“Laying a business, and dreams, to rest,” The Colorado Springs Business Journal, June 8 - 14, 2012, 19.

BUSINESS BURIALS

Shakespeare famous lines, “I come to bury Caesar, not to praise him,” came to mind as I boarded my flight to New York to celebrate the closing night of Mercat on Bond Street in Manhattan (after 5 years). An authentic Catalan restaurant next to one of the best Italian restaurants in New York and on one of the last cobble-stone streets in the city, Mercat has become a destination point for local and visiting Spaniards.

This where Lionel Messi has been watched on big-screen televisions for the past two years; this is where grandmother’s recipes find admiring customers; this is where celebrities knew they could hide from the paparazzi.

Almost half my age, my partner inspired me to think about the restaurant business not as something I did in the past, but as something I should still be doing. Having sold the Warehouse Restaurant and Gallery in 2007 (after 10 years), I thought I’d never be part of another restaurant ever again.

Not only did I become a partner in Mercat, I helped open a second location in Brooklyn. But as sure as we were that our warehouse conversion was perfectly timed with the gentrification of this Williamsburg neighborhood, we discovered that the Great Recession affected us, too.

Instead of economies of scale, preparing the food in one location and shipping it to the other, we were burdening one successful enterprise with a newly opened laggard. We even changed Mercat Negra (black market) with its Catalan cuisine to Tecalote (owl) which served high-end Mexican food. Within two years a dream was sold to another operator.

In the summer of 2010 a group of investors helped me renovate what became Il Postino. Within six months the Mining Exchange Hotel incorporated it into its overall operations, making it Springs Orleans. Here, too, the menu radically changed to Cajun/Creole and the restaurant is thriving.

Not all burials are the same, and some deserve praise, after all. Financially, there is never a proper compensation for the sweat equity that accompanies the actual money it takes to open the original restaurants. You are lucky to recoup some of your investment.

Emotionally, there is no clarity. You are sad because you failed to fulfill your dream: you had to close or sell it. It’s impossible to sugar-coat the fact that you failed. No matter the reason, you are no longer part of it.

Yet there is some profound pride that your labor is bearing fruits, even if for someone else. Your partners and you are the ones who had the vision, courage, and tenacity to take on massive renovations and open restaurants. And this feeling will never be taken away from you, even if most of the new customers have no idea about the history of the place.

None of these cases warrant the label of resurrection, since their reopening isn’t that profound or divinely inspired. But their resuscitation is still magical and astonishing, reassuring you that your own failure has been turned around.

The sadness of your failure gives way to a deep humility, having realized that someone else can better execute your dream. And perhaps this is what the business world is all about: measuring your success or failure against others.

As long as your ego isn’t entangled in this process, you can withstand public scrutiny. Your customers have a sense of “ownership,” and vote with their wallets. New York restaurants (numbering 4,500) are radically different from those in Colorado Springs (numbering 750). In NYC fierce competition and messy licensing processes are daunting; in CS, “Fast Food Nation” reigns supreme.

The harsh realities of different marketplaces ensure a level of transparency and honesty. You can tell whatever tales you want, but at the end of the day, you either can make it or not. If you can, you stay in the game, if you can’t, cook at home and serve your friends.

The lessons to be learned from the opening and closing of four restaurants are too many to recount here. Some have to do with partnerships and investors, some with banks and landlords; others have to do with permits and contractors, and still others with health and liquor licensing boards; and finally, many have to do with employees and customers.

Unless you think about the team that makes it possible for you to succeed, unless you think about the ambiance you are creating to invite your guests to dine and drink with you, don’t ever open a restaurant. It’s a labor of love, given the anemic profit margins of this industry (5% national average). And love is difficult to sustain when your counterpart is an amalgam of diverse people and their ideas of a perfect meal.

Raphael Sassower is professor of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com

“Partnerships bring best of times, worst of times,” The Colorado Springs Business Journal, October 7-13, 2011, 19.

PARTNERSHIPS

As the Ten Days of Atonement are here, a time of reflection and stock-taking, a seasonal turning point that encourages revisiting ideas and habits alike, I want to share my sense of the value of business partnerships.

My late accountant, Sam Huff, who was generous with his time on many non-profit boards used to tell me: the problem with partnerships is that when they succeed, it’s because of me; when they fail, it’s because of you. Whichever way, responsibility is easily shifted around.

Yet, there are those who thrive in partnerships because the whole is stronger than its parts. Partners complement each other, and can trust that the benefits of each partner’s contribution outweigh any disadvantages associated with a difference in personality traits.  

Though partnerships are fundamentally social-contract associations, they need not be democratic (one person-one vote principle, majority rule). They can be hierarchical, where senior partners have more rights than junior ones who accept less responsibility with less rights. In some cases, senior partners may have veto-rights even when they don’t have a majority. There are partnerships that require unanimous consent for every decision, and as such may require certain finesse in how issues are presented to a vote.

So, if partnerships differ from other business arrangements where there are tensions, for example, between managers and workers, do partners really “feel” equal? In some partnerships, within a few years, it becomes apparent that some contribute more to the whole than others, tensions may rise, and they may fall apart.

What is the meaning of equality in partnerships? Regardless of unequal contributions to the partnership, are all partners equal in their voting rights, assuming majority rule? Should more senior partners have more rights or differentiated weight of their votes? Should there be a difference between partners, associate partners, and senior partners? Most Operating Agreements can take care of these questions, but in fact none of them spell out in enough detail how to ensure camaraderie.

Most professional partnerships (lawyers, accountants, doctors) account for different contributions (hours worked) by distributing funds at the end of the year proportionate to contributions (the more you work, the more you earn). Most distributions take into account shared overhead costs (equally or proportionately). Questions of fairness are always raised, since there is no “one-size fits all.” Founding partners may expect junior partners to buy their way into the partnership, while in other cases, they may be asked to pay senior partners an annuity when they choose to retire.

One problem with partnerships is the free rider syndrome, where some take advantage of the fruits of the partnership without contributing their fair share to the whole. Free rider issues are usually confronted through peer-pressure, penalties, or eventual dismissal from the group; they are tricky to “prove” and nasty to resolve.

Since partnerships are voluntary associations, everyone is free to leave, even when tenure is assumed to protect partners from being summarily eased out. Operating Agreements at times spell out the conditions under which any partner may leave (or be asked to leave) and what compensation is appropriate. Partnerships, like marriages, are complex relationships that require continued attention and fine-tuning.

As I look back at my own experiences, some have been exhilarating, some painful; some enlightening, some infuriating. The worst one was when a partner in one of my restaurants made demands that we stop serving gays because we were being known as a “gay bar.” Is a place a gay bar because it’s frequented by gays? How would you know, anyway? If Jews come in, is it a “Jewish bar,” if African-Americans, is it a “black bar”? I borrowed money from my mother and bought him out in three weeks.

But then I had partners who are smarter than I, who coached me and guided my decisions, who gave me realistic feedback, even when it was difficult to hear, who reminded me why I formed a partnership to begin with. Never be resentful towards your investors, a New York investment banker told me, they are indeed your partners; without them you would have nothing! So, remain grateful and repay with interest when they want out, or continue to pay dividends even when you are the only working partner.

I have met some fascinating people because of partnerships, people I wouldn’t have had the opportunity to meet otherwise. So, as I look backwards and forward, despite the heartaches that at time accompany partnerships, when the reasons are right, embrace and celebrate them; they add a dimension to your well-being you would otherwise be missing, including being accountable to someone other than yourself! Accountability is a good practice we are reminded to uphold at the dawn of yet another Jewish New Year. 

Raphael Sassower is professor of philosophy at UCCS and is still involved in eight partnerships. He can be reached at rsassower@gmail.com Previous articles can be found at sassower.blogspot.com