Most of the time, sugar daddies don’t intend to enrich the targets of their pursuits.
But if the sugar daddy is a deep-pocketed developer courting a high-profile restaurateur to open marquee eateries in dazzling new condo, hotel, retail or amusement park projects, making sure the foodservice partner is richly rewarded is a prime directive.
The growing number of deals between billionaire real estate developers and celebrity chefs or restaurant-operating groups is changing the way fine-dining specialists finance their growth. While observers note that no two deals are alike, what they have in common is the potential to pay participants handsomely.
“I’m in a better position personally than I have ever been in my life,” said chef Rick Tramonto, who along with chef Gale Gand recently joined ranks with Chicago-based Crescendo Cos. “But I wouldn’t say the pressure is over. You are always striving to be more profitable and more secure.”
Crescendo, which has a portfolio of hotels valued at $1.2 billion, absorbed Cenitare Restaurants—a venture founded by Tramonto and Gand, also of Chicago—with the goal of establishing a marquee collection of distinguished restaurants in Crescendo’s forthcoming chain of posh hotels as well as stand-alone destination restaurants.
Crescendo is a four-year-old company with 30 years of hotel management and real estate development expertise in its three Chicago-based founders—Peter Dumon, David Bossy and Michael Firsel.
Dumon, the company’s president, described Crescendo’s alliance with Cenitare as a “long-term partnership” in which Crescendo has invested 75 percent of the capital into Cenitare and team Tramonto-Gand has invested 25 percent. Each side of the partnership will accrue and derive profits commensurate with their investment levels, he said.
Dumon said that Crescendo would provide the capital investment for real estate, construction and related hard-asset, design development elements for the properties to be built, while Cenitare would have complete control over the staffing of the foodservice operations and menu development.
Among Crescendo’s holdings is a Wheeling, Ill., property, called the Westin Chicago North Shore complex, which features four new Tramonto and Gand concepts, including Osteria di Tramonto, Tramonto’s Steak & Seafood, the RT Lounge and Gale’s Coffee Bar. Crescendo also operates the InterContinental Chicago O’Hare hotel.
“We are more than excited to have as our partners chefs with such recognition, but we would not have done it if there was not a financial return for us or them,” Dumon said. “That’s where the optimism comes: great partners involved in a great concept.”
While stopping short of calling his and Gand’s partnership with Crescendo a career capstone, Tramonto said that he could not have envisioned such a lucrative financial partnership when he began his career long ago.
“Neither Gale nor I ever intended to hook up with developers, but the opportunity presented itself,” he said. “They [Crescendo] bring us a lot of global opportunity and the possibility to take our brand and cuisine to other locations through their contacts and deal-making strategies.
“These guys are top notch. [Great food and great service] are what they live and breathe.”
Although the Cenitare and Crescendo deal is one of the most-watched alliances between big money and major restaurant talent, the two companies are hardly alone in their daring or scope of operations.
At least a dozen or more high-profile partnerships, management contracts and equity-operator alliances between developers and celebrity chefs or restaurant groups are turning foodservice operators who used to be identified only with one city or region into international players with all the support and know-how of miniature conglomerates.
For instance, Tom Colicchio’s Craft Worldwide in New York is rolling out its concepts in hotel and condo projects from Dallas to Los Angeles. Jean-Georges Vongerichten and partner Phil Suarez have entered a development deal with Catterton Partners to develop upscale restaurants for Starwood Hotels & Resorts. Los Angeles-based Meridian Entertainment Group has transplanted its hip signature dining spot Table 8 in the Regent Hotel in Miami. And SBE Entertainment Group has sealed a deal with Starwood, tapping Washington, D.C., chef José Andrés to create a line of fine-dining operations for a new luxury hotel chain.
Charly Robinson, chief operating officer of Orlando, Fla.-based Ebrands Restaurants, a 14-unit diversified dinnerhouse company anchored by its fine-dining seafood concept Aquaknox, said it is important that operators who are considering relationships with developers think more about the maximum sales potential than the prominence of the location that developers might dangle.
With two units operated through a management contract with the Venetian Hotel in Las Vegas, Ebrands seeks not only exposure but also growth.
“We prefer higher-profile locations, for sure,” Robinson said. “But what is more important is that, since we are a multiconcept operation, we look for locations that can do $8 million or better, as opposed to locations that generate $2 [million] or $3 million in sales. It sounds like a contradiction in terms, but it’s a lot easier to do fewer units with big numbers than to do several units with smaller numbers.
“A Darden or a Brinker can grow with higher densities and stretch out their brands like that, but that strategy doesn’t work on this level.”
Robinson added that Ebrands prefers for the landlords in high-profile locations to take care of tenant improvements, like new kitchens, although such generosity is becoming increasingly rare.
Robinson, who noted that Ebrands gets about 15 solicitations a week from developers, almost all of which are rejected, said another Aquaknox would debut later this year in the Terminus project in Atlanta’s Buckhead section. Terminus is a $660 million, mixed-use condo, hotel, office, retail and entertainment complex being built by Cousins Properties.
Although some of the deals nearing the finish line don’t entail billionaire partners, but lesser-known entities, the profits to be shared are just as valued.
In Sioux Falls, S.D., the Fuzion Food Group—a multiconcept operator of steak-houses, pizza shops, coffeehouses and casual-dining concepts—sought and secured the exclusive foodservice management contract in a $90 million water amusement park and resort complex to open in Sioux Falls in 2009.
The project is to be built by Lloyd Solberg, a wealthy heart surgeon who is funding both the project and the management company that would run the day-to-day operations.
Blaze Okerlund, president of Fuzion, said his company’s procurement of the food management contract is one of few deals in the industry in which the operator solicits the builder. In this case, Okerlund heard about the project in the news and set up a meeting with Solberg, whom he eventually sold on Fuzion’s expertise.
The project will cover more than 50,000 square feet and have 413 guest rooms and a 20,000-square-foot convention and banquet center, Okerlund said.
Okerlund said he hoped the project would be the go-to facility in the region for weddings.
Fuzion’s menu-development executive chef Andy Revella—a 30-year veteran of the industry with ports of call at such concepts as Rainforest Cafe, Bennigan’s, Steak and Ale and B.B. King’s Blues Club & Grill—said Fuzion plans to install five foodservice venues in the Sioux Falls project, including a fine-dining steak-house, a Tex-Mex concept, a food court consisting of pizzas and burgers, as well as room service.
Okerlund said that what probably clinched the deal is that Fuzion is a very environmentally friendly, or green, company. All of its kitchens are equipped with proprietary ovens and other cooking equipment that use no open flames, no venting and no kitchen hoods through “self-contained and sealed” cooking equipment.
The company expects first-year foodservice sales from all concepts to total $10 million.
Scott Feldman, president and founder of Two Twelve Management and Marketing, a New York-based firm that represents such celebrity chefs as Colicchio, said the many deals being formed between developers and chefs or restaurant groups are spawned by the awareness that operators, no matter how good their culinary skills or business acumen, must see themselves as brands if they want to grow.
“Chefs are looking at themselves as brands, and they are trying to connect themselves with brands or projects of the same level of quality and excitement,” Feldman said. “Hotel and condo developers are looking at these guys’ portfolios of restaurants and asking them how can we create a luxury portfolio together to match our competitors and grow.
“Maybe a few years ago, a well-known chef with a strong track record might have asked himself, ‘Where am I going to open my next restaurant? What part of town?’ Now sophisticated chefs who recognize their brand value are asking themselves, ‘What is my next five- to10-year growth strategy?’
“That’s a big difference in thinking about a business.”
