Why did a seemingly successful restaurant, named after a celebrity chef and located in one of the most prized neighborhoods in New York, suddenly shut down operations? By one estimate, Guy’s American generated $17 million in sales last year in a Times Square neighborhood that attracts more than 350,000 pedestrians a day.
From the outside, the Food Network star’s restaurant appeared to be bulletproof to even the nastiest critiques, no matter how artfully they were crafted.
No one directly associated with Guy’s American would talk about the closure, despite repeated requests, phone calls and emails. Fieri wasn’t available for comment. Neither was Jon Bloostein, founder and chief executive of Blue Stein Group, the company that actually operated the restaurant in New York’s theater district.
But based on interviews with retail real estate brokers in Manhattan and high-volume restaurateurs, Guy’s American probably died for one simple reason: It didn’t sell enough Donkey Sauce. And “Awesome” Pretzel Chicken Tenders. And Motley Que Ribs. And. . . well, you get the picture. Apparently, $17 million doesn’t go far in the high-rent Times Square market.
“I know it was an amicable split,” said Christine Taylor, spokeswoman for Kushner Companies, owner of the former New York Times Company building and Fieri’s former landlord. Jared Kushner, senior adviser to President Trump and husband to Ivanka Trump, resigned his position as chief executive of the Kushner Companies before joining the administration.
“From what I understand, it wasn’t the right concept for that space in the long run,” Taylor added about Guy’s American. “I think he appeals to a more Midwestern aesthetic than a New York [one].”
It’s doubtful that many New Yorkers, outside the restaurant critic from the New York Times, ever set foot in Guy’s American. Times Square, real estate brokers say, caters mostly to tourists. Because of its high volume of pedestrians and tourists, retail leases in Times Square don’t come cheap.
The most expensive retail locations are located within the heart of Times Square, known as the “bow tie,” said Gary Trock, a senior vice president with CBRE, who has been leasing commercial spaces in Manhattan for more than 20 years. Landlords of such locations typically ask for between $1,500 and $2,000 per square foot, Trock added, which can lead to rents in the tens of millions of dollars.
Located at 220 W. 44th St., Guy’s American was just outside this main drag. Rents in this area range from $100 to $300 per square foot, depending on whether the space is on street level or not. Guy’s American occupied about 6,000 square feet on street level, with another 10,000 square feet below grade. One New York source with knowledge of Fieri’s lease said the celebrity chef and Blue Stein Group were paying $1.8 million in annual rent. The source spoke on the condition of anonymity because he was not at liberty to discuss the business of Guy’s American.
Taylor with Kushner Companies declined to confirm the figure.
If Fieri and Blue Stein were indeed paying $1.8 million in annual rent, they would need to gross considerably more than $17 million a year in sales, according to two large-volume restaurateurs. Generally speaking, restaurant owners are loath to commit more than 10 percent of gross revenue to rent. They prefer to keep it in the 6 or 7 percent range. A restaurateur, for example, who wanted to commit no more than 6 percent of gross revenue to rent on a $1.8 million space would need to generate at least $30 million in annual sales.
Few independent restaurants can hit those kind of numbers, said Tom Meyer, president of the Clyde’s Restaurant Group. In fact, according to Restaurant Business magazine, only about six do, including the Old Ebbitt Grill, a Clyde’s property in Washington, which generated more than $32 million in sales last year.
Meyer estimated that a restaurant could cover its $1.8 million in rent and other operational expenses — including food, labor, utilities and insurance — with about $25 million in annual revenue, still $8 million more than what Guy’s American was estimated to be taking in. Of course, it’s worth noting that New York City’s minimum wage increased by $2 an hour on Jan. 1, the day after Guy’s American closed. And the city’s minimum wage will rise by another $2 an hour next Jan. 1, which will only add to an operator’s labor costs.
A restaurant’s revenue would need to be even higher, Meyer added, if the owners had to finance the build-out of their own space. It’s not clear if Fieri and Blue Stein Group built their own three-story, nearly 16,000-square-foot restaurant or worked out a deal to have the landlord pay for the costs, or a fraction of them. Kushner Companies would not comment on the financials of Guy’s American.
One of the few restaurants that can afford a Times Square address is Carmine’s. Last year, the Italian restaurant raked in $33 million in sales at its tourist-heavy location, according to Restaurant Business, ranking just behind Tao Downtown as the top-grossing restaurant in New York. Like Fieri’s former restaurant, Carmine’s is just off the main Times Square corridor, which means the place wouldn’t pay the highest rents in the area, even though it occupies 14,000 square feet.
Jeffrey Bank, chief executive of the Alicart Restaurant Group, declined to share the terms of Carmine’s rent on Times Square.
Yet, even with its track record of strong sales, Alicart Restaurant Group decided to pass on the former Guy’s American space when it came on the market, Bank said. He wouldn’t name the price that Kushner Companies was asking for rent, but a New York retail broker, who spoke on the condition of anonymity because he’s not authorized to discuss such negotiations, said the annual rent for the former Guy’s American space is now set at about $2.5 million. (With an annual rent of $2.5 million, a restaurant that wanted to commit only 6 percent of its revenue to rent would need to generate about $42 million a year in sales.)
Bank had considered the space for Virgil’s Real Barbecue, another Alicart business on Times Square, on the other side of Seventh Avenue from Carmine’s. Bank thought about moving Virgil’s next door to Carmine’s, so the former might get some overflow traffic from the latter. But the executive balked at the asking price for the space.
“I think it’s a great location and a great storefront,” Bank said. “But I know no restaurants that could pay rents that high.”
Apparently, not even Guy’s American.