Moving back to Michigan in 1980, Matt Prentice found a shuttered deli he could afford to reopen, a new reason to think he might yet become a restaurateur, and an economic climate that puts the area’s present malaise in perspective.
“We were in the worst part of a Michigan recession; it was really ugly,” recalls Prentice, a Culinary Institute of America dropout, whose Matt Prentice Restaurant Group now extends from the fine-dining Coach Insignia to two delis, including the one he opened at age 20 with $200 left as working capital. “General Motors was rumored to be going out of business, Chrysler had to be bailed out by the government, and Ford wasn’t in much better shape. Things were really, really tough.”
Yet, by comparison with Michigan’s current plight, some might recall that stretch as the good ol’ days.
“Today, it’s a different kind of ugly,” Prentice says.
General Motors announced in November 2005 that it would lay off 30,000 workers, or 27 percent of its North American workforce, by 2008, with three major Michigan plants tagged to close. The company is once again the subject of speculation about a possible bankruptcy—a reality already for the local company that supplies the guts for GM cars, Delphi Corp., whose own job-elimination target also has been estimated to fall in the five-figure range.
Ex-GMers will have a hard time finding work at Ford Motor Co., Prentice’s largest customer. It’s looking to cut 30,000 jobs by 2012.
DaimlerChrysler is presumably not in a hiring mode, either. It set a target of 12,000 firings, though the number could change if the Chrysler half of the partnership is sold, as shareholders have been demanding.
“I have a place in an office building. Two years ago, its occupancy rate was 98 percent. My biggest problem was not having enough spaces to valet-park my customers’ cars,” Prentice says. “Today, it’s less than 50-percent [occupied]. What are you going to do?”
Conditions forced him to close two venues last year, he says “and we’re still in recovery from that.”
But, he’s quick to add, “ ‘recovery’ ends in May. Then we start growing again,” albeit in a decidedly different fashion. The area’s premier independent group, a home-grown version of Chicago’s Lettuce Entertain You Enterprises or New York City’s B.R. Guest, Matt Prentice Restaurant Group is set to branch into health care feeding, a logical extension of its involvement in recent years with the foodservice operations of seniors’ residences and such prospecting efforts as going after kosher-catering gigs and a $50,000 after-prom party.
“There’s business out there, if you know where it is,” Prentice says.
Matt Prentice Restaurant Group is hardly the only restaurant operator today to brainstorm alternative fuel sources as it watches a market’s traditional economic engine run out of gas. In Rochester, N.Y., restaurateurs dependent on local employer Eastman Kodak are contending with the camera film company’s elimination of 25,000 jobs.
In mid-April, New York-based Citicorp disclosed its intention to cut 17,000 jobs and relocate 9,500 others to lower-cost international markets. Four restaurants run by Sodexho U.S.A. in Chicago’s landmark Sears Tower are expected to lose $700,000 during their first year of management by the contract feeder. The 110-story skyscraper lost its namesake tenant and saw its occupancy rate dip below 80 percent. One of its biggest tenants right now: Citicorp.
“That’s the tough thing about the restaurant industry: It’s a business of extremes,” says New York City restaurateur Peter Poulakakos. “Things can be going great, and suddenly, you’re struggling to keep your head above water.”
THE SEARCH FOR NEW MOUTHS TO FEED Matt Prentice tried to be methodical in gauging where the foodservice business was growing in Michigan during the challenges of recent times. But he acknowledges that one of the better opportunities came to him by sheer serendipity. “I stumbled onto it,” says Prentice, who has built his eight-restaurant company during a 27-year stretch in which Michigan’s economy has had its good times and bad times. Dire times in the automotive business, the area’s power train, led to the closing of two venues last year and prompted Prentice to scout for new sorts of opportunities for his Matt Prentice Restaurant Group. Along the way, his attention was diverted to a daughter’s medical situation. But it proved no diversion at all. “My daughter spent seven weeks in the hospital last summer,” he says. “You have a quarter-of-a-million-dollar hospital bill, and you still have to feed your kid every day.” The alternative? “I remember one day that they sent up bouillon—that’s bouillon in parentheses. By that I mean soup base mixed with water.” The experience prompted Prentice to think about the boom in health care facilities and the competition for patients. He realized that quality food could be an important marketing advantage. Less than a year later, he’s looking to outfit the Henry Ford Health System, a major health care provider in the state, with a top-of-the-line foodservice operation. Done in partnership with a local culinary school, the facility will be part of what he describes as a hotel-like health care facility, closer to spa than hospital, with cooking demos and restaurant-caliber fare. Matt Prentice Restaurant Group has been involved with the foodservice at senior citizens’ residences for three years, Prentice said, though he acknowledges that some time was needed to adapt a restaurant mind-set to that world. “I had to learn how to adapt my recipes,” he says. “Eating plays a different role there. Their dinner is the highlight of their day.” Senior feeding, Prentice says, “is an area where we’re going to expand.” For one thing, he points out, “about the only thing you can build today in Michigan is senior housing.” The commercial and residential markets are overbuilt in many areas, and regulatory complications are a big yellow light to anyone who might want to pursue development anyways, he says. Besides, he notes, we’re all getting older. —Peter Romeo
He speaks from experience. His family has operated restaurants in the southern tip of Manhattan for decades, cultivating a niche when the area would turn into a ghost town every night as Wall Street traders and financiers took their dinner business back to the uptown or suburban areas where they lived. Finally, new residential developments raised the promise of greater vitality, and the company’s fortunes looked brilliant. Then came the morning of Sept. 11, 2001, and the ensuing loss of an estimated 100,000 jobs in the area. Landlords found their apartment buildings emptied first by government directive, as facilities were scrubbed of toxic materials, and then by lack of demand.
WHEN LIFE GIVES YOU LEMONS… Look for niches of growth and exploit them. Know your market, so you can identify the less-affected components. Be willing to take a risk on emerging sectors, like banquets or group business. Tap your savings, which should have been set aside when times were good. Be careful about jumping at “opportunities” that appeal more to your heart than your mind, like a bargain-priced site. When business contracts, it’s survival of the fittest in terms of food, service and value. Be the fittest.
Poulakakos tried to turn that very lack of a crowd into a market advantage.
“We advertised that it was easy to eat down here on weekends and nights,” he said, contrasting that hassle-free experience to dining uptown, where the throngs can turn a wait at a popular restaurant into one long, noisy pluck on the nerves.
Meanwhile, redevelopment officials worked with local operators to put together draws like a Lower Manhattan Restaurant Week, when competitors collectively marketed bargain-priced meals. On May 24, the area will host a festival called Downtown for Dinner, where restaurants will gather to offer samples of their fare in hopes of luring customers into their dining rooms at a later date.
Poulakakos and his father also helped to turn a local cluster of restaurants into a dining destination. Stone Street, despite what it offered pre-9/11, was virtually unknown beyond its Financial District setting. Now, on any typical weekday evening, it’s abuzz with patrons, many of whom are drawn from other areas of the city by the closed-off street’s cobblestone setting, ample seating, quaint cafe-like restaurants, and the availability of everything from pizza to steak to Scandinavian fare.
With business coming into the area, and both residential and commercial redevelopment delivering more potential customers, the area is on the rebound, says Nicole LaRusso, vice president of planning and economic development for the Alliance for Downtown New York. As of 9/11’s fifth anniversary, the downtown population had increased by 38 percent, or 10,200 residents, and office vacancies have fallen by 2.5 percentage points, for an occupancy rate of about 88.2 percent.
Restaurants, LaRusso suggests, have been both a beneficiary and a driver of the area’s recovery.
“We could still use more restaurants, but they’ve been coming back,” she says.
Operators have been drawn to the relatively low rents that allow the entrepreneurially minded to try something different, she says. Included among the new arrivals is a branch of Zen Palate, a high-end vegetarian restaurant, and the Poulakakos clan’s Gold Street, a 24-hour diner.
Reaching a critical mass of restaurants, the various observers’ comments suggest, can be more important than the actions of any individual operator when a market shifts from living off a backyard traffic feeder to becoming a dining destination. In the meantime, operators say, you’re often left with few options but to white-knuckle it and try to out-do the place next door.
“You try to offer the best food, the best service, the best ambience,” Poulakakos says. “Hopefully, you’ve put some money aside during the good times, to get you through the tough periods.”
Prentice agrees. “There’s always business to be had, if you exceed expectations,” he says.
But he adds that “in some areas of Michigan, I don’t care how good you are, you’re going to hurt.”
While striving to maintain the caliber of his operations, which currently include eight restaurants, Prentice took an inventory of the area to which he returned 26 years ago after dropping out of the CIA because of a family member’s health issues, his foodservice career seemingly over before it had begun.
“Michigan seems to have two phases: recession and off the hook for a while,” he jests. “This last time around, we took a look at where foodservice sales are growing. Health care is booming right now, so we decided to go after senior citizens’ residences and hospitals.”
His company is both consulting with the self-operated foodservice operations of elderly care and senior residence facilities, and stepping in to manage the facilities.
“We link them to our buying power, which is generally enough to cover our fee,” Prentice says.
Meanwhile, his company is looking to open a top-of-the-line foodservice operation for the Michigan-based Henry Ford Health System network in collaboration with a local culinary school.
“It’ll be more like a glorious hotel than a hospital, with a spa, cooking demos, even making cooking films for the college,” he says.
Meanwhile, he’s continuing to scout for opportunity, be it a party for 150 high school seniors who were part of the new trend toward big-ticket prom nights, or prospective sites whose price reflects the economic climate.
The latter, he warns, has to be approached with more calculation than emotion.
“I look at what I think a site can gross, calculate what 6 percent of sales would be, and then see if the landlord will take that,” he says. “If not, I walk.”
That slice of time when occupancy costs have yet to catch up with a recovering area’s near-term potential is when lemons can really be turned into lemonade—at least that’s what Joyce Bernstein and partner Lawrence Rosenthal discovered.
Bernstein and Rosenthal wanted to move their company, a marketer of devices for monitoring the health of the elderly, closer to a weekend home in the Berkshire Mountains of Massachusetts. They found a landmark building available in Pittsfield, a gritty, one-time blue-collar city that had been a factory town for General Electric until the company pulled out a decade ago.
“Pittsfield had lots of beautiful buildings at fireside prices,” she says.
The facility they chose, an old retail store, featured a long stretch of storefront that looked ideal for a Starbucks or a cafe-style restaurant. Whatever place went in there, Bernstein felt, would benefit from the street traffic that was starting to build from efforts by local redevelopment agencies to turn Pittsfield into a center for the arts.
Bernstein contacted several operators, but “it was not easy to find anyone willing to take a shot on Pittsfield,” she says. “We offered rent concessions and build-outs, but in the end they all said, ‘Sorry, not interested.’ I decided I’d do it myself.”
Their restaurant, a fine-dining outlet called Spice, opened to a capacity crowd last June. “We’ve been mobbed since,” Bernstein says. “We have 250, 350 people coming to have dinner with us all the time.”
She declined to say how much she and her partner paid for the building and disputed a local newspaper’s report of $270,000. But she noted that the paper’s estimate of $4.5 million in improvements was also incorrect. They actually spent $7 million, though for the whole building rather than merely the restaurant.
Now they’re preparing to open two other restaurants on the site: Burger, like the upscale burger places opening in New York City right now, and Sugar, a dessert place.
“We were here before they reopened the Colonial Theater”—a restored landmark that now hosts national-caliber performers—“and did some other things to bring in more cultural attractions,” Bernstein says. “It’s only going to get better and better.”