Billionaire Bites

The restaurant business is a hard way to make a buck, let me tell you.If you scoff bitterly at how ridiculous it is that you are “expected” to tip your waiter 20 percent on the bill total, which includes tax and a $90 bottle of wine that could just as easily been $45, then you might wonder why more people aren’t clamoring to be professional waiters. “Obamacare,” or “Trumpcare,” or whatever you want to call it, breezes right past waiters, who make just enough to be seen as not poor but aren’t “wealthy” enough to be able to live without roommates.

Owners have it worse in many ways. Everyone sees the restaurant owner as the glad-hander at the front door, the guy everyone wants to say “hi” to—or have him/her say “hi” to them, actually. They see the check averages, and they see a handful of the owner’s counterparts who are living the high life.

What they don’t see is the 5-percent profit margin, which can be a healthy sum but requires fastidious control of every ledger to achieve, and is always one faint hiccup away from being shaved to nothing, like a $85 block of Parmesan. They don’t see the panicked calls from a porter who discovers that the meat walk-in has failed overnight and $15,000 of meat is trash, or when a pipe bursts in the basement and kills the $6,000 ice machines, or that the bar coolers are suddenly not working at 3 p.m. on a summer Saturday and the refrigeration techs are stuck in traffic.

I had a friend who opened a restaurant in East Hampton a few years ago. He had a small bit of experience in the industry and some folks with a little money to help back him. He thought that being a restaurant owner was about being the guy who made everyone feel welcome, and he relished it.

He started to say to me, “This has been so crazy …” to which I nodded knowingly, thinking he was going to start talking about the hurdles of hiring busboys and getting things fixed and sending back substandard produce deliveries. “… It’s like I’m a celebrity,” he finished—at which point I wondered what the name of the next restaurant in that space would be.

For a restaurant owner who does not have cavernously deep pockets, let me tell you, such feelings of excitement go right into the Dumpster when the reality of what being a restaurant owner really is comes crashing down on you like a first-night food runner who drops $220 worth of food cost and Bernardaud on the floor.

A restaurant owner sweats every dime, every rainy summer weekend, every broken B&B plate, every dollar an hour that this year’s dishwashers are demanding, and every liquor invoice.

Unless, that is, he or she is among the ranks of the Hamptons’ newest brand of restaurateur: billionaires.

Seriously. Billionaires, with a B. Billionaires own restaurants now.

There are, from what I understand, at least three billionaires—men who have made vast fortunes in various other businesses, and now own restaurants in the Hamptons. Five restaurants, by my count.

Rest assured, these men are not looking to lobsters and cosmos to diversify their investment portfolios in case of another recession.

It’s quite laughable, really, when you think about it. That someone whose annual income might be eight or nine figures would see a restaurant that, if it’s hugely successful, might bring in low six-figure profits. It’s like the old Eddie Murphy joke about one of Johnny Carson’s ex-wives who opens a boutique or something, and gives him the pittance of income it makes to claim contribution to the family wealth. Funny.

Funny, that is, to someone who is not competing against said billionaire’s new plaything, and seeing their reservation book—the bellwether of their next tax return—whittled away to satiate someone’s ego or whim or fancy.

The math for these more terrestrial restaurant owners is simple: dinner reservations in the Hamptons are a finite resource. The pie can only be split so many ways, and each new slice takes a bite or two from someone else.

The restaurant business is dog-eat-dog, and anyone who has had their well-being linked to it knows that. But competition is only really competition if it is played on a level pitch.

When an investment company, for whom the bottom line is not actually the bottom, becomes a player in a business where survival one year to the next is a matter of the next liquor delivery bill coming due, that pitch is not level.

I’m not saying that billionaires with restaurant investments just throw caution to the wind and are paying no attention to the bottom line. From what I know of one of these operations, through a colleague, it’s quite the opposite. Such savvy businessmen know where every one of their trillions of pennies lies, and where it will be dropped next. Sure, in this case, they have other people running this part of their empire, but they are keeping close tabs, you can be sure.

It’s been many years now that restaurant owners who have become very wealthy from other interests have bought their way into an industry once populated solely by people trying to earn their livings from your dinner bill. They skew the margins a bit, but most of these players still aren’t willing to absorb losses for more than a year or two. The restaurants are still expected to at least cover themselves and not be a drain.

Billionaires have a different math. I don’t suppose to know what it is exactly, or maybe I’d be one of them, but I’m going out on a limb to guess it is more about long-run property value than food costs and the price of pumping out a cesspool.

Much has been made of Marc Rowan—head of one of the country’s largest hedge funds—and his investments in Montauk over the last few years. But despite obviously large influxes of money, relative to the restaurant world, he’s hit no home runs yet, really. The Duryea’s spruce-up was great and does just fine, I’m sure, and nobody is very eager for him to push the grandiose plans he has in a file somewhere to fruition. Arbor has just been “meh” and definitely hasn’t begun to recoup the substantial investments in renovations, to say nothing of the cost to buy the property.

Now, he’s sent his operation team to Sag Harbor to open two new restaurants there—Lulu Kitchen & Bar, his own game, and fellow billionaire Ron Perelman’s investment in Le Bilboquet, if that is to be the name when the renovations are finally finished. Those likely will be surer bets just because of the walkability of the town.

Noam Gottesman is playing a slightly different game. Also a hedge funder, he has a substantially more developed and multi-tiered investment in the restaurant industry. He owns some of New York City’s most celebrated restaurants—Eleven Madison Park, Nomad, Shuko—and the Highway in East Hampton, now coming into its third summer (no, it’s not still the diner). Eleven Madison Park will open its Hamptons pop-up next month.

Mr. Perelman’s opening of Le Bilboquet is purely a one-off, it would seem, a thing to call his own and maybe make some money on the spectacular property down the road. He’s “hired” Mr. Rowan’s company to run the place—that’s the word on the wires.

So, what are these fat cats doing to those poor saps who have to make sure that the check to the liquor company won’t bounce before they send it? Well, they are making an uphill climb that much steeper.

The product will still win out in the long run. A billion dollars in Silicon Valley stocks does not guarantee that people will flock to your bistro. The competition from Cove Hollow, the new East Hampton restaurant by the owners of Vine Street Cafe on Shelter Island, will deliver the same blow to the reservation books at Nick & Toni’s as Eleven Madison Park will—perhaps more, actually.

But in a business where every punch is a sock to the gut, sucker punches from the guy on the sidelines seem the most debilitating.

So when the guy at the door shakes your hand and is happy to see you, just take note that he actually is there and he is happy to see you.

I’ll have the salmon.