Fine Colorado eateries spend big to survive a decade of slim margins | Daniels College of Business

Fine Colorado eateries spend big to survive a decade of slim margins

May 10, 2015

The Denver Post

You’ve had a special dinner out, splurging for an entree priced north of $30. Maybe even $40.

The fantasy has crossed your mind: How great would it be to own a glitzy restaurant, nightly raking in large quantities of diners’ cash? Good luck with that career plan.

For all of the hundreds of new restaurants opening each year in metro Denver, relatively few stick around long enough to celebrate their 10th anniversary.

Among the survivors, some common themes for success emerge. Hard work. Long hours. Crisis management. An element of luck. And all that cash pouring into the till? Well, be prepared to spend most of it on keeping the doors open.

“It’s a very big misconception, people thinking that we have large (profit) margins,” said Jennifer Jasinski, an award-winning chef and co-owner of Denver restaurants Rioja, Bistro Vendôme, Euclid Hall Bar and Kitchen, and Stoic & Genuine.

At the popular, 10-year-old Rioja in Larimer Square, Jasinski and business partner Beth Gruitch scrap to maintain 7 percent margins.

“If you’re in fine dining and bringing 10 percent profit to the bottom line, you are considered a hero in the restaurant industry,” said Bobby Stuckey, co-founder of Frasca in Boulder, now in its 11th year.

“A lot of restaurants never start out with enough capital to weather a small dip in the economy,” he said. “You have such a small margin of error. But nobody wants to talk about that. They only want to hear the romantic stories about success.”

Upper-tier restaurants particularly are challenged to invest, financially and creatively, in maintaining culinary curb appeal.

“A little bit of wear and tear in a casual restaurant is almost permissible,” Stuckey said. “But the expectations are so much higher in fine dining. Customers expect everything to be really nice.”

Five years ago, Frasca spent $1.1 million on a major remodel of the dining room and kitchen. Now, Stuckey is girding to write a check for new Zalto wine glasses, priced wholesale at $45 each.

Rioja closed for a month this year for a top-to-bottom renovation of its dining areas. Jasinski and Gruitch won’t reveal the cost but said it ended up way over budget.

Even though the work took place in January — typically a slower time for restaurants — the Rioja partners estimate that they lost sales of $300,000 to $350,000. But the expense, they said, is a necessary aspect of providing memorable experiences for patrons.

Aside from creating attractive rooms, restaurant owners must maintain a knife-edge balance on menus between new offerings and long-standing customer favorites.

“You have to reinvent yourself in small ways,” said David Corsun, director of the Fritz Knoebel School of Hospitality Management at the University of Denver.

“A regular clientele is hugely important to the survival of a restaurant,” he said. “Customers will come back to what’s familiar, but they are also looking for what’s novel. Regulars are looking for both of those things.”

Table 6, in business for 11 years at East Sixth Avenue and Corona Street, changes its menu almost daily based on the freshness and seasonality of ingredients.

But owner Aaron Forman is well aware that a few core items must always be available to satisfy regular customers. That includes the duck confit entree and the appetizer of tater tots, garnished with smoky dijonnaise and poblano tomatillo ketchup.

“Oh, and the chocolate beignets,” Forman said. “If we mess with those things, we’d have a revolt.”

Forman said his typical workweek involves 60 to 65 hours at the restaurant. His job description varies by the minute. If the dishwasher fails to show, Forman will be washing dishes.

“It’s hard work,” he said. “You have to be consistent, and you have to stay on top of things.”

Despite perennial challenges for restaurant owners, Colorado is a stronger performer than its national peers.

Colorado restaurant sales are projected to grow 4.3 percent this year to $10.2 billion, compared to the national growth rate of 3.8 percent, according to data from the National Restaurant Association.

Analysts say Colorado fares better than the national average because the state’s relatively higher income levels result in more dining out.

“Obviously, Colorado is a very strong restaurant market,” said Hudson Riehle, senior vice president of research for the Washington, D.C.-based association.

“A lot of restaurants’ success long term is not just the site selected, but the demographics around the area,” Riehle said. “In the restaurant industry, demographics become destiny.”