When to Walk Away From A Deal: A Frank Discussion with Five Top Chefs
by Amanda McDougall
photos by Vicky Wasik and Antoinette Bruno
Antoinette Bruno - photo by Ken Browar
Norman Van Aken
Restaurant Info La Fonda Del Sol 200 Park Avenue
New York, NY 10166-0005
239 West Broadway
New York, NY 10013
4012 Central Florida Pkwy
Orlando, FL 32837
It’s an ever-present question for chefs who want to open their own place (and don’t have the cash do go it alone—the case more often than not these days): am I getting a good deal?
Let’s be frank, most chefs are chefs; not business people. The realms tend to be mutually exclusive. As Norman Van Aken described one of his past relationships with a partner: “He was the business; I was the art.” It sounds like a perfect scenario, and in some cases it is. But more often than not, the artist gets, well, screwed.
StarChefs.com Editor-in-Chief Antoinette Bruno has been hearing the woeful tales of chefs getting the short end of the stick in their restaurant deals for years now; thus the impetus for our recent Congress business seminar “When to Walk Away From A Deal.” The September 22nd morning seminar included a talent-packed chef panel of Norman Van Aken (Norman’s 180, Coral Gables), Josh DeChellis (La Fonda Del Sol, New York), Paul Liebrandt (Corton, New York), Akhtar Nawab (Elettaria, New York), and New York-based consulting chef Joe Isidori. Bruno, already familiar with the details of many of the chefs’ previous and current deals, led the panel and pressed the chefs with hard-hitting questions with intrepidness. “I’ve wanted to do this panel discussion every single year,” she explained. “I think it is the most important panel of the entire Congress.”
Van Aken was the senior statesmen of the group, with over 30 years of experience in the restaurant business, and was apt to share his lessons with the group: you can negotiate menu control; most people won’t get 51% share in the company—most won’t even get 25%, he added; and most won’t be able to say "This is my restaurant." “I walk away when I feel like my values are being compromised,” he said of a more recent break with partners. “You need to have an honest conversation with the people you intend to go into business with to see if your ideals are aligned.” Of his most recent project Norman’s 180 (with his chef/son Justin Van Aken; due to open by the end of 2009), Van Aken described the deal structure as simple: he is a full partner but doesn’t have controlling interest, and perhaps more importantly, his deal is with people he’s already been in business with for years, but they’re investors, not operators.
Paul Liebrandt, after a gut-wrenching experience at Gilt, echoed a similar lesson. Liebrandt entered a deal with one of the richest men in the world (who hired nouveau riche Londoners as managers) to be the opening executive chef/partner of Gilt in the New York Palace Hotel. He was signed on to create the restaurant space, hire the entire team, and develop the concept and menu. After noticing wonky numbers, and the hotel managers accused of (and eventually deported for) embezzling millions of dollars, Liebrandt was fired over the phone while on vacation in France. He described his dismissal as dismissive at best: “by the way, we’ve decided to change the entire concept, you and your entire staff are no longer employed here.” “Choose who you go into business with very carefully” he warned. For his next partner, famed New York restaurateur Drew Nieporent, Liebrandt had the satisfaction of knowing Nieporent’s successes, but he still did his due diligence by, as he described it, going to dinner and just talking person to person.
Akhtar Nawab also learned the hard way the importance of having a good partner. When Nawab took the helm of the yet-to-be-opened Allen & Delancey, he admits that he was “very inexperienced about the business side of things at that time.” He agreed to be a profit-sharing partner while Richard Friedberg would be the sole proprietor. The problem: the restaurant took an astronomical amount of money to build, and after months of delays (and no paycheck the last two months), the chef cut his losses and left before Allen & Delancey even opened. “I didn’t know [Friedberg] very well,” Nawab explained, but for Elettaria, “there was one investing partner who I met through somoen else, but everyone else I’ve known for quite some time.” He and his business partner raised 51% of the money, and 49% came from investing partners, one of whom ended up being a landlord Nawab had befriended. The ultimate (and recent) demise of Elettaria, Nawab said was an issue of location, high rent, and a business model that didn’t work with the economy.
For Josh DeChellis it boils down to knowing what you want going into the deal: “the biggest thing you have to ask yourself before you get [there] is what’s important to you, what are my goals.” Unlike many of the chefs on the panel, DeChellis had a very good relationship with his partners Zak Pelaccio and Rick Carmac at BarFry, their short-lived American tempura bar. He was the chef and operator and had real equity—a bigger slice of the pie than many chefs get—but, the problem was, as DeChellis put it “we weren’t doing the gravy.” He described the closing of BarFry as his own decision; he took a hard look at the numbers after the first 120 days and despite the unflagging support of his partners, he went to them and told them they needed to close. His equation: you see how much you have in your bank; you know what it costs to stay open each week, and you count how many weeks you have to go, and you decide how close you want to cut it. “That’s how reasonable people assess it,” he said. “What did I get out of it?” DeChellis concluded, “I have two guys who I can do future deals with together.”
The first deal for Joe Isidori was with notorious deal-maker Donald Trump. After four years of working for Trump as executive chef of his resorts and his personal chef, Isidori was appointed Vice President of Food & Beverage of 17 luxury hotels and was solely responsible for the F&B operations at the Las Vegas Trump International Hotel and Tower and its flagship, 5-star restaurant DJT. “I had a good relationship with [Trump] for four years already. I could go into his office and close the door,” Isidori described their relationship. What went wrong? The economy. Isidori also underestimated labor costs. He also emphasized the importance of going into a deal with realistic goals (in terms of costs and expected revenue) and expectations (in terms of what happens if you don’t hit your numbers). In a more recent deal-gone-wrong, Isidori admitted to not doing his due diligence before shaking hands with Richard Schaeffer to open TriBeCa’s Harbour restaurant. “Diligence is great, but when you need a job... the almighty paycheck rules. I got nipped in the bud for being impulsive.”
In the end, the lessons on when to walk away from a deal were clear. First and foremost, know your partners before you sign the dotted line. Whether through years of friendship or business relations, mutual friends, or sheer investigative due diligence, find out who your prospective partner is and what other people think of him or her. Secondly, go into the deal with realistic expectations on all sides. Spell out your expected costs, revenue, timeline (for earning revenue), and what happens if you don’t make your numbers. Lastly, have an exit strategy: know what you want to get out of the deal, and have a plan to walk away if you’re not getting it. Paul Liebrandt captured the overall conclusion of the panel: "The relationship is everything… Life is about relationship in every aspect of everything, in every business, in everything you do… it’s very simple. You have to really have the same symmetry and see eye-to-eye. It has to feel right—your gut tells you it’s right.”
Of course, real life experience is always the best teacher. After all, there is good reason for the old adage: that which does not kill us makes us stronger. Surely, every one of the chefs on the panel are stronger and better chefs and business people after each of their deals. Hopefully, this discussion will also make you a stronger deal-maker.
Interview with Corton Chef Paul Liebrandt.
VIdeo: JJ Proville
Un-edited Audio of When to Walk Away From A Deal panel discussion in its entirety.