fall, I picked up Stanley Tucci’s best-selling memoir, Taste: My Life Through Food. His charming book includes many of the dishes that were featured on his CNN show, Searching For Italy, and not surprisingly, many of those recipes were for pasta dishes.

As I read along, I noticed a pattern: Tucci really wants us to make use of the starchy cooking water that’s left over when pasta comes out of the pot. So much that starchy water is cited 12 times throughout Taste, from Spaghetti With Lentils to Pasta Alla Norma to Fish Stew.

Now, I’ve often stirred a tablespoon of starchy water into thickened pasta sauce to make it a little smoother. But I have a method that works even better with pasta: chicken broth.

In my story for The Takeout, I talk about three different ways to incorporate chicken broth in pasta dishes. Whether broth comes from a box, your favorite store or you make it yourself, these are ways to incorporate it into comfort food.

Keeping Up With CulinaryWoman

I’ve started a page on my website that’s devoted to events I’ll be holding for Satisfaction Guaranteed. Please check it out, and if you have a favorite bookstore or organization that might like to host me, feel free to connect us.

My email is culinarywoman at gmail dot com. You can follow Culinarywoman on Facebook, Twitter and Tik Tok. My Instagram is @michelinemaynard.

Covid cases where I live have skyrocketed, and they’re disrupting many aspects of daily life. Please stay healthy and be careful.

See you next Sunday!