Sunday, July 13, 2008

Suddenly, everyone wants to be in onsite

If Danny Meyer utters, “Nice day,” weathermen probably adjust their forecasts accordingly. He’s regarded with such respect and admiration that world leaders likely buzz him from time to time at Gramercy Tavern or Union Square Cafe, eager to check their world view against his. And what’s he likely to say if the Pope makes small talk about where the restaurant sage is planning to open restaurants during times like these? The Pontiff must grab his hat when he hears “onsite,” a segment once typified by cafeterias and scaled-down outposts of the big fast-food chains.

Yet that’s the bold expansion initiative that Meyer detailed late last week to the onsite specialist of Nation’s Restaurant News, Elissa Elan. Meyer has created a new division within his Union Square Hospitality Group, an operator largely of fine-dining restaurants, expressly to develop the group’s concepts in pro-sports facilities from coast to coast.

Meyer is hardly alone among celebrity restaurateurs and fine-dining specialists in diversifying during these challenging times into so-called captive markets. A few years ago, Wolfgang Puck and Todd English snagged a sea of ink by lending their menus and reputations to airport locations. Once a footpath, that alternate route is quickly being trampled into a major thoroughfare as operators seize the opportunities of opening in department stores, sports and concert arenas, bus and train stations, casinos, hotels, ski resorts, even spas. It may be just a matter of time until a hospital patient can call down and have a meal brought up from the Gordon Ramsay outpost on the main floor.

Meanwhile, a whole new wave of chains, full and limited service, are right there with the folks in chef’s whites, vying for their piece of the onsite scene as well. As Elan also reported last week, you can now add IHOP to a list that already includes nearly all of the big casual-dining brands.

The deals are as diverse as the concepts involved. But you can readily assume some common advantages. For one thing, there’s the attraction during a time of softening streetside traffic of having a built-in market of sorts. The business can come in peaks and valleys, depending on events and the season of the year. But those peaks can be pretty high.

Operators also cite the sweetheart deals that some places will extend to put a big-name brand on the premises. And even without significant build-out assistance or a dream rent, the situation carries certain incremental advantages that can add up to a big plus. Several years ago I had dinner with a casual-chain operator who’d just landed his first casino location. The volumes he expected were astronomical, based on the host facility’s traffic. But, he noted with glee, his costs would be cut by piggybacking on the place’s purchasing, maintenance, inventory-control and credit card processing functions. It amounted in his case to a point or two of margin.

Of course, the risk is also sky-high. Screw up in a streetside location and you damage your reputation in the local market. Botch things in a site where half the world can be turned off and you have quite a comeback to engineer, on virtually a nationwide scale.

Which brings us back to Danny Meyer. He’s revered as the Jimmy Stewart of the restaurant industry in part because he foregoes gimmicks and bandwagon jumping. As he told Elan, USHG’s new Hudson Yards Sports & Entertainment division will try to learn next year from its initial at-bat, at the New York Mets’ new homefield, before swinging for the fences. It also plans to work with an experienced concessionaire, starting with Aramark at the Mets’ new Citi Field.

But his decision to move into onsite will likely be taken as a sanction. Meyer has yet to close a restaurant, or even backtrack from one of his initiatives.

Indeed, one of his most successful endeavors, the Shake Shack retro-styled burger concept, was actually a good deed that turned great, like cutting the elderly neighbor’s lawn and discovering oil in the process. It started as a cart in Madison Park, across from his Tabla and Eleven Madison fine-dining restaurants. Meyer’s staff sold hotdogs in the park as a public service, a payback to the community. The dogs became so popular that the city gave Meyer a nifty 1960s-style building in the park, where the lines were soon dozens of people deep.

Now Shake Shack generates volumes that rival some of Meyer’s white-tablecloth places, according to members of his organization. No wonder it will be one of the anchor concepts of Hudson Yards, with each new stadium or arena likely to sport one, according to Meyer.

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