Retail Shops Present Opportunity for Restaurateurs
After running restaurants in five-star resorts all over the world, Chef Azmin Ghahreman opened his Laguna Beach, California, restaurant Sapphire with an adjoining retail store to market the spices and flavors he discovered from cultures across the globe. The restaurant and the store share some customers. But they serve different purposes and, oftentimes, different audiences.
In The Pantry, Chef Ghahreman says he can sell certain items like wine and beer for lower prices than on the restaurant’s menu, which offers globally inspired foods. And the store provides many grab-and-go items like yogurt parfaits in the mornings, prepared sandwiches, and cappuccinos and lattes. Chef Ghahreman says the proliferation of stores like Trader Joe’s and Whole Foods has helped to shape more sophisticated consumer palates, and this makes specialty shops like his viable.
For restaurants that choose to offer retail—either through in-house shops or by branding their own items to outside retailers—the strategy often proves to be a boost for consumers who are excited to purchase goods from their favorite restaurants.
Many brands have found success moving their products onto supermarket shelves: P.F. Chang’s and Wolfgang Puck are prominent examples. Done right, a retail presence can be a boon to a restaurant’s bottom line and its overall brand awareness, while product manufacturers regard the brand association as a way to make their products stand out in crowded aisles.
However, from the restaurant’s perspective, adding a retail component is often more of a supplement than a lifeline. Chef Ghahreman says The Pantry is only a fraction of his overall business and doesn’t compare in size or sales to the restaurant. Additionally, there is risk in retail, especially if the food on the shelves doesn’t live up to a restaurant’s standards, says Fred LeFranc, founding partner of the restaurant consultancy Results thru Strategy. However, he notes positive aspects, as well.
“The restaurant brand benefits from the halo and promotional effect, not to mention the [increased] cash flow with little time commitment once a product launches,” LeFranc says. “The initial work is the hardest part during the recipe-formulation stage. Once that is complete, there is little required of a company.”
Within a week of opening its first location in 2010, Jimmy’s Famous American Tavern in California was inundated with customers looking to take home a jar of the gastro tavern’s Bold & Smokey Chipotle Ketchup. Managing partner David Wilhelm was inspired to create the ketchup while on a safari in Africa seven years ago when he was served roasted potatoes accompanied by a ketchup-like sauce infused with cinnamon, garlic, and cloves. He created a similar sauce once he returned home for the restaurant’s three California locations. The ketchup’s popularity has catapulted it onto shelves at Gelson’s, a regional supermarket chain in Southern California; Whole Foods; and specialty retailer Sprouts Farmers Market.
It took about 10 months to find a manufacturer, develop a large-batch recipe, design labels, send samples out, and receive initial orders for the ketchup, Wilhelm says, adding he expects the retail side of the business to grow slowly. But if the ketchup is successful, he has other retail items waiting in the wings. The key is offering a product that will stand out.
“It wasn’t difficult once the buyers tasted the product,” Wilhelm says. “There are hundreds and hundreds of salsas on the market but very few specialty ketchups, so the buyers, from the very outset, were interested in the idea of trying to market a boutique ketchup.”
Boutique items are one strategy for lesser-known brands to expand into retail, but for an established restaurant, sometimes name recognition is enough. Johnny Rockets plans to distribute hamburger patties and other products to retail stores beginning in October.
While many established restaurants such as Johnny Rockets and P.F. Chang’s get into retail after the restaurant brand finds success, Murray’s Cheese Shop in New York City took the opposite route. The cheese shop opened in Greenwich Village in the 1940s. Seven decades later, its brand recognition spurred its leaders to launch the accompanying Murray’s Cheese Bar, a full-service restaurant and wine bar that opened just down the street in 2012.
“We opened [the restaurant] and immediately saw traffic, because the name Murray’s is pretty well-known; the cheese shop is an institution,” says Jason Donnelly, vice president of foodservice for Murray’s.
Most of the restaurant’s dishes are crafted around specialty items found in the cheese shop, which also sells charcuterie, olives, and jams.
“The ingredients in the shop are like a playground,” Donnelly says. “We carry 3,000 ingredients in the shop. The only limitation is our imagination in trying to figure out how we can implement these things from the retail shop into the restaurant.”
But the restaurant and the shop are decidedly separate. Promotions in the shop constantly change, and displays and signage help push sales of certain goods—unlike in the restaurant where the menu is the main communicator.
Inevitably, some items just don’t translate. The shop could sell a high-end bar of chocolate that goes for $18 a pound, but such an expensive ingredient would have no place on the restaurant’s dessert menu, because it would raise the price for the dessert beyond what consumers at the restaurant are willing to pay.
Donnelly says the differences between running a restaurant and a retail shop make it inherently difficult to merge the two under one roof. He’s seen at least half a dozen restaurants in New York City try to open their own internal markets with little success.
Donnelly’s advice is that separate, stand-alone concepts are a much better strategy. “A lot of restaurants have tried doing a market-style retail shop inside the restaurant. And that’s a tough pull,” he adds. “People don’t necessarily think about going to a restaurant and buying things other than dishes of food.”
The management at Sapphire, on the other hand, believes that having The Pantry located adjacent to the restaurant doesn’t confuse the clientele. The idea was simple: Chef Ghahreman initially dreamed up a retail store because he hadn’t found a good cheese shop in Orange County. But now The Pantry offers cheese, wine, beer, mustards, oils, locally produced honey, jams, and charcuterie. And many of the items sold in the store inevitably find their way onto the restaurant’s menu.
“I wanted to make it a good stop for people,” Chef Ghahreman says. “You eat something in the restaurant and you can shop for the stuff you enjoy.”