I Really Hope It Won't Be This Way!
Dara and I went to eat in New York City on Friday. We drove in because neither one of us has any interest in taking the train yet. We cruised through the mid-town tunnel and then had no problem driving up 3rd Avenue, across to 5th Avenue and then down past “the tree.” I was literally able to stop the car in the middle of the avenue to look at the tree in Rockefeller Center and watch the light show on Saks Fifth Ave. On a Friday…In December. It was sad!
Then we made our way down to TriBeCa to grab dinner at an Italian restaurant that we have gone to with friends in the past. L'Angelo is doing a great job trying to survive. They have tables set up outside and each table has its own heater. Even with that, it was cold. If you want to sit outside you now need to be in full winter gear. I don’t like eating that way. No one was inside, so we went in. Better! As usual, the food and the service were amazing. If you are in the city, you should go there!
You see, I enjoy eating out. I love restaurants. I think that some chefs are artists. I think that the meals that they create are similar to the works of a painter or a sculptor or a photographer or even a choreographer. A well thought out recipe is on par, in my mind, with a good concert (or a symphony if you are fancy). I have a tremendous amount of admiration for the chefs who are truly creative and talented. Here is a little know fact, my answer to the question “what would you most want to do if you didn’t do what you currently do?” is chef!
What I really like is the whole experience: the setting, the food, the wine, the service…all of it. I don’t want to be shivering outside in my winter coat, barely able to move because I am in layers. But, unfortunately, this is where we are now.
In TriBeCa, I can only describe the scene as “bombed out.” Empty restaurants, shuttered stores. Little to no foot traffic. The place where we were married in April 2019, closed (we hope they reopen). My favorite wine bar (closed, doing online wine events). It was sad! What sets these places apart and makes them great, is that the employees are creative, the chefs are talented and there is originality to the menu and the food / wine pairings. My fear is that many of these places are not going to make it through the winter. I am sure it is like this all over the country and even the world.
Then I read this, about Starbuck (SBUX) in the Financial Times and I started to wonder if this is what we are in for.
“Smaller specialty chains, the mom and pop coffee shops . . . don’t have the balance sheets that Starbucks has,” said RJ Hottovy, consumer equity strategist at Morningstar. Larger groups have also struggled: Caffè Nero, the UK’s third-biggest chain, has been forced into a financial restructuring, while Pret A Manger has axed 3,000 people. “There’s going to be a lot fewer coffee shops,” Mr Hottovy noted. “Starbucks stands to benefit from that.” Mr Johnson strikes a sympathetic tone, saying he favours further government stimulus “to help small businesses of all kinds, even independent coffee shops”. But he added: “We have line of sight to grow faster than the addressable market, which means we’re going to be taking market share.”
Is this what the entire hospitality space is going to become. Not just coffee shops but restaurants & hotels too. Cookie cutter, little to no personality? No up and coming chef testing new ideas on adventurous diners across the globe? Don’t get me wrong, I love Starbuck, I am a happy owner. The stock just went to a new all-time high.
But, I really hope that this is not how it’s going to go. It would pain me to see New York City filled with nothing but restaurant chains where small creative businesses used to be. Generic, homogenous. Maybe I should take some cooking classes to try to keep my dining experience creative. As investors, we have to think about this as a real possibility, not my cooking classes but the rise of the chains. We have to put emotion aside for the time being and look for the opportunities.
When you hear New York City and restaurant, you should immediately think of Danny Meyer. And if you haven’t already, you should read his book, Setting the Table: The Transforming Power of Hospitality in Business. Danny started Shake Shack and it is a public company. I have owned it on and off over years and should probably give some real thought to adding it back…if this is how it’s going to be in NYC. Right now, the chart is not compelling though.
I bought McDonalds on the breakout in September, the breakout didn’t stick so I sold it at a loss. It’s a great business but right now the trend is sloppy, so I will leave it alone.
There are already a few Capital Grills in the city. How long before there is an Olive Garden or two? It could happen. Both brands are part of Darden Restaurants, Inc. (DRI), which is close to making new highs.
Investing is very much a lesson in playing the hand you are dealt. The food person in me truly hopes that our choices will not be “which of the big chains” are we going to tonight! The investor in me is already looking for the potential winners if this is the fate that is in store.
*Nothing in this note should be considered investment advice. If you are enjoying reading my thoughts everyday, please consider sharing them.