Fair question from our perspective and it is that perspective that defines our position. Granted we have pulled no punches in calling out by-the-glass failures, wine list pretense and sommeliers who have more attitude than anything else. But, as much as we have great expectations about what the fine dining experience should be, we do like to eat out and enjoy an innovative menu.
We have a lot of friends in the restaurant business, so it’s not like we’re against eating out. But we do have a little bit of an edge developed over the years working as ‘second class citizens’ in an industry that treats eateries with kid gloves and creates more advantageous programs with minimal purchase requirements for them. Why should a restaurant literally pay less, sometimes substantially less per bottle, for a two case wine order than a retailer for an order 10 to 20 times that size? There is no business logic for that, particularly when one takes into account that restaurants are one of (if not the) highest failure rate businesses in the country. Yet it has been that way since we started.
We have had plans to address this fine dining issue for some time, but more in the context of what we see happening around us. We’re talking about the disappearance of the ‘white table cloth’ venue. Yes there are still a number of them that have opened in hotbeds like San Francisco, New York and Las Vegas. But the upscale burger palace and pizza spot have been proliferating at a much faster clip than what one would consider ‘traditional’ restaurant concepts.
Yes there are still steak houses. But how many have opened recently around you? You are much more likely to see places that serve ‘gourmet burgers’ (at $20 or so) and have an extensive selection of IPA beers, with wine service that has been given little thought beyond having both colors (red and white). The point is that places like fancy burger joints, upscale pizza places and, of course, those places dedicated to permutations of the chicken wing, are essentially a step up from the fast food the ‘next generation’ grew up on.
Is this upscale dining these days? Does Michelin have a special section for ‘gastro pubs’ and ‘wine bars’? Given the rate at which these types of venues are opening these days, they surely must be popular. But what kind of experience is the diner getting for these elevated costs? By the time you have a couple of cocktails and a couple of upscale ‘angus burgers’, the costs aren’t insignificant. Is this the millennials idea of ‘living large’? Or is this what they can afford simply because true ‘fine dining’ has become prohibitively expensive?
The other day we heard an interesting term from a well known vintner who, though he put it in a nice way, suggested that they were deigning to visit retailers like us because of the ‘restaurant crisis’. Huh? There was a clear vision in this fellow’s mind of restaurants being ‘costed’ out of existence. Rents for certain places have become almost laughably steep, food costs have been erratic, and little employee amenities like extra ‘paid’ sick days and medical insurance mandated in places like San Francisco have made profitable operation quite a challenge.
As this gentlemen went on to say, “restaurants can’t make money on food any more” and are forced to rely more on “beverage” for their profits. Essentially that translates to restaurants demanding even heavier discounts and favorable pricing to improve their bottom line from suppliers. Also, he pointed out that a lot of restaurants are raising the ‘multiples’ on their wine lists, making, say a $20 wine that would have been $60 under the old system, now closer to $100. First of all, restaurant wine was expensive enough before, so making it more expensive hardly seems like a well thought out solution.
Second, you can’t bank ‘percentages’. You bank dollars. So raising prices could (and usually does) have the opposite effect by lowering sales and thereby potentially decreasing profits. With all due respect to Uber, the stricter alcohol laws have probably lowered ‘on-sale’ wine sales over the years anyway.
So what do we have to look forward to? Well one might presume those large, cozy restaurants are a thing of the past, unless they are underwritten by a hotel or some other entity for which the restaurant is a draw that pays off in other ways. Restaurants have been seemingly getting smaller by virtue of the costs of rent and labor. Usually the sizeable venues are going to be chains that can survive based on economies of scale. This of course comes with the corporate mentality that can tone down the innovation part of the dining experience.
An emerging scenario is the deliberately small, fixed menu establishment. Something on the order of 18-30 seats, which makes the staffing needs less, with a fixed menu so food costs are much more controlled. This seems to be the ‘new wave’, gives the chef great latitude in what to serve since they know exactly what they will need, and can provide an amazing experience. Of course these experiences seem to come at a considerable cost. Dinner for two, a couple bottles of wine (with those hefty markups), tax, tip, some sort of add-on percentage for staff health care or some such, and an Uber, can run well over $1000. That’s a lot of ‘wings’. Also, they are charging for the meal up front. So lord help you if you get the flu. Talk about the hidden costs of illness.
Where is this going? Well, certainly the restaurant landscape is going to continue to change. Restaurants (and menus) are trending smaller, and more of the middle tier of restaurants, mostly chains, is proliferating. For a lot of folks, that’s OK. There are lots of people that like to go to the same restaurant, sit in the same chair and order the same thing (we find fine wine buyers to be substantially more adventurous as a rule). And, yeah, there will b a good number of ethnic places, too. But we may be seeing the last of a certain ‘maverick’ breed that has influenced the food scene over the last few decades.
Where are the next icon eateries going to come from? Great chefs may have to start with food trucks because of the prohibitive costs of opening a brick and mortar venue. Maybe everyone will be cooking in business parks and serving via UberEats or Eat24, or in a food court of some sort. The problem we see is that the next generation of innovators, new versions of places like Spago, Valentino, Providence, French Laundry or Boulevard, will have a much lower chance to survive and become an icon. It has never been easy. But with the current rent scenarios, mandated entitlements, and, of course, a near-double minimum wage, the road is going to be much harder for aspiring chefs and their investors.
For our part, we like to eat out, though we do have a little bit of trouble with a meal costing as much as a house payment. We, like everybody else, will see what develops. The only thing for sure is that it will continue to change, and not necessarily for the better. As for the ‘restaurant crisis’, what our vintner friend was talking about is real for wineries. With an ever increasing number of premium wine labels, serious competition from imports, and what promises to be a lot fewer places dealing in those kinds of wines in general, a lot of ‘upscale wines’ will have trouble finding homes. Then what?.






