RESTAURANTS

Tongue & Cheek reveals its recipe for a restaurant opening

 

Tongue & Cheek start-up costs

•  Legal: $30,000

•  Lease/key money: $250,000

•  Public relations/social media: $20,000

•  Liquor license: $175,000

Uniforms/marketing collateral: $25,000

•  Website design/branding: $50,000

•  Preopening payroll: $50,000

•  Construction (labor, materials, fixtures & artwork): $150,000

•  Working capital: $150,000

•  Total budget: $900,000


Industry standards

Tongue & Cheek’s owners used these general amounts to design their pro forma budget. These numbers reflect levels of costs based on a percentage of revenue. They expect to generate revenues of $3 million to $3.5 million during their first year.

•  Salaried labor: 10 percent

•  Back of house labor (kitchen): 9 percent

•  Front of house labor (dining room): 6 percent

•  Rent, real estate taxes, maintenance: 10 percent

•  Food cost: up to 35 percent (first two to three months) then settling at 30-31 percent

•  Beverage cost: up to 21 percent (first two to three months) then settling at 18-19 percent

•  Non-food and beverage costs: 5 percent

•  Utilities and repairs: 3 percent


Special to The MIami Herald

Chef Jamie DeRosa and partner Michael Reginbogin have opened more than two dozen restaurants between them.

But this time it’s different. After spending their careers working for celebrity chefs and major restaurant corporations, they are going out on their own for the first time.

On Jan. 29 — Reginbogin’s birthday — they signed a lease for a location in South Beach and embarked on the dream of creating Tongue & Cheek. The vision calls for a restaurant that will be casual enough to attract local residents but creative enough to distinguish itself from the plethora of competition. The name highlights the whimsical nature of the restaurant, which is meant to be a place that is both sophisticated and not too serious.

It’s a tall order to fulfill, especially in a market as finicky as Miami Beach. When the doors open on Monday, they will find out if they got it right.

“Successful restaurants aren’t just about cool food and service anymore,” DeRosa said. “It’s really about brand recognition and identity. It’s about doing something different and still appealing to the masses.”

DeRosa and Reginbogin gave The Miami Herald a behind the scenes look at the process of opening a restaurant. They started with a $900,000 opening budget to cover everything from their initial lease payments to construction, marketing/public relations and pre-opening payroll. Plus, it included $150,000 to cover last-minute issues and working capital as business ramps up.

Finding traditional funding for restaurants is a virtual impossibility in today’s world. The money came from a combination of personal savings and one private investor.

“A lot of new restaurateurs sell their soul to open the first location,” Reginbogin said. “It was very important to us that we have 100 percent creative control, and we own 80 percent of the business. If you own the majority, there’s so much more personal gratification.”

DeRosa and Reginbogin know the risks they are taking. Restaurants have one of the higher failure rates of any industry, but experts say it’s nowhere near the myth that 90 percent of restaurants fail in the first year. The only formal study on the issue was published in 2005 by Cornell University, and it verified that 26 percent of independent restaurants fail in the first year. The three-year cumulative failure rate for independent restaurants was 61 percent.

“You pretty well can tell if you’ve got a winner or a loser in six months,” said Ron Paul, president of Technomic, a restaurant industry consulting firm. “It doesn’t take that long. The most important thing is you’ve got to have a differentiated concept.”

In Miami and South Beach, where new restaurants come and go like customers through revolving doors, the challenge might be even tougher.

“With all these new restaurants opening in Miami, right off the bat there is going to be a shakeout,” said Richard Lackey, a West Palm Beach-based industry consultant and broker.

Opening in Miami Beach wasn’t part of the original plan for Tongue & Cheek, a concept DeRosa has been working on since leaving Tudor House in Miami Beach last August. He originally had visions of opening a much smaller place in the Wynwood or Midtown areas. They actually passed several times on their current space at 431 Washington Ave. in Miami Beach, which was best known as the former location of Tuscan Steak and most recently Kane Steakhouse.

But after looking at the costs of building a restaurant from scratch and the time it would take, the partners decided it made more sense economically to convert a failed restaurant space. This way construction costs would be reduced to a fraction and they could open in as little as two or three months, compared to the six to eight months it would take for construction of a brand new space.

“We couldn’t afford to spend six to eight months on a build-out with no revenue coming in,” said DeRosa, a new dad with a 7-month-old daughter. “What happens if there was a hurricane or the economy tanks? Then it could be even longer. It was too risky. We had to find a space we could flip.”

The biggest chunk of the start-up budget was the $250,000 that covered the first and last month’s rent, security deposit and what landlords in hot markets like South Beach call “key money,” essentially a service fee for the privilege of getting a functioning restaurant with things like a kitchen.

Before Tongue & Cheek opens, the 5,000-square-foot restaurant had to be completely gutted on a cosmetic level. The new look included stripping down the wood trim throughout the dining room, adding light fixtures, repainting the interior and installing a white tile wall behind the bar. The kitchen got a new refrigeration system and a second walk-in cooler because DeRosa likes to make everything in his restaurant from scratch.

Gone is the nightclub feel, with the big white tufted booths and black tufted walls that was Kane’s signature. The new look is lighter and more understated with custom-made chocolate brown banquettes and handcrafted wood tables. The art in the main dining room features a series of three paintings showing a 1950s view of the Miami skyline across Biscayne Bay with a Chalk’s seaplane in the foreground. New lighting cost an extra $5,000 when they discovered factories in China were closed for the Chinese New Year and they had to switch to local suppliers that could deliver in a shorter timeframe.

Regardless of how much DeRosa and Reginbogin expected to save by using an existing restaurant, there have been easily $10,000 of unexpected repairs that they didn’t anticipate. The fire control panel cost more than $2,000 to rewire. The restaurant’s back door wasn’t a true fire door and had to be replaced at a cost of $1,100. None of the restaurant’s three existing safes worked, so all had to be ripped out and a new one installed at a cost of $2,000.

The biggest problem: discovering they couldn’t pass the city fire inspection without replacing all the sprinklers. Initial inspections had shown the system was in compliance and operational. But when they discovered that wasn’t the case it meant shutting off water to the building for a day and a bill of just over $2,000.

The problems with the fire and plumbing inspections were just some of the challenges that delayed Tongue & Cheek’s opening, originally planned for late March.

“These are all things you don’t realize until you get in and touch and feel the space,” Reginbogin said. “There’s nothing you can do. You just have to lock your jaw and get through it. We have no choice.”

At the beginning the partners consulted each other closely every time they had to write a check. They compared prices from three different vendors to make sure they were getting the best price. But as opening day quickly approached, the urgency picked up. Then it was just about writing a check and getting the problem solved. There was $150 a day for the people doing the construction finishing work and $800 for someone to clean out the grease traps.

In many cases, it also meant hiring outside people to do things they once thought they could do themselves. Like the expediter that cost about $3,500 to get the inspection-related paperwork moved quickly through Miami Beach’s approval process. At the last minute Reginbogin also decided to bring on an accounting firm that specializes in the restaurant industry. For $3,000 a month the firm will handle paying all vendors, managing receivables, payroll and more. They quickly caught the fact that Tongue & Cheek had not filed for its local business tax receipt application with Miami-Dade County, something that must be done long before opening day.

“I’m so overwhelmed that things are starting to slip through the cracks, which we can’t allow,” Reginbogin said. “I don’t have the luxury of sitting in an office and figuring it all out. It’s important to do this right.”

For DeRosa, who has always spent all his time in the kitchen, it’s been an eye opener learning what goes into an opening from the financial and construction side. He’s happy to retreat to the kitchen where he can focus on creating a menu that is an eclectic mix with influences from various cuisines and parts of his life. Dishes like Iberico ham, Spanish-style tortilla and Boquerones (white anchovies) pay homage to his mother’s Basque heritage. The Vietnamese-style pork jowl with soba noodles and Beijing-style green beans with dried shrimp reflect the time DeRosa spent living in Asia. During a recent trip through the South and up the East Coast with his wife and baby he found inspiration for such dishes as cheddar pimento cheese with country ham and fried chicken with pickled red cabbage.

“I just took a journal and starting writing down what people seemed to enjoy eating and writing down ingredients that I wanted to work with,” he said. “The trend today is that people want to be able to identify what they’re eating.”

What DeRosa loves most is putting his unique twist on even the most typical dishes. It’s why you’ll find his version of chicken and dumplings made with chorizo, or the specialty burger of the house made from beef cheeks with pimento cheese.

The plan is to keep everything on the menu under $30 while offering a mix of snacks, small plates, main dishes and sides so people can mix and match. The average check for dinner should be around $50. Lunch and brunch menus will be phased in after opening.

DeRosa showcases his creativity in dishes like lettuce wraps with crispy pig ears, cauliflower panna cotta with uni and American caviar and crisp lamb belly with barbecued octopus, roasted eggplant and romanesco. But for those who prefer simple comfort food there’s fish and chips, meatballs and gravy and fried clams

“I’m very serious about my food, but I’m a playful person,” DeRosa said. “The menu is about that whimsical sense of humor on a plate. It’s fun, but there’s a serious side in the execution.”

The Washington Avenue location for Tongue & Cheek in the South of Fifth neighborhood has seen its share of successes and failures over the last two decades. Tuscan Steak opened in 1997 and was a South Beach landmark for more than a decade. But after owner Jeffrey Chodorow shuttered the space in 2009, nothing has really stuck. Chodorow’s son had a short-lived run there in 2010 with El Scorpion Mexican Kitchen + Tequila Bar and most recently it was home to Kane Steakhouse, which lasted less than six months before closing in Nov. 2011. But for much of the last several years it has sat vacant.

Landlord Scott Robins said that both before and after Kane, he turned away easily a dozen restaurateurs interested in the space. He either didn’t believe in the management, the chef or the concept. But with DeRosa and Reginbogin, he embraced their vision.

“I don’t rent space to people I don’t think are going to survive,” Robins said. “These guys had the background and the Miami Beach experience. I felt Jamie’s food was unique and different. I wanted to give them a chance because they have earned the opportunity. That is the kind of tenant I want, someone who is going to put their heart and soul into it.”

Tongue & Cheek is about fulfilling a dream for DeRosa, 40, and Reginbogin, 34. The two have known each other through the industry over the years and worked together most recently at Tudor House in Miami Beach. But for both of them, running a restaurant didn’t start out as an initial career choice.

DeRosa worked as a cook at Outback Steakhouse in high school and college just for extra cash, while majoring in criminal law at the University of Florida. After dropping out because he hated it, DeRosa found his calling in the late 1990s working at Chef Allen Susser’s restaurant in Aventura while going to culinary school at Johnson & Wales. Over the years, his culinary career has taken a winding road from South Florida to California, England and China with high-profile positions at Chef Wolfgang Puck’s empire in Florida and California and stints at Fat Duck in England, Campanile in Los Angeles and most recently Iron Chef Geoffrey Zakarian’s Tudor House in South Beach.

Reginbogin studied political science at the University of Southern California, and his first job was working in mergers and acquisitions during the .com boom. But when the boom turned to bust, he ended up begging for a three-month internship at Houston’s in Century City, Calif., as a waiter, where after proving himself he went on to cut his teeth in the chain’s industry-leading management program. Over the years he has been a general manager or regional manager at high-profile restaurants in New York, Los Angeles and Miami including Tao, Blue Water Grill, Sugarcane Raw Bar and the South Beach opening of Estiatorio Milos.

“We’ve seen a lot of what works and what doesn’t,” Reginbogin said. “That should account for something, at least giving us a steady platform to build on.”

Working together at Tudor House, a concept that lasted about a year in Miami Beach, further cemented the pair’s desire to become restaurant owners rather than operators. At Tudor, they lived through the challenges of having to juggle the interests of too many different parties, including a hotel owner, management company and celebrity chef. Reginbogin left Tudor House to open Milos and DeRosa left after Zakarian announced he was pulling out of the partnership with the Dream Hotel.

“It reiterated the fact that if we’re going to do all the work and put everything we have into a concept it should be our own,” DeRosa said.

Their skills complement each other with DeRosa presiding over the kitchen and Reginbogin the operations of the dining room, as well as taking the lead on financial matters. But together they have made all the major decisions on everything from the branding to the design of the restaurant.

“You have to have the Yin and the Yang to make it work,” DeRosa said. “It’s the separation of church and state.”

They have spent a lot of time focusing on the little details like the restaurant’s five signature characters that appear everywhere from the coasters to T-shirts worn by the wait staff and doggy bags for the leftovers. There’s the horse dressed in a business suit with designer glasses, who represents Reginbogin, and the ox with a top hat, who is DeRosa. There’s also a cigarette-smoking bunny girl (DeRosa’s wife), an owl with a top hat and a woman with a parasol who is also part octopus.

That humor also carries through to the apparel pins the servers will wear and that customers will be able to take home with them. They have catchy slogans like “Don’t sweat the technique” and “B-O: Bourbon-omics. You never share Bourbon.” Don’t be surprised if you find hip hop slogans from Rapper’s Delight or other popular songs hanging on the walls.

“Everything with Tongue & Cheek has to have a little fun with it,” said Alex Martinez, creative director and principal with Deep Sleep Studio, which designed all of the restaurant’s branding. “What I tried was to take 1920s and 1930s classic elegance and infuse it with some humor.”

They wanted to bring the same edginess to the employees’ uniforms with T-shirts, denim aprons and trucker-style caps designed by Flavour Gallery, a Los Angeles company best known for designing apparel for such premier events as the South Beach Wine & Food Festival and TV personality Andrew Zimmern.

The Tongue & Cheek apparel will be the first restaurant merchandise available for sale on Flavour Gallery’s website.

“We wanted to create apparel that looked like something you would see off the rack and is on point with what’s going on in contemporary fashion trends,” said Alfredo Malatesta, owner of Flavour Gallery. “We think the designs are cool enough that our fan base will respond to them.”

That kind of branding could only help build Tongue & Cheek’s name recognition on a long-term basis.

But for the early stages of the opening, the focus is on building buzz through social media. Tongue & Cheek has its own Facebook, Twitter and Instagram accounts, plus the website at tandcmiami.com. DeRosa and Reginbogin are also active on social media. They hired a local social media consultant because they wanted to be sure to maximize their exposure and engagement with potential customers.

“Real time news is what everyone is looking for,” DeRosa said. “If you do it properly and tease things it build excitement. If we can put out three, four or five posts a day we’re building a relationship with people and they’re getting excited about the product. It’s another form of guerilla marketing without having to put people on the street corner with signs that say, ‘Eat Here.’ ”

The big question is will social media, branding and traditional public relations bring people into the restaurant?

The goal is for Tongue & Cheek to generate $3 million to $3.5 million in revenue during its first year. Projections call for operating losses during the first three months but after six months to be generating a profit of 18 percent to 20 percent, a level they estimate they will need to be successful, Reginbogin said.

He’s tried to be conservative in his projections and keep costs in line with industry norms. “I’m always a glass is half empty guy,” Reginbogin said. “If the bar business happens, brunch gets hot or the late night takes off, it’s all a bonus.”

Industry experts contacted by The Herald agree that Tongue & Cheek’s numbers are in the ballpark. A restaurant’s prime costs — food, paper, beverages, labor and benefits — should be 60 percent or less of revenues with some variations depending on the concept, said Dean Haskell, an industry consultant with National Retail Concept Partners, whose career has included stints as both a restaurant operator and Wall Street analyst.

At $900,000 for start-up costs, Tongue & Cheek is keeping costs well below the average, considering new restaurants can run anywhere from $1.8 million to $5 million, Haskell said.

“You want to hit a 30 percent return on your investment; if you spend $900,000 you want to bring $300,000 to the bottom line,” Haskell said. “The goal is to move toward that as quickly as possible because it shows that the concept is sustainable and replicable.”

Any new restaurant should have enough cash on hand to pay rent and labor for three months.

“The number one problem with most restaurant start-ups is under capitalization,” Haskell said. “If you’re under capitalized you’re going to start cutting costs here and there, and the customers are going to see it. That’s counterproductive to what you’re trying to do. It starts a downward cycle that’s very hard to turn around.”

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