New York Restaurant Group, Inc. Business Information, Profile, and History
New York, New York 10021
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History of New York Restaurant Group, Inc.
The New York Restaurant Group, Inc. (NYRG) owns and operates high-priced restaurants in New York City and several other cities. Founded by Alan Stillman, who originated the T.G.I. Friday's restaurant chain, NYRG is best known for its Smith & Wollensky steakhouse in Manhattan. Of NYRG's 12 restaurants in 1999, eight were owned and four were operated by the firm; six were located in Manhattan. The company was planning to make an initial public offering of stock, probably in 2000. It was then expected to change its name to that of its flagship Manhattan restaurant, Smith & Wollensky, which was said to be the most successful single à la carte restaurant in the nation.
Smith & Wollensky and Others: 1977-89
Alan Stillman was a salesman living on Manhattan's Upper East Side in the mid-1960s. Perceiving that the many affluent unattached young people in the neighborhood needed more places to meet and mix, he took a lease on a rundown bar on First Avenue and 63rd Street with $5,000 borrowed from his mother and opened one of the first singles bars, which he called T.G.I. Friday's. Stillman opened, with partners, about a dozen other Friday's in other cities as well as several Manhattan restaurants with names such as Tuesday's, Wednesday's, and Thursday's. In the mid-1970s he sold his share of the Friday's chain (an act he later described as his biggest mistake), reportedly for $1 million, to Carlson Companies, except for the original, which he kept until 1987 and then sold for a reported $3.8 million.
By this time Stillman had turned to serving a more mature--and more affluent--clientele. Backed by Ben Benson and other investors, in 1977 he purchased Manny Wolf's, a restaurant in a landmark 1897 building on Third Avenue at 49th Street, and converted it into a steakhouse named, for reasons still obscure, Smith & Wollensky. The restaurant was not an instant success, and in spite of gimmicks such as slices of roast beef offered to passersby, few people entered at first. 'We came very, very close to selling,' Stillman recalled to Pamela Kruger of the New York Times in 1993.
Instead, Stillman went back to the investors for money, added a 100-seat lower-priced grill next door, and launched an effective advertising campaign. Gael Greene, the restaurant critic for New York who rated Smith & Wollensky last among the ten steakhouses she reviewed in late 1978, conceded, 'The house is often crowded. The faces are young and seem happy.' By 1984 the restaurant, several times refurbished and enlarged since its opening, was worthy of inclusion in Gourmet, where Jay Jacobs noted, 'Typically, the place is about as serene as an ordinary day in a boiler factory.' He called the meats and fish 'top-quality stuff ... served in massive portions, and with very few exceptions ... prepared precisely as they should be.'
By 1990 Smith & Wollensky was a smashing success, perhaps 'not the best steakhouse in town,' wrote restaurant reviewer Bryan Miller of the New York Times, 'but it is probably the busiest. ... Smith & Wollensky is an efficient feeding machine ... that churns out more than 700 meals daily.' By this time the 380-seat restaurant was more than a steakhouse. Although steak and prime rib continued to be best-selling individual entrees, seafood now made up 40 percent of the menu. Sales volume, including the adjoining grill, came to $17 million in 1989, with the average check for the main room at $38 for lunch and $50 for dinner.
Stillman opened two more midtown Manhattan restaurants in the early 1980s. The Post House, launched in 1980, was a steak and chop house with an American theme. Restaurant reviewer Moira Hodgson of the New York Times wrote, 'This unpretentious yet elegant restaurant offers high quality, straightforward food in a thoroughly pleasant, relaxed atmosphere. ... This is not the fare of Puritan austerity. The proportions are enormous. ... The choices are the same at lunch and dinner, with prices identical, at expense-account level.' The Manhattan Ocean Club, opened in 1984, was a high-end seafood restaurant. Reviewing it some months later for the Times, Marian Burros wrote that the eatery 'is playing to large crowds, despite high prices and some inconsistencies.'
By 1984 these three restaurants formed the New York Restaurant Group, which in 1993 encompassed a complex series of partnerships, with Stillman as general partner and owner of 25-85 percent of each restaurant. (NYRG, for example, was the operator, not owner, of Smith & Wollensky. Its owner, in 1999, was St. James Associates, in which Smith & Wollensky Operating Corp., controlled by Stillman, was a general partner.) Each of the group's nine managers had been with the company for more than a decade in 1989, and 25 of the 450 employees had shares in the enterprise. Michael Byrne, who began as a bartender, had been director of operations since 1980 and had been supervising Smith & Wollensky on a daily basis for more than ten years.
Stillman, not a hands-on manager, spent at least two months of each year on combined business and pleasure travel abroad. A lover of fine wines and artwork as well as haute cuisine, he owned a vineyard near his Long Island oceanfront estate and had been featured on Robin Leach's television program 'Lifestyles of the Rich and Famous.' The luxurious restaurants of the New York Restaurant Group reflected his epicurean tastes. Smith & Wollensky carried at least 45,000 bottles of wine. The Post House was decorated with American folk art, and the Manhattan Ocean Club displayed Stillman's collection of Pablo Picasso's pottery.
Expansion in the 1990s
La Cité, described by New York Restaurant Group as a Parisian cafe-style restaurant, opened in midtown Manhattan near the end of 1989. It was still struggling to make money in 1993, although Stillman had revised the menu, lowered prices, added a 70-seat grill, and shortened the name to simply Cité. Reviewing it late that year, Gael Greene approved the changes, noted a greater emphasis on meat and a longer wine list, and added, 'I find it the handsomest steakhouse in town.'
Park Avenue Cafe, characterized by the company as offering 'cutting-edge new American cuisine in a cafe atmosphere,' opened on the Upper East Side, but only a few blocks north of midtown, in 1992. It was under the direction of chef David Burke, who had been lured from River Cafe, his previous home, where he made a name for concoctions whimsical and even bizarre. Greene declared, 'Burke's tornado of creativity is delivering mostly remarkable food,' including a 'swordfish chop' carved from the seldom-used collarbone and neck, house-smoked salmon atop corn blini, scallops on braised oxtail, and duck-and-chicken pie rich with wild mushrooms, asparagus, and potato in a biscuit-like crust. New York Restaurant Group sold The Post House that year but continued to operate it under contract.
By 1993 Stillman was estimating that he was feeding one million people a year, with the dinner check at New York Restaurant Group's five operations averaging at least $47.50 and perhaps as much as $60. Described by Kruger as 'Using marketing savvy-street smarts and a Donald Trump-sized ego,' Stillman had built an organization that claimed to have annual sales of $42 million, including $19 million for Smith & Wollensky. More than $1 million a year was being spent on promotion, including full-page ads in the Times, Forbes, and Fortune and commercials on cable television. Stillman had employed at least four advertising agencies in the last five years and was fond of such publicity stunts as roasting an entire steer outside The Post House.
During twice-a-year Wine Week, beginning in 1986, his customers were offered a choice of free wines for sampling during lunch; at Cité unlimited free wine was offered beginning at 8 p.m. to fill a room typically vacated by diners moving on to nearby theaters.
Park Avenue Cafe introduced a Chicago locale in 1994, closely duplicating the original, on the second floor of the Guest Quarters Suites hotel (later the Doubletree Guest Suites hotel). New York Restaurant Group already had opened a more casual Mrs. Park's Tavern on the ground floor of the hotel. Both were later sold to Doubletree, but NYRG continued to operate them.
New York Restaurant Group, L.L.C. was formed in 1995 as a holding company for a series of partnerships and limited liability companies anchored by Stillman but involving as many as 40 investors. In early 1996 Stillman sold 23 percent of the company to the Thomas H. Lee Co., a Boston-based investment house, for as much as $15 million. This sale wiped out the company's debt, according to Stillman, reduced the number of NYRG's investors to about ten, and provided the means for financing Stillman's plans to expand the group's operations to other cities.
In 1996 New York Restaurant Group launched Maloney & Porcelli. Located close to Smith & Wollensky and named for two lawyers Stillman had hired to negotiate a liquor license, the new restaurant was essentially a steakhouse, although its piece de resistance was a 2
After what Stillman described as 16 or 17 years of trying, his Smith & Wollensky partners agreed to license the name to NYRG and allow expansion. The group then spent almost $8.5 million to convert a former seafood restaurant in Miami Beach into a replica of the original Smith & Wollensky. When it opened in late 1997, this branch had the largest seating capacity--670--of any NYRG restaurant at the time. Other versions of Smith & Wollensky opened in 1998 in Chicago (overlooking the Chicago River), Las Vegas (on the Strip, with 675 seats), and New Orleans (on the site of a registered national landmark) and in 1999 in Washington, D.C. All were owned by NYRG and were on leased property except for the New Orleans site. Appointed president of New York Restaurant Group in 1998, James Dunn was in charge of opening the new restaurants. Byrne remained director of New York operations and was a limited partner in St. James Associates.
New York Restaurant Group in 1999
New York Restaurant Group, Inc. was formed in 1997 by a merger with New York Restaurant Group, L.L.C. The cost of opening new restaurants threw this enterprise into the red, with a combined loss of almost $5.5 million during the years 1996-98, despite the rise in revenues (for group-owned restaurants) to $52.8 million in the latter year. The long term debt was $17.6 million. Counting restaurants operated but not owned by NYRG, sales came to $89 million. Sales of $24.7 million for the year ended June 28, 1999 made Smith & Wollensky's Manhattan site one of the highest grossing single restaurant locations in the country.
Second place in revenues for this period--$10.3 million--belonged to Maloney & Porcelli. In third place--and first among NYRG-owned restaurants--was the Chicago Smith & Wollensky, followed by Cité, Manhattan Ocean Club, and Park Avenue Cafe. The Las Vegas Smith & Wollensky, although open for only the last seven months of this period, had sales of $7.9 million, the same amount as the Miami Beach Smith & Wollensky, which was open for the entire period. The average check per person in this period ranged from $73.60 at The Post House to $24.30 at Chicago's Park Avenue Cafe (including Mrs. Park's Tavern). NYRG was stocking 92,000 bottles of wine. Stillman held 30 percent of the company's shares and Lee held 23 percent in mid-1999.
Stillman planned to make an initial public offering for the New York Restaurant Group--which he planned to rename Smith & Wollensky Restaurant Group--in the fall of 1999. The company issued a prospectus that, at 972 pages in length, reflected the complexity of its organization but postponed the offering because of lukewarm investor interest. While awaiting a new offering date, NYRG announced a joint venture with New York City's Plaza Hotel to create and run a new restaurant concept in the space previously taken by the Edwardian Room. It also was planning to open Smith & Wollensky units in Atlanta, Boston, and Philadelphia. A Maloney & Porcelli was scheduled to open in January 2000 in Washington, D.C.
Principal Competitors: Morton's Restaurant Group, Inc.; Ruth's Chris Steak House.
- 1977: Alan Stillman opens Smith & Wollensky.
- 1984: NYRG now includes The Post House and Manhattan Ocean Club.
- 1993: NYRG is feeding an estimated one million people per year.
- 1996: Stillman sells a 23 percent stake in NYRG to Thomas H. Lee.
- 1998: Four Smith & Wollenskys opened in other cities.
- 1999: NYRG postpones a plan to offer stock to the public.
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