Ark Restaurants Corp.
Ark Restaurants Corp.
Sales: $76.8 million (fiscal 1996)
Stock Exchanges: NASDAQ
SICs: 2051 Bread and Other Bakery Products, Except Cookies and Crackers; 5461 Retail Bakeries; 5812 Eating Places; 5813 Drinking Places (Alcoholic Beverages); 6719 Offices of Holding Companies, Not Elsewhere Classified
Ark Restaurants Corp. is a holding company that, through subsidiaries, was operating 26 restaurants, 2 bakeries, and 2 corporate dining facilities in 1996. The bakeries and 20 of the restaurants were owned by the company. Although Ark’s restaurants had no single format, most were in New York City and offered a wide range of moderately priced food. Many were big, open spaces that could seat a large number of diners. In 1997 the company opened a group of restaurants in a new Las Vegas hotel and casino that were capable of feeding as many as 25,000 people a day.
Ark Restaurants to 1989
Michael Weinstein, a law-school dropout, was a young New York City investment banker when he invested $6,000 to open, with two friends, the Museum Cafe near his home on Manhattan’s Upper West Side in 1975. When the partner running the restaurant became sick, Weinstein took over the management and fell in love with the business. He followed this up with other restaurants, including Perretti—also on the Upper West Side— in 1977 and the Metropolitan Cafe in midtown in 1982. Weinstein and Ernest Bogen formed Ark Restaurants in 1983 as a holding company for four restaurants and took it public in 1985, at a time when it had nine restaurants and $19 million in sales. The two partners reserved about one-third of the stock each for themselves, but Bogen sold much of his investment in 1987.
In 1982 Ark opened its biggest restaurant yet, 300-seat Ernie’s, located on the Upper West Side and specializing in Italian food. Two years later Ark opened Albuquerque Eats (which later became Canyon Road), serving Southwest cuisine on the Upper East Side, and 350-seat America near Union Square Park, which with its later Center Cafe satellite could accommodate 700 patrons. Ernie’s proved popular, and America, featuring regional American food, became the company’s biggest hit, accounting for about one-fourth of Ark’s revenues at the time.
In 1985 Ark Restaurants, flush with cash from its initial public offering of stock, ventured into the metropolitan area’s New Jersey suburbs, opening an Albuquerque Eats in Englewood, America Eats in Paramus, America’s Diner in Verona, and an Ernie’s in Hackensack. But within a year of their opening, the first three had closed, with the company taking a $1.5-million writedown. (The New Jersey Ernie’s, also in the red, later closed as well.) Betty Brown’s Broadway Dining, an East Village diner featuring “retro” food like meat loaf and mashed potatoes, also failed. Ark’s common stock, first offered at $7.50 a share and trading as high as $12.25 in 1986, dipped to $3.25. “But I learned several things from it,” Weinstein later told a Nation’s Restaurant News reporter. “You can’t go into the suburbs with a New York value system. It’s too competitive out there, and we did not know how to get people out of their cars.”
Unfazed, Ark Restaurants expanded its holdings to 14 restaurants by the spring of 1987. The five 1986 openings, all in Manhattan, included another Albuquerque Eats on lower Third Avenue; Big Kahuna, a bar with a surfing theme and limited food service on the former site of Betty Brown’s; B. Smith, a trendy cafe in the theater district; and the Ritz Cafe on lower Park Avenue, featuring Cajun-Creole seafood. These were followed, in 1987, by the Western-style Rodeo Bar on the location of the Third Avenue Albuquerque Eats. Company revenues reached $24.4 million in fiscal 1986 (the year ended in September 1986). Ark also revamped and began managing three restaurants in Boston’s Faneuil Hall for developer Ben Thompson.
Ark Restaurants, which lost $284,000 in fiscal 1986, rebounded the following year, earning $699,000 on sales of $26.7 million. By then it had earned a reputation for cost control, reducing its food and beverage tab to 30 percent of net sales, and keeping its rental bills low by locating in Manhattan neighborhoods that were rundown but being discovered by yuppies. Ark negotiated long-term leases for most of these locations and sometimes even persuaded landlords to pay part of the construction costs.
Expansion Between 1989 and 1993
Early in 1989 a partnership brought Larry Forgione’s esteemed An American Place to the site of the former Ritz Cafe. New York Times restaurant review Bryan Miller reported that “Mr. Forgione has carried many of his signature dishes downtown” and “tables are well spaced and (how rare in New York!) generous with elbow room.” During the summer Ark opened K-Paul’s New York on the site of the former Big Kahuna in partnership with Paul Prudhomme, celebrity chef of K-Paul’s Louisiana Kitchen in New Orleans, which had been largely credited with the vogue for Cajun-style cuisine. In April 1989 Ark established a catering division that drew on the resources and kitchen staff of other restaurants in the chain, and by June the company had opened Gonzalez y Gonzalez, a Mexican restaurant, across the street from K-Paul. Waiters and waitresses were required to speak Spanish at all times, and a strolling eight-member mariachi band entertained customers.
Also in 1989, Ark opened a 17,000-square-foot version of America in Union Station, the refurbished Washington, D.C. railroad terminal whose innards had been transformed into a retail center. In 1990 Ark launched its first megarestaurant, 1,000-seat Sequoia, in a huge vacant space overlooking Washington’s Potomac River waterfront where another restaurant had failed in 1987. The setting did more to lift Washington Post reviewer Phyllis C. Richman’s spirits than the food, but by 1993 Sequoia was grossing $9.5 million a year. In 1991 Ark opened a second Sequoia in Manhattan’s South Street Seaport historic district and the Beekman 1766 Tavern in Rhinebeck, New York. The K-Paul joint venture ended in 1992, with Ark remodeling and reopening the restaurant as the Louisiana Community Bar and Grill.
After earning net income of $848,000 in fiscal 1988 on revenues of $28.1 million, Ark Restaurants lost $43,606 on revenues of $29.1 million in 1989. The following four years, however, were all good ones. Revenues rose from $39.1 million in 1990 to $56 million in 1993, and net income from $753,000 to $1.9 million. By the end of 1993 Ark had 26 restaurants in its stable, including the Whale’s Tail, acquired in Oxnard, California, that year. Although Ark’s lack of a single identifiable concept for its restaurants troubled investment analysts, by refusing to adopt any one formula the company also opted not to accept any limit on its potential market appeal.
Willingness to locate in marginal Manhattan neighborhoods and hard bargaining with landlords was still helping to hold Ark’s costs in check, allowing prices to remain the same on most items for six years. A computerized system was in use for buying in quantity 3,000 food and beverage items a year for the company’s 140,000 weekly patrons. Dining-out reviewers were less impressed, and the editor of Restaurant Business told the Wall Street Journal, “Mr. Weinstein is known more for his success with themes and concepts, decor and ambiance, than he is for stunning food.” Former New York Times food critic Mimi Sheraton added that Ark’s restaurants tended to be “places where food is the prop; you want to be there and therefore you eat something.”
New Venues, 1994-96
During 1994 Ark Restaurants ventured into fine dining for the first time since becoming a partner in An American Place by purchasing Lutéce, one of the world’s best-regarded French restaurants, from its proprietor-chef, Andre Soltner, for an undisclosed sum. Lutéce remained at its East 50th Street location in Manhattan and retained its four-star rating under Soltner’s successor, Eberhard Miiller. The company also opened two new Washington-area properties in 1994: a second B. Smith’s in Union Station and a third America in McLean, Virginia, plus the Lorelei Restaurant and Cabana Bar in Islamorada, Florida. By then it also had formed a travel-and-tourism division to book groups into its restaurants. Ark Restaurants ended fiscal 1994 with reduced earnings of $1.1 million on net sales of $60.4 million, which Weinstein blamed on bad weather and higher corporate overhead due to a beefed-up management team and rising salaries.
Also in 1994, Ark Restaurants converted Poiret, a restaurant on the Upper West Side’s Columbus Avenue, into a bakery supplying its restaurants and also selling at retail coffee, baked goods, and prepared foods on a takeout basis or for on-premise consumption. A second Columbus Bakery opened in 1995, adjacent to the Metropolitan Cafe.
That same year Ark opened its biggest eatery yet, in Manhattan’s midtown Bryant Park, just south of 42nd Street and west of the New York Public Library. The complex consisted of Bryant Park Grill, which could seat 220 in a small building and had room outside for 300 more patrons. In season, a roof terrace could accommodate 200 and the casual outdoor Bryant Park Cafe another 700, allowing the complex to serve as many as 4,000 customers on a summer day and evening. Nation’s Restaurant News reported in the fall that the complex “has played to a relentlessly packed crowd ever since its debut.” A hard winter, however, included the cancellation of many parties scheduled for the year-end holiday season.
Ark ended fiscal 1995 with net sales increasing to $73 million but net income holding at $1.1 million. The company gained an important corporate client the following year when it began managing the cafeteria of Universal Studios in southern California. Also in 1996, it purchased two Manhattan restaurants, Jim McMullen and Mackinac Bar and Grill, which it had been managing. Before the year was out, however, Ark sold the latter, plus the Rodeo Bar and the Museum Cafe—Weinstein’s initial establishment—for $1.5 million, below book value.
Interviewed about the sale by Nation’s Restaurant News, Weinstein pointed out that “managing larger facilities makes more sense, and they are more economically efficient.” Robert Towers, the company’s treasurer and chief operating officer, stressed that small restaurants would continue to play an important role in Ark’s evolution, but added “that other operators are better at running these smaller restaurants, and it’s hard to compete against them.” Ark chose to sell these properties below cost rather than make a profit by pursuing competitive bids because, according to Weinstein, “It was more important to us that we put them in the right hands, people who appreciated the asset. We had a responsibility to our landlords and our employees that there be no business interruption.”
Ark Restaurants was known for a paternalistic policy in a high-turnover industry, offering medical benefits to anyone working at least three shifts a week and giving its staffers, many of them artists or actors, time off for a theater role with a guaranteed job on return. When Ernie’s had to be shut down for an eight-month remodeling after the building collapsed, he kept the entire 325-person staff on the payroll. In exchange, Weinstein said, he received employee loyalty in an industry plagued by petty thievery. Nevertheless, after storms during the harsh 1995-96 winter forced the cancellation of many holiday-season parties for the second straight year, Ark Restaurants began paring its payroll through attrition and layoffs. Its net income fell to $788,762 in fiscal 1996 on net sales of $76.8 million. The long-term debt, only $761,000 at the end of fiscal 1994, reached $6.4 million at the end of fiscal 1996.
Gambling on Las Vegas in 1997
Ark Restaurants was taking on debt for its largest project: operating restaurants, a food court, room service, and employee dining for the New York-New York Hotel & Casino resort in Las Vegas, which made its debut in 1997. In addition to opening a 450-seat around-the-clock America and a second Gonzalez y Gonzalez, Ark introduced a branch of midtown Manhattan’s Gallagher’s Steak House and built a quick-serve food court with Little Italy, Greenwich Village, and other New York themes for the hotel-casino, each of whose 10 towers duplicated a famous Manhattan skyscraper. Ark invested $15 million in the project, which covered 100,000 square feet and was capable of feeding 20,000 to 25,000 people a day.
Ark Boston Corp.; Ark Bryant Park Corp.; Ark Operating Corp.; Ark Parties, Inc.; Ark Potomac Corporation; Ark Union Station, Inc.; Las Vegas America Corp.; Las Vegas Festival Food Corp.; Las Vegas Restaurant Corp.; Las Vegas Steak-house Corp.
Blumenthal, Robin Goldwyn, “Ark Restaurants Differ in Looks, Earn Big Profits,” Wall Street Journal December 29, 1993, p. Bl.
Edwards, Joe, “Ark Plugs ’Leak,’ Plots New Ventures,” Nation’s Restaurant News, March 6, 1987, pp. F30, F32, F34.
Fabricant, Florence, “We’d Like to Make a Reservation: Table for 1,000 Please,” New York Times, May 17, 1995, pp. Cl, C6.
Frydman, Ken, “Ark Restaurants Launches Gourmet Catering Division,” Nation’s Restaurant News, April 3, 1989, p. 3.
Gambon, Jill, “Restaurant Group on Expansion Arc,” Grain’s New York Business, August 29, 1994, pp. 3, 20.
Hall, Trish, “Urban Dining: An Empire Built on Savvy and Intuition,” New York Times, May 11, 1988, pp. Cl, C5.
Hilzenrath, David S., “Washington Harbour Pact Reached,” Washington Post, August 12, 1989, pp. Fl, F14.
Kamen, Tobin, “Profits Set for Higher Ark After Group Weathers Storm,” Grain’s New York Business, March 25, 1996, p. 67.
Miller, Bryan, “Lutéce. A Bastion of Classic French Cuisine, Is Sold,” New York Times, October 12, 1994, pp. Bl, B2.
Prewitt, Milford, “Ark to Bring Taste of the Big Apple to Las Vegas,” Nation’s Restaurant News, October 2, 1005, pp. 3-4.
____, “Ark Downsizes NYC Holdings, Focuses on New Ventures, Nation’s Restaurant News, November 18, 1996, pp. 3, 67.
____, “Michael Weinstein: The Ark Restaurants President Reigns Over a Flood of Prosperous Business Ventures,” Nation’s Restaurant News, January 1997, p. 222.