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Chicago Restaurateurs Shrug Off Economic Worries

High End Restaurant Scene Powering Up in Ways Not Seen Since Pre-recession Days

By Kathy Bergen, Chicago TribuneMcClatchy-Tribune Regional News

Jan. 06, 2013--Chicago may have lost a few of its Michelin-starred restaurants in 2012 and waved goodbye to the inimitable Charlie Trotter's, but the higher-end restaurant scene is powering up in ways not seen since prerecession days, according to industry players and observers.

Local operators with a hit or two are embarking on ambitious ventures, though keeping an eye on startup costs and menu prices. A handful of chefs with established followings, among them Curtis Duffy and Iliana Regan, are sticking out their necks with riskier fine-dining ventures. And some prominent out-of-towners are investing on a grand scale, with a Del Frisco's Double Eagle Steakhouse just opened in the former Esquire Theater on Oak Street, and an Italian food and wine marketplace, Eataly, planned for the former ESPN Zone site in River North.

The flurry of activity is seen by some as a signal the economy has stabilized, at least for now.

"People are out spending money again, and corporations are hosting expensive dinners again, and there was a period when that was not happening," said Neil Stern, senior partner at McMillanDoolittle, a retail consultancy. "It affects the high end significantly."

Still, the bubbling of enthusiasm for the upper end of the market is something of an anomaly. The rebound in Chicago restaurant startups across all price ranges is tenuous. The city issued 1,458 new retail food licenses in 2012, only 11 more than in 2010 and below the 1,589 issued in 2007, the year leading into the recession.

Just as there are new arrivals, there were some big losses last year in this notoriously volatile business. Notable exits include Charlie Trotter's, Crofton on Wells, Il Mulino, One Sixtyblue, Pane Caldo and Ria at the Waldorf Astoria, one of several luxury hotels to step away from fine dining.

Weak economic conditions played a role for some, and the forecast for 2013 remains uncertain.

"It's a precarious market, and one economic blip really can take demand out of the market very, very quickly," Stern said.

Still, upscale-restaurant operators are moving ahead, betting on Chicagoans' seemingly endless fascination with food trends, dining out and the city's robust roster of accomplished chefs.

"When I was a child, people would go to each other's homes for a dinner party every week and would rarely go to restaurants -- now it is almost the opposite," said David Flom, who with his business partner Matthew Moore hit a grand slam with Chicago Cut Steakhouse in River North, which opened in 2010. Steaks range from $34 to $114; soup, salad, sauces, vegetables and potatoes all are extra.

In December, they opened The Local at the Hilton Suites in Streeterville, a more modestly priced venue where executive chef Travis Strickland, formerly of the Inn at Blackberry Farm, is serving locally sourced comfort food. Meatloaf made with prime dry-aged beef goes for $24, rotisserie chicken pot pie for $22.

"People can use The Local as an everyday restaurant," Flom said. "People can say, 'Let's just grab a burger at The Local.' It doesn't have to be $100 a person, it can be $25."

At Chicago Cut, the average check, per person, is $82, including drinks, versus $44 at The Local, he said.

Industry observer Ron Paul, president and CEO of Technomic Inc., said he is particularly intrigued by the growing strength of such emerging independents, who are nipping at the heels of Lettuce Entertain You Enterprises Inc., even as that homegrown powerhouse continues to churn out winning concepts.

As restaurant real estate broker Randee Becker, president of Restaurants!, put it: "People who are doing north of $8 million to $10 million of sales are expanding in a big way."

After establishing a high-style, large-scale foothold in River North with the opening of Epic in 2009, proprietors Steve Tavoso and Jeff Krogh last fall embarked on a second act in the neighborhood. They engaged prominent chefs -- Thomas Elliott Bowman and Ben Roche, who worked together at Moto -- but kept their initial investment more modest this time.

Their latest entry, the eclectic Baume & Brix, opened last fall in the former Rumba space, which had most of the necessary mechanical, electrical, plumbing and kitchen elements in place. Startup costs were about $1.5 million, compared with more than $5 million spent to open Epic. "I took raw space (for Epic) -- I would never do that again," Tavoso recalled.

Mercadito Hospitality, whose Chicago offerings include high-energy Latin American tapas spots Mercadito and Tavernita, also is watching its pennies on startups, its most recent being Little Market Brasserie in the Talbott Hotel. Led by chef/partner Ryan Poli, the restaurant has quietly opened with a Parisian decor and American small plates. Its grand opening is expected Jan. 18.

"We are aware of the fact the economy is not fully recovered, so we try to keep our expenses down without sacrificing quality," said managing partner Alfredo Sandoval.

The Chicago-based group intends to keep expanding. It just signed a lease at a River North spot with a 4 a.m. liquor license, with plans to open a drinks-focused venue there in 2013.

All the startup activity means landlords are growing pickier, offering fewer concessions and asking higher rents in the trendier neighborhoods, particularly River North. Brokers say the days of $20-a-square-foot rents are over, with prime spots going for double or triple that rate.

The froth, in fact, led chef Michael Taus to shut Zealous at year's end after a lengthy run. His River North location had been in the shadow of Cabrini-Green when it opened in 2000, before the public housing complex was demolished and the neighborhood gentrified.

After a planned hiatus of several months, he expects to open a more casual rendition of his cross-cultural cuisine in another location. "I'm looking for a smaller space, better rent, maybe to the north -- something a little more raw again," said Taus, a protege of Charlie Trotter.

Still, the River North vibe continues to be a draw. In December, Lettuce Entertain You opened a reinvented Bub City, a southern barbecue concept by co-founder Rich Melman's children, RJ, Jerrod and Molly. This year, it expects to add a tiki bar, Three Dots and a Dash, below the restaurant.

The Italian food emporium Eataly, which made its U.S. debut in Manhattan, N.Y., more than two years ago, is establishing its second American foothold, in River North, selecting it over neighborhoods in San Francisco, Washington and Beverly Hills, Calif. The Eataly team, which includes chef Mario Batali, is planning a project with food vendors and multiple restaurants to open in mid-2013 within a 65,000-square-foot space on East Ohio Street.

"Outside of Manhattan, there is only one market that really, clearly captures the hotel density, the residential and office density ... the theme of live/work," said retail specialist Todd Siegel, a vice president at brokerage CBRE Inc. who worked on the deal.

Meanwhile, some of the city's noted chefs are taking bold risks in other neighborhoods.

In a tiny storefront in Lincoln Square, underground chef Regan recently opened her first official restaurant, Elizabeth, named for her late sister. Her investors put up $155,000 to open the venture, which offers three fixed menus that draw heavily from farm and field, with dishes such as venison tartare on brioche and raccoon prosciutto with pulped beets, carrots and rose gelee.

The restaurant sells tickets for one of three fixed menus. The shortest includes eight to 10 courses for $65 to $95, with an estimated dining time of 2 1/2 hours. The goal was to provide an option for gourmets with relatively modest budgets.

The longest menu offers 20 to 25 courses for $175 to $205, with mealtime estimated at 4 to 4 1/2 hours.

The backers "are taking a big chance ... that is why we kept it small," Regan said. But she is confident her vision will be received well. "There is a large foodie culture, especially in Chicago and the Midwest, with its agricultural roots."

On West Randolph Street, chef Duffy, formerly of Avenues at the Peninsula Hotel, is aiming for the rarefied stratum of top-tier restaurants with Grace, which opened in December in a former frame shop.

The restaurant offers two eight- to 12-course tasting menus, one focused on vegetables, with both priced at $185. The "flora" menu offers such items as poached chestnut with perigord truffle, roasted almond milk and red sorrel. The "fauna" menu has items such as veal cheek with red wine-braised endive, black grape and black mint.

The restaurant is booked for the next three months, Duffy said.

"With the economy as it is, this is probably not the best time to open it," said Duffy, an alum of Trotter's, Trio and Alinea. "But if we went the route of every other chef and opened something a little more casual, or a diner, or something less than what we used to do, then we fail as owners who like to take risks."

Tribune reporter Phil Vettel contributed.

kbergen@tribune.com

Twitter @kathy_bergen

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(c)2013 the Chicago Tribune

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