Eleven Madison Park was crowned the Best Restaurant in the World in 2017. They are the epitome of hospitality, having earned four stars from the New York Times Review and three stars from the Michelin Guide. Today, when the restaurant opens its reservations on the first day of each month, they are typically fully booked within minutes.
Little over a decade ago, however, Eleven Madison Park nearly closed its doors … forever.
EMP During The 2008 Global Recession
The 2008 Global Recession was the most severe global economic crisis to occur after the Great Depression in the 1930s. Nobody was spared from its effects. Naturally, fine dining restaurants like Eleven Madison Park (EMP) were seen as an unnecessary expense amidst the severe economic and financial meltdown. Will Guidara, then-manager of EMP, writes of the aftermath experienced by EMP in his book:
“Our private-party business ground to a halt. Wedding parties downsized, either by cutting the guest list or fleeing to more modest venues. And companies, whose lavish private events and cushy expense accounts are a fine-dining restaurant’s bread and butter, had switched into austerity mode as well.”
In many ways, providers of luxury goods and services were the worst affected. Why? Well, businesses that sell expensive things are expensive to run. Guidara continues:
“We had all the expenses associated with running a four-star restaurant without the demand that came with the honour—or the ability to charge four-star prices.”
Even worse, EMP had yet to earn a spot in the Michelin Guide. Earning stars from the Michelin Guide was among the most prestigious honour that a restaurant could achieve. Without a star, EMP was at the bottom of the luxury restaurant food chain.
Another type of restaurant, however, thrived: casual dining restaurants which offered reasonable food at affordable prices. An example of this was Shake Shack. The quality of food and service at Shake Shack and the price at which it was sold appealed to the masses, and large crowds flocked to them for a sumptuous meal. Guidara writes:
“One couple brought a bottle of champagne to Madison Square Park and raised a glass to our huge windows from across the street—over an order of cheese fries from Shake Shack.”
The reason EMP managed to stay afloat was the financial support it received from the profits of Shake Shack. At the time, Shake Shack was owned by the same corporation that owned EMP, which in turn was a subsidiary of the Union Square Hospitality Group (USHG) run by Danny Meyer. Hence, the profits from Shake Shack were used to cover the losses incurred by EMP during the recession.
The First Step to Overcome a Crisis: Cutting Costs
Guidara was frustrated by the financial losses incurred by EMP. The dining room became emptier as the days went by, leading the restaurant to bleed cash. Moreover, Shake Shack couldn’t support EMP forever. The situation got to the point where Guidara almost gave into his despair at EMP’s potential closure. However, multiple calls to his father, Frank Guidara, gave him some support … as well as a way to reframe the situation. Guidara writes:
“He (Frank) was a cutthroat survivalist, never precious about the niceties of restaurants in general, and fine dining in particular. But as always, he pulled me out of the forest so I could see the trees. ‘Adversity,’ he told me, ‘is a terrible thing to waste.’”
In an economy where demand was unpredictable, Guidara focused on what he could control — minimising costs. He sometimes struggled to find expenses to cut given the high labour and food costs that luxury restaurants bore. However, at every Profits & Losses (P&L) meeting where Guidara and USHG discussed areas of concern and success, Paul Bolled-Beaven, (President of Core Businesses of USHG and Meyer’s partner) reminded him that “raindrops make oceans.”
Guidara became hyper-attentive to every cost at EMP — every expense was counted, and the money saved allowed them to survive another day. Cutting costs, however, did come with some trade-offs. Guidara writes:
“Our cooks wore tall paper toques because they were beautiful and classic and a link to Daniel’s European heritage. They were also disposable; the cooks could discard them when they got sweaty or stained. One night, I did the math. If a cook went through two or three toques over the course of a hard shift, and there were thirty cooks in the kitchen working two shifts a day, that meant we were spending thousands of dollars a year on those toques—whereas a box of the thick, washable cotton skullcaps most restaurants gave their cooks cost a few hundred, and we’d get at least a year out of those. That cut was hard: we’d chosen the toques because we wanted the cooks to feel a sense of pride and a connection to their culinary history every time they put them on. But leadership during a crisis means recognizing it’s more than the hats that give the cooks a sense of pride.” (emphasis added)
As Guidara went through these trying times, his father encouraged him to maintain a journal of his thoughts. Frank said: “Perspective has an expiration date, no matter how hard you try to hold on to it.”
The journals gave Guidara access to valuable experiences that he could carry into the future.
However, Guidara still had big dreams for EMP. In his words, “managing expenses is playing defence,” and it was not enough to sustain the business in the long run. They needed to play offence — investing capital to increase footfall and become the best restaurant in the world.
The Second Step to Overcome a Crisis: Getting Creative in Making Money
Guidara set a goal for EMP ‘to be the four-star restaurant for the next generation.’ By this he meant that the restaurant’s old clientele of high spenders — affluent patrons who could care less about the bills they ran up — had all but disappeared. Guidara needed to create a dining experience for a new set of customers: middle-class patrons who had dreams of living a more comfortable life. Guidara’s own dream was for EMP to grow with this new demographic.
As EMP continued to cut costs, Guidara used the money saved to launch creative experiments designed to earn profits. It began with the introduction of a $29 two-course lunch set. For context, an entree at EMP would have cost a minimum of $25 per plate before the recession. Guidara said:
“The check average at EMP had never been low, not even when it was a brasserie, but it helped to fill the empty seats and bring the energy back into the dining room.”
Instead of being discouraged by the low revenue earned per table, Guidara was determined to offset it. He described a tweak that earned EMP a 300% increase in dessert sales:
“At EMP, we introduced a dessert trolley—a cart stacked with delicious pies and cakes and tarts—that we could push right over to the table. Most of the time, when you offer people a dessert menu at lunch, they look at you like you’re an alien. It’s partly calories, but mostly no one has time to go through the whole rigmarole of ordering a dessert, then waiting for it to be plated and brought out and eaten and cleared before they can get the check. Dessert tacks half an hour onto your meal, and at lunch, especially in New York, people are in a hurry to get back to work. Roll up to their table with a dessert cart, though, and they turn into wide-eyed little kids struggling to choose their treat—especially because they know they can have the one they point at, right away. The cart was beautiful and experiential, and people loved it. Dessert sales went up by 300 percent.”
Guidara put into action the 95/5 rule he devised while designing a gelato cart for the one-of-a-kind Sculpture Garden in the MoMA. Guidara’s 95/5 rule is to manage 95% of your financials down to the penny while spending the remaining 5% “foolishly”, and “splurging” the 5% on the guest to create an unforgettable experience. In the gelato cart incident, the 95% had been the financially disciplined way Guidara had set up the gelato cart, and the 5% his decision to “splurge” on distinctive blue gelato spoons! At EMP, however, Guidara decided to splurge on a big party celebrating the Kentucky Derby. Held in Louisville, Kentucky, the Kentucky Derby was the most-watched and attended horse race in the US. For Southerners, it was equivalent to a national holiday. It did not make sense to throw a huge party in the middle of a recession, but Guidara did it anyway. He capitalised on homesick Southerners and the joy of having fun without a reason. At the end of the night, Guidara had only broken even, but he had fostered a loyal crew who were passionate and happy about their work.
The Fruits of Their Labour
EMP’s financial position improved by leaps and bounds, its profit margins had never been better. Soon enough, they caught the attention of Frank Bruni, a restaurant critic for the New York Times — the man who would decide if they got the four-star review they had been vying for.
The review process was unexpectedly long. Compared to the usual few weeks it took to review a restaurant, the process to evaluate EMP took months. Guidara didn’t leave anything to chance, making sure that everyone in the restaurant performed their tasks as if Bruni was in their restaurant every day. Guidara writes:
“I thought about this when I watched The Last Dance, a documentary about Michael Jordan and the Chicago Bulls, the team he led to six NBA championships. Jordan’s competitiveness was legendary; it was his fuel. If another player dared trash-talk him on the court, or disrespect the Bulls in the media, watch out. But if nobody dared, then Jordan would fan the flames himself, inventing slights and interpreting accidental bumps as personal attacks. Any hint of disrespect, even fabricated, was enough to motivate him to rise to the occasion. He’d create stakes, even when there were none. Most nights, the critic in our restaurant wasn’t real, just as the rivalry Michael Jordan created in his head wasn’t real, but it doesn’t have to be real to work.” (emphasis supplied)
Finally, on August 11, 2009, all the guests and employees of EMP celebrated when the restaurant was awarded a four-star New York Times review.
EMP had reinvented itself, and it would continue to do that for the rest of its existence. Guidara writes: ‘In short, it was good that we’d figured out how to put our own oxygen masks on, because there wasn’t a lot of relaxation that year.’