Renovation du Jour

Restaurant Makeovers Come with a Side Order of Risk

Menus aren't the only things changing at restaurants around the world. In the hypercompetitive dining industry, even the most celebrated restaurants feel pressure to constantly reinvent their spaces to ensure their reputations don't go stale.

Taco Bell unveiled four new store models, with plans for 2,000 redesigned locations in the next five years.

The French Laundry in Yountville, California, USA, which once ranked as the world's best restaurant, completed a US$10 million, four-year renovation in March. The project demolished six buildings and placed large windows between the dining area and an expanded kitchen so guests can watch chefs in action. The upgraded space now includes a 16,000-bottle-capacity wine cellar, a 2,120-square-foot (197-square-meter) annex and 9,000 square feet (836 square meters) of landscape design.

The upgrade wasn't prompted by a sense of competition, but rather the restaurant's commitment to staying at the cutting edge, general manager Michael Minnillo told the San Francisco Chronicle in February. “We're constantly changing everything every day. I tell the team all the time, we're trailblazers. We have to do it for the profession.”

The competition is just as fierce among global fast-food chains. For instance, Taco Bell unveiled four new store models in Southern California, USA in 2016, with plans for 2,000 redesigned locations in the next five years.

But risks abound for restaurant revamp projects. Poor ROI calculations can be devastating: It can take years for restaurants to earn back big upfront costs—at which point it might be time to revamp all over again. Plus, with margins already tight, every day closed equals lost revenue. So project leaders must align any closures to the amount of financial reserves owners have on hand to weather losses during a renovation.

Some restaurants mitigate lost revenues by keeping the kitchen open for carryout or delivery orders during the project. The owners of Eleven Madison Park in New York, New York, USA have a different mitigation strategy for a three-month renovation that started this month. They timed the project so the restaurant would be closed while many customers are out of town—and they opened a pop-up restaurant in East Hampton (in eastern Long Island, New York), where many of those people will be vacationing.



The dining room at Eleven Madison Park in New York, New York, USA


“We're constantly changing everything every day. … We have to do it for the profession.”

—Michael Minnillo, French Laundry, Yountville, California, USA

While keeping customers happy and aware of changes during a renovation is important, restaurants should not neglect another major stakeholder on these projects: landlords. Many restaurants rent their spaces, so project managers must inform the property owner of any renovation plan, says Rui Barbosa, founder and managing director, KPM Project Management, Macau, China. When Mr. Barbosa's firm managed a US$125,000 restaurant renovation in a casino resort last year, the project was delayed for several months until the landlord's team finished one of its own in-house projects and was able to approve KPM's restaurant design. The project was completed in May 2017.

Because landlords need to sign off on changes, “all the planning involving the contractors needs to start much earlier than usual,” Mr. Barbosa says. —Ambreen Ali

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