The 19th Hole

Friends of Branded:

Happy Saturday and I hope you had a great week.

I’m well into my fourth decade in the financial markets, but there’s a question I still get asked often where I feel my answer disappoints.

Do you play golf?

As a kid, or as Joe Pesci said in My Cousin Vinny, as a “yout” growing in New York City, I didn’t play the sport. When I started on Wall Street, the game of golf was highly and consistently recommended both by those who loved the game as well as by those that perceived it as being a valuable skill for business.

I gave it a shot, bought a bag of Spalding golf clubs from Herman’s World of Sporting Goods, went to a few golf ranges, and even ventured to Stratton Vermont for a weekend of golf camp / school. I caught the proverbial “bug” and got into it. Van Cortlandt Golf Course, located in the North Bronx (and the oldest public golf course in the USA) was my weekend destination and where I played with a co-worker on the trading desk at UBS who was also launching into the sport of golf and where we both hoped to learn and master the game.

One of us became a scratch golfer. The other contributes to a Saturday morning newsletter. 😊

Golf wasn’t for me, or I wasn’t for golf.

Over my decades of work, I’ve been asked about golf and with leading questions about scheduling a time to play. “Do you play golf?” I get asked or “would you like to meet-up for a round of golf?” at any number of conferences or events.

To the question of whether I play, my standard answer used to be “yes, poorly, but quickly.” That response was usually met a chuckle or a smile, but rarely an invitation to play followed.

My new or at least current answer is simple “no,” but with the added piece of information, “but I’m really strong at the 19^th hole.”

For those with less golf experience or expertise than me, a round of golf is 18 holes. The 19^th hole is slang for the clubhouse and is often associated with the bar, lounge, or restaurant where players unwind and socialize after the round they just completed.

While it took me a moment to get here (doesn’t it usually take me a moment?), Restaurant Finance Monitor’s Restaurant Finance & Development Conference or “RFDC” as its usually abbreviated to, begins on Monday and it’s our industry’s 19^th hole!

I feel fortunate to view my work as a cerebral sport and despite golf not being “my sport,” I have an understanding of the game and reference the sport fairly often (or too often if you ask Schaty).

For investors, it’s not uncommon for me to inquire, with the unnecessary disclaimer that I don’t play the game, what type of investment would be considered “straight down the fairway,” meaning, aligned with the investor’s core strategy and well within their expertise.

In a negotiation, I may ask how “close to the pin” are we, meaning we may not be at the ideally desired place, but are we close, getting there, good enough.

For the restaurant industry, the front-of-house (“FOH”) is the tee box and while I often joke that like “driving” or the first shot taken on any hole, is for show. Kidding aside, the tee box or the FOH is where the guest journey begins, where presentation, confidence and first impressions are made.

The back-of-house (“BOH”) is the putting green and the second half of my joke that “the FOH is for show and the BOH is for dough.” The green, and the BOH, in reality is about precision, touch, and execution (under pressure, just watch The Bear on FX).

There are a lot of industry events that embrace or are about the FOH, BOH or both. That’s not what RFDC is about. This conference is the clubhouse or the “19^th Hole” b/c this is where strategy meets capital.

RFDC isn’t about restaurant operations or about how you can run your FOH or BOH better. It’s where operators, investors and lenders coming together to discuss funding your growth. Other events (and Branded loves and attends many) focuses on menu innovation, design, or guest engagement. RFDC is the 19^th hole for the business side of hospitality. Deals are discussed, expansion plans are drawn, capital quietly (and sometimes not so quietly) changes hands over coffee (or cocktails, no judgements). The people attending RFDC aren’t chasing operational perfection, they’re building portfolios, raising rounds and planning for the year ahead.

With full recognition that I’m beating this golf analogy to death, it’s never been lost on me that RFDC is perfectly positioned at the end of the calendar year / conference season. Yes, for so many in our industry, the 4^th quarter is the most important one (as a result of holiday activities and events), but it also represents a time to reflect on the year gone by and prepare for the year ahead. Great operators understand that they need to master all parts of the “game” and that includes, of course, the FOH and BOH, but the clubhouse can’t be ignored or under-valued b/c that’s where the future of your business gets financed.

The role of restaurant operators requires as much if not more breadth and depth than any other profession. There is no shortage of challenges in our industry and a never-ending need to manage labor, supply chains, menus, improve (or embrace) tech-stacks and create memorable guest experiences and engagement. All are of critical importance, but so too is the financial side of the house (we don’t have an embraced or industry accepted acronym for that yet) and that’s what RFDC represents. A gathering of owners, lenders, and investors to talk capital, expansion, and strategy.

This week’s Top of the Fold isn’t meant to be a puff-piece for RFDC, but rather a strong reminder or maybe a challenge to the myth that our industry is about creativity, flavor, design, and storytelling. Yes, all those things are important and critical for success, but that’s not the business, not even close. Underneath the artistry that guests see lies an industry that is really a brutal numbers game, which includes, but isn’t limited to margins, costs of goods, labor ratios, turn times, occupancy costs, comp sales, and cash flows. The best operators understand that hospitality is emotional, but the business is mathematical. Every plate, every pour, every smiling guest sits atop of a spreadsheet.

That’s what I love about the RFDC event and our industry (especially for a person like me who has truly limited kitchen skills). The restaurant industry gets celebrated for its creativity and people romanticize restaurants as artistic playgrounds. Chefs as artists, operators as storytellers, but behind every beautiful plate is a balance sheet. CFOs and GMs keep these businesses sustainable. At the risk of angering the creative folks in our industry, I’ll argue that the real art is in turning pennies into profits and balancing heart with hard numbers. The best operators know the numbers so well, that they can afford to focus on creativity.

One of the industry’s favorite sons, Danny Meyer, has referred to hospitality as emotional labor, but that it only scales with disciplined systems and financial fluency. None of this is to say that creativity doesn’t matter, but just that it needs to be funded by math that works. Concepts often fail not for a lack of inspiration, but for a lack of capitalization, discipline, or scalability.

That’s why conferences like RFDC matter b/c they move the conversation from how to cook to how to capitalize. Creativity may be the driver of filling seats, but finance keeps the doors open. Hospitality isn’t just about serving guests, it’s also about solving for profit, sustainability, and scale.

We’re an industry that is art, but it’s also arithmetic and when both are done right, it’s beautiful!

For those rallying to RFDC, safe travels and I’ll see you there. But please remember, what happens in Vegas, I may write about in the Headline!

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