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VOL. 40 | NO. 38 | Friday, September 16, 2016

Finding success in the shifting restaurant business

Entrepreneurs, chefs offer fresh concepts for changing appetites

By Jeannie Naujeck

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Look at the restaurant to your left. Now look at the restaurant to your right. Chances are, one of them won’t be there by 2020.

The restaurant industry has low profit margins and a notoriously high failure rate. And with new eateries opening by the week in Nashville, it’s reasonable to assume some won’t make it past the critical five-year mark.

And after several years of breakneck growth, the time may be ripe for some shakeout in the restaurant industry.

“My business advisors have always told me, ‘If you’re not growing after the third year, sell,’” says Randy Rayburn, veteran restaurateur whose Midtown Cafe turns 29 this year.

So, what’s the secret, the winning formula that keeps a Nashville restaurant open and thriving for five, 10, even 29 years when so many places end up serving a last supper?


“What makes a concept successful is consistency and quality and the professionalism and passion that the team leaders and team put into their craft over time,” says Rayburn, who closed his landmark Sunset Grill in early 2015.

“It’s hard to create a champion and even harder to maintain a championship level over time.”

Plenty of Nashville restaurants still draw full houses long after the shine has worn off the silverware, such as Lockeland Table and Etch, each of which just turned 4 years old. City House will turns 7 in December, and Margot Cafe & Bar just celebrated its 15th year.

All are upscale restaurants opened by hands-on chefs with strong local ties and located in growing areas. Menu items change regularly, depending on what ingredients are available seasonally. Margot’s dinner menu changes daily but stays of consistent quality with owner/chef Margot McCormack working the line every day with longtime employees.

Ben and Max Goldberg of Strategic Hospitality restaurant group.

-- Submitted Photograph By Andrea Behrends

Exceeding expectations is what Max and Ben Goldberg set out to do with their restaurant group, Strategic Hospitality, which started bringing then-new concepts like cocktail lounges to Nashville before the boom and now has a portfolio of eight very different restaurants, from a downtown honky-tonk to The Catbird Seat, which opened in 2012 and quickly topped national “best new restaurant” lists, bringing guests from all over the country to interact with celebrated chefs in the tiny space (dinner for two costs $300, not including drinks.)

If there’s a common theme, it’s elevated food in sophisticated but unpretentious spaces with warm and gracious service. And each restaurant is a concept that is unique to the market.

“Our methodology for restaurants is we create spaces where we want to go because we can’t go elsewhere,” Ben Goldberg says. “So the minute someone else does that and we love it we’re like, ‘We’ll just go there. Why would we ever do it ourselves?’”

“We’re happy that there’s so many talented people who are now looking at opening in Nashville or coming to Nashville to open,” Max Goldberg says.

“There’s so many great people doing great things in Nashville. It’s the most supportive city you could ever be in, and it’s great to see this kind of attention on it. We hope it really continues to thrive and we’re honored to be a part of it.”

Adapting to changing tastes

As the recent bankruptcy of Nashville-based chain Logan’s Roadhouse indicates, consumer tastes are becoming more sophisticated. Diners expect food to be fresh and locally sourced if possible, and they’re open to new cuisines.

“Fresh continues to be the growing trend and that’s across all segments – proteins, produce, certain dairies,” says Troy Edwards, president of Sysco Nashville, which supplies food to restaurants across the entire dining spectrum. Another trend is more ethnic flavor profiles, from the Far East to the Middle East and even North Africa.

“Those flavors find their way into mainstream dining, from convention space to white tablecloth,” he says.

Jesse Goldstein, CEO of Fresh Branding and a former chef in Charleston before moving to Nashville, attributes consumers’ more adventurous palates to The Food Network.

“When an audience is educated on flavors and they see people on TV and celebrity chefs working with different ingredients, they start to open their minds to trying new things and trying new foods. I think it started with customers wanting to try something different than the typical things that they’d been served.”

They also value their time and don’t want to wait for a meal.

Full service from a wait staff is being relegated to high-end, upscale restaurants, while serve-yourself and limited-service restaurants like Chipotle, Shake Shack, Baja Burrito and Taziki’s are forcing chains like Chili’s, TGI Friday’s, Olive Garden and Outback Steakhouse to retool their business model, shifting away from sit-down service towards more take-out, catering and delivery.

The hottest trends in the restaurant market are “fast casual” and “fast fresh,” the trade magazine Nation’s Restaurant News tells us.

“The leading demographic group are millennials, and they won’t sit for an hour,” says Alex Susskind, a professor of restaurant management at the Cornell University School of Hotel Administration. “They’ll call for delivery, they’ll do takeout, but they just won’t sit for an hour.”

“If they are going to sit down and have an hour to two-hour meal, they’re going to do that in an upscale restaurant. What people are giving up on is that middle-of-the-road dining stuff because they’re just not differentiating themselves enough.

“You can go to a Chipotle or a Five Guys and have a 30-minute experience that is better than sitting in Applebee’s or Logan’s Roadhouse or whatever the brand is.”

That 30-minute experience is what Fresh Hospitality, a restaurant investment and operations group, is trying to optimize across a range of tastes. Its portfolio of fresh casual restaurant brands in Nashville includes Biscuit Love, Martin’s Bar-B-Que Joint, I Love Juice Bar, Cochon Butcher, Little Donkey, Taziki’s, Vui’s Kitchen and The Grilled Cheeserie.

With meals around the $10 price point and seat-yourself or takeaway service, most have lines out the door.

Its newest brand is Greko, a fresh casual “Greek street food” outlet that will open later this year on Main Street in East Nashville, where several high-density developments are currently being built. Pitas will be baked in-house, and souvlaki made from heritage breed, pasture-raised pork.

“They’re doing something that’s different from anything else out there and has a distinct voice,” Goldstein says.

“And as we are dealing with the challenges of having enough great people to staff the restaurants, it only makes sense that you look at mixing up the style of service, to still have incredible food and great experiences but maybe not have to rely on a full-service restaurant.”


McCormack, owner of Margot Cafe and the more casual Marche bistro in East Nashville, says she debated whether to keep the white tablecloths that have lent a slightly formal air to Margot since it opened 15 years ago.

In the end, she and the staff decided to leave them, partly in defiance of the breakneck pace of life outside the cozy French-inspired, full-service restaurant in Five Points.

McCormack was an early and enthusiastic proponent of “slow food,” the precursor to today’s farm-to-table concept.

“I do have white tablecloths, and we do have proper dining service. There’s none of this throwing food on the table and walking away,” she says.

“There’s a certain level of decorum and, you might say, manners. It does sort of intimidate the younger crowd sometimes because they want to just slide in, and when you have a white tablecloth it definitely gives a certain air and tone.

“We do get plenty of young people but we have a more mature crowd most days, and fast casual doesn’t necessarily appeal to them for what would be considered a nice dinner. I still think there’s a place for a certain standard of dining.”

As McCormack reminisces about converting an old service station into the restaurant in what was then considered an edgy part of town, she worries that independent chefs and restaurateurs will have a harder time making it as developers transform East Nashville into a high rent district.

“The restaurant business has a very low profit margin so it is very hard to make a living in this business – not only make a living, but do it well and responsibly,” McCormack says.

“I don’t know that today I could do the same thing that we did 15 years ago. We didn’t have a big bank loan, I didn’t have investors and we didn’t even have that much money. We did mostly all the work ourselves.

“Fifteen years ago, you could throw up a shingle and make a living. How’s the next person going to come along and do that without deep pockets?”

What can go wrong

For the past few years, the hospitality industry has driven sales tax growth in Davidson County, which now contributes about 30 percent of the entire state’s sales tax revenue. That dovetails with a 10 percent growth in population from 2010 to 2015, most from new residents.

The population boom, and Nashville’s now year-round draw of tourists, makes it easy to fill seats in new restaurants that are located in rapidly developing areas, especially near the city’s core.

Dozens of eateries have opened in Germantown to serve the thousands of new residents pouring in.

Urban restaurant group M Street, which owns trendy urban eateries Virago, Kayne Prime, Saint Anejo and Tavern, among others, has grown with the development of The Gulch and Midtown, as have the restaurants Prima and Adele.

That steady flow of new customers can keep a restaurant humming for a while, masking underlying problems with the business.

But to achieve longevity, they need to develop repeat customers. And that’s harder to do in a business where so many things can go wrong.

“There is a huge influx of people who are moving to town and want to be part of that excitement, and I think there are lots of people who say, ‘I’m going to open up a restaurant in Nashville because it’s a good business opportunity,’” says Goldstein.

“Anyone who has opened up a restaurant knows it’s not as easy to do as it is to say. Every element you have to work with is incredibly inconsistent – your customers, your employees, vendors, the economy, the weather. It’s a really challenging business. And with the competition for customers and employees and attention, it makes it even harder to do.”

On a recent staycation, for example, Rayburn decided to check out a few newer restaurants that had opened with considerable buzz. He named two where, he says, at lunch there were “more staff than customers.”

“You just can’t do that very long,” he says.

“We’re beginning to see the shakeout of some of the startups. (Late chef) Mario Ferrari used to say, “The pie isn’t getting much bigger, it’s just getting sliced thinner.”

The biggest reason new restaurants fail in the first few years is not having enough startup capital, says Alex Susskind, who teaches restaurant and foodservice management at the Cornell University School of Hotel Administration, the nation’s top hospitality program.

“They don’t have enough money to do what they need to do in the first couple of years, and they have this large base of expenses that come with starting a business,” he says.

“Restaurants that can’t produce consistent product that people look forward to and love are never going to be successful. You’re just another average restaurant.”

Another pitfall is not matching the needs of the market.


“A lot of restaurants will be in the NFL - Not For Long,” says Tom Gaddis, who runs the culinary arts program at Pellissippi State Community College in Knoxville.

“They come in and think they can run a business in the style they’re used to running it in another state and another location and it’s not going to work in Nashville. There are certain things we expect, and if you don’t meet those expectations you’re not going to be around long.”

Frugality, a commitment to quality, supplier relationships and customer loyalty allowed restaurants like hers to weather the recession, which technically ended about six years ago.

When the inevitable next downturn hits, Rayburn says, he knows who will survive.

“Phases and stages, circles and cycles, and scenes that we’ve all seen before …” he sings, referring to a Willie Nelson tune.

“I once asked Mrs. Ella Brennan of the Brennan family restaurants in New Orleans, ‘To what do you owe your family’s success?’ And she said, ‘In every Brennan restaurant, on every shift, there’s a BOD – a Brennan On Duty.’

“What I take away from that is, if there’s not someone on duty with skin in the game, something’s missing and that is passion and professionalism. Because their life is on the line, too.

“The restaurants where there is caring ownership will prevail. The good ones will stay standing.”

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