The Unifying Theory of Restaurants
A new framework to make sense of the chaos of the hospitality industry
The restaurant industry gods can certainly seem mercurial at times. An edgy haute cuisine temple thrives selling house-made sourdough and butter for $18, while a New American joint three blocks over gets pummeled because they charge $5 for their basket of piping hot baguettes. The $500/head Very Serious Sushi Bar is booked out for a year, while the $400/head Very Serious Tasting Menu Restaurant has empty tables as far as the eye can see. The stalwart French bistro slays, while the new French bistro two doors down, with the same menu and slightly less patinated tiles, can’t make it happen. This setup could go on forever if I wanted it to: steakhouses almost always work; location, decor, supporting menu items are all, so sayeth the gods, irrelevant. But, Big Swings—temples of ambition, staff everywhere, designed to thrill and amaze—almost always fail, as if trying hard to please were the cardinal sin of hospitality. Some cities have particular streets where logic goes to die, the parade of openings and closings presented as if solely to defy credulity, like East 20th Street in New York City; Melrose Avenue in Los Angeles; Collins Avenue in Miami Beach.
Success and failure in the restaurant business doesn’t make any sense, except that in the back recesses of your mind, it does. Because, ultimately success and failure in the restaurant business boils down to product-market fit (just like it does in every single other industry on the planet), and emotionally product-market fit is something that one can feel. It is just on paper, in the process of trying to codify the condition—and, for an operator, to plan for it—that things seem to go haywire. It may be because we rely on reviews and stars as a stand-in for product-market fit, and that is a deeply flawed and unreliable system. To be sure, we need something better.
So today, we propose the Unifying Theory of Restaurants, a modestly named new model to map the restaurant industry; an alternate framework for understanding why some restaurants thrive and others fail. The theory goes:
Every restaurant in the world is either a diner or a club
First of all, let’s define some key terms. By diner we mean a restaurant that is in the business of saying “yes” — to requests for access, primarily, but also to all the other things that customers generally request: menu substitutions, highchairs, walk-ins, and such. By a club we mean a restaurant that is in the business of saying “no.” Diners sell spontaneity, egalitarianism, and ease; Clubs sell scarcity, exclusivity, and access. And, while actual diners and actual clubs do fit into the model, we mean to expand the two genre definitions beyond our traditional understandings of diner (neighborhood, Greek, 24-hour) or club (explicit membership, bottle service, strip).
Furthermore, let’s align on two more terms, Guest Potential Value (GPV) and Repeat Visit Frequency. GPV is an admittedly imprecise metric (but one Blackbird endeavors to measure well someday). It is a measure of how much value a restaurant could reasonably extract from one customer on one visit. Contrast it with lifetime value or LTV, which measure a guest’s value over time. GPV is not necessarily average check, either, although GPV and average check in dinerland are pretty close cousins. Repeat Visit Frequency is the easiest of all, defined as how often the average repeat customer visits.
And, finally, here are two rules of the Unifying Theory of Restaurants. 1.) This isn’t a model for predicting revenue or scalability. It looks exclusively at longterm economic viability or, simply, potential profitability. 2.) A restaurant cannot be both a diner and a club. Sure, clubs can start to feel like diners after many, many visits; and, no, not every table in every diner is considered equal. But restaurants that thrive absolutely, positively know their lane and stay in it.
Let’s consider some restaurant pairs to help tie this together.
Balthazar vs. Polo Bar
The towering seafood towers. The iconic maitre d’s. The world famous private reservations line and the A, AA, and AAA guest ratings system. Balthazar? She’s a diner, friends. They’re in the business of saying yes, 1,500+ daily covers at a time. Being a diner is part of Balthazar’s—and proprietor Keith McNally’s—magic. You might wait 45-minutes for a table as a walk-in, but walk in you will. Balthazar is here to please.
If you want to see what it would be like if Balthazar just said no all the time, perhaps you’d be interested in a stroll uptown to the Polo Bar, Ralph Lauren’s superb American restaurant on E55th Street. The bar is reserved for friends of the house and guests who have a reservation in the dining room, and those resys are not easy to come by. Balthazar’s GPV is lower than Polo Bar’s, but both have a clear path to profitability.
Peter Luger vs. Joe’s Stone Crab
The diner-club line between this duo is rather thin, and that’s what makes it a wonderful comparison. Some of the differences are obvious: Peter Luger, the world-famous Williamsburg steakhouse, relies heavily on reservations and only accepts its own charge card for payment. Meanwhile, at Joe’s—though the Miami seafood heavyweight is starting to accept some reservations—walk-ins are still a thing. Another difference is Peter Luger’s product line, which, as a brand extension, helps boost GPV and put it squarely in club territory.
Mandolin vs. Milos
You’d look at Milos, with its sky-high prices and self-important Midtown Manhattan crowd and say, “that’s a club, sport.” And, then, you’d look at Miami’s Mandolin, the easiest, breeziest, best Greek taverna in the U.S. and say, “diner.” And you’d be wrong about both. Milos sells one thing, and that’s food on a plate. It also sells it to all comers. Mandolin, though it does take some walk-ins and runs a waiting list, is selling something much more complete, including the salt on the table (available online and at the restaurant’s housewares shop). It’s possible that Milos is the more profitable of the two profitable restaurants, but it’s not the club.
If we return to the mercurial restaurant gods now, do they seem less so? The problem with the Very Serious Tasting Menu Restaurant is that it didn’t figure out soon enough that it was a club and needed to cultivate members, not guests. The Very Serious Sushi Bar knew this from the get. The new French bistro with the shiny tiles tried to be a club, when it should have focused on being a diner. Those Big Swings? They’re always hard, but there’s a reason they’re sometimes called clubstaurants.
So, there you have it, the Unifying Theory of Restaurants. It’s a pet thesis of ours, but we think it does a lot to help explain how this industry works. Diners and clubs; pick your lane, restaurateurs. Drop your feedback in the comments or join us on Discord, where we’ll be talking about this some more.
Founder + CEO
Blackbird Labs, Inc.