Ark plugs 'leak,' plots new ventures. 'We have not lost momentum,' successful Manhattan restaurateur Mike Weinstein insists after shakey ventures into New Jersey

Nation's Restaurant News, March 9, 1987 by Joe Edwards

Ark plugs 'leak,' plots new ventures

NEW YORK -- When Ark Restaurants Corp. set sail for the New Jersey suburbs a year ago, it seemed like a logical move for the fast-growing, pioneering operator of trendy Manhattan restaurants. The company was flush with cash from its first stock sale, most of its dozen or so New York restaurants were going like gangbusters, and co-founders Michael Weinstein and Ernie Bogen had established themselves as wunderkinder of food service in a city where running even one successful restaurant is sometimes likened to walking on water.

Ark, however, sprang a leak on the shoals of suburban food service. The restaurant-as-theater formula that had worked so well in New York played to empty houses in New Jersey. After a few months of favorable press notices, but overwhelming consumer indifference, Ark finally shut albuquerque Eats in Englewood, America Eats in Paramus, and America's Diner in Verona, took a $1.2 million writedown in the September quarter and another $280,000 writedown in the December quarter, and returned, depressed and humbled, to Manhattan. A fourth Ark property, Ernie's in Hackensack, N.J., is breaking even and will remain open, at least for now.

Missed the market

"We did spectabular work, but we missed the marketplace," Weinstein lamented in a recent interview.

With the dark days of 1986 behind it, Ark is currently negotiating the purchase of two existing restaurants in New York; studying several Manhattan sites where it may develop its own concepts; and trying to build a restaurant management and consulting business. And, of course, it continues to operate 14 Manhattan restaurants, serving more than 50,000 meals a week at places as diverse as Albuquerque Eats, specializing in Southwest food, and The Ritz Cafe, which features seafood.

Hard times in Manhattan

At about the same time that the New Jersey ventures were failing, the seas were getting uncharacteristically rough for Ark in Manhattan as well. One new restaurant, Betty Brown's Broadway Dining, was going belly up. B. Smith's, a new venture, was costing much more than had been originally estimated. And Nanny Rose, a popular Columbus Avenue restaurant, was forced to close when the landlord demanded an astronomical rent increase.

Then, too, the stock market reflected a big disappointment. Ark's stock plummeted to a low of $3.25 a share from a 1986 high of $12.25. The company went public, at $7.50 a share. Recently Ark shares were still trading at less than $5. Weinstein and Bogen each control 33 percent of the company.

Roger Lipton, an analyst with Ladenburg, Thalmann & Co., which took Ark public, said he is optimistic about the company's prospects for 1987 and beyond. He admitted, however, that Ark lost a year with its ill-fated move to the suburbs.

Has Ark lost its way?

The big question that remains is, Has Ark lost its momentum as well?

Weinstein thinks not. "By June we will be earning money at a greater rate than we ever have," he declared. To support his optimism, he cited the following:

* Ark's two flagship operations, America and Ernie's, which accounted for 41 percent of the company's $24.4 million sales in fiscal 1986, continue to enjoy high volumeS. America, a 350-seat restaurant featuring regional American foods, will gross about $6 million this year, and the 300-seat Ernie's, a casual Italian dinnerhouse on Broadway near 75th Street, will gross about $5 million.

* The Ritz Cafe on Park Avenue South, which Ark bought last year from Sam DuVall, has been turned around and is "a significantly profitable restaurant." Over the last few months, Ark has added seafood items to Ritz Cafe's Cajun-Creole menu and cut payroll costs by 20 percent, liquor costs by 7 percent, and food costs by 2 percent. The restaurant is expected to gross about $2.3 million this year on average dinner checks of about $26.

* In midtown at the corner of 8th Avenue and 47th Street, B. Smith's, a stylisch cafe that Ark owns in partnership with Barbara Smith, the restaurant's namesake and former America manager, is breaking even after only a couple of months. The restaurant is enjoying strong word of mouth around town and received a highly favorable review from critic Jeff Weinstein (no relation to Michael Weinstein) in the Village Voice.

* Big Kahuna, a bar with a surfing theme and limited food service (burgers, hot dogs, fries), is making a splash in Noho at the site of the failed Betty Brown's Broadway Diner. Big Kahuna was "instantly profitable" after its late December opening, Weinstein boasted.

Hitting singles, doubles

If Ark Hasn't scored another grand slam home run like the one back in 1984 when it opened America, at least it is hitting a few respectable singles and doubles.

Even during the dark hours of 1986, Ark continued to run a tight ship. The company, known for its lean management style, has been able to cut total food and beverage costs to 29.5 percent of net sales, compared with 32.1 percent two years ago, thanks to its growing purchasing power and a new central computerized purchasing system. "We're tremendously efficient," Weinstein said. "There's no waste in payroll, no waste in food." An Ark supplier said the company "makes money because it knows how to save money."