Why luxury fashion houses still open restaurants – Vogue Business

Key takeaways:

• Luxury brands, including Louis Vuitton, Tiffany & Co., Bergdorf Goodman and Browns have opened or will open new restaurants this year in cities globally.

• It’s a continuation of fashion’s interlinking with food, but the strategy has changed: restaurants bring new customers in and help secure top-client loyalty.

• Two businesses are difficult to run simultaneously, and restaurants can take up to two years to break even.

The operations of luxury houses and restaurants have little in common. That hasn’t stopped fashion brands from opening eateries through which they can find new ways to woo customers.

In February, Louis Vuitton ventured into the culinary world for the first time, opening a café and restaurant, Le Café V and Sugalabo V, atop its new Maison Osaka Midosuji in Japan. Bergdorf Goodman opened Goodman’s Bar, a Parisian-inspired bar and restaurant inside its Fifth Avenue men’s store, at the beginning of the year. While its New York location temporarily closed, Tiffany & Co. opened The Blue Box Café on the ground floor of Harrods in February. Details are scarce, but Browns’ new location in London’s Mayfair will include a restaurant when it opens this summer.  

With upscale menu items, like Goodman’s $40 roast duck or Sugalabo V’s $59 glass of Krug Grand Cuvée champagne, the restaurants all serve to appeal to — and make more money from — the brands’ target, affluent clientele. 

These new eateries join long-standing fashion restaurant plays, including Ralph Lauren’s Polo Bar and 24-year-old Freds, the restaurant inside Barneys’ Madison Avenue flagship that is living on even after the store closed its doors. What’s new is the role these restaurants and cafés play in luxury retailers’ strategies. Faced with online competition, brands need to give customers more of a draw to make a visit. For top customers, they can also host exclusive experiences.

“In the past, the restaurants were developed to keep customers in the store longer and spend more. Now restaurants are a way to attract people in store,” says Marc Metrick, president of Saks Fifth Avenue, whose portfolio of restaurants includes 51fifteen in Houston and L’Avenue at Saks in New York. But luxury retailers — especially those squeezed by the pressure of falling foot traffic — are not restaurateurs, and running two businesses simultaneously is no easy feat.

Multi-restaurant plays

Sometimes in the same building, retailers are opening restaurants for different purposes. Forty Five Ten has two eateries in its Dallas store. The lower-priced ground-floor café, No Aloha, is for “people walking in off the street” and first-time shoppers, says president and chief creative officer Kristen Cole, while the top-floor fine-dining restaurant, Mirador, attracts existing customers, local socialites, the business crowd and guests from the boutique’s swanky sister hotel, The Joule.    

Visual links between the restaurants and store drive sales in different ways. The cheaper No Aloha café is situated next to the entry-level products like art books and small ceramics to drive impulse purchases and to make the boutique appear “much more approachable”, says Cole. At the Mirador, where personal shoppers bring in clients for lunch, mannequins are prominently displayed wearing pieces from the latest delivered collections or current trunk show and are changed every two weeks. Cole says the store receives regular inquiries from Mirador customers about the mannequins’ rotating looks.

Peter Baldaszti, co-owner and chief executive of Hungarian fashion label Nanushka, has opened cafés in the brand’s Budapest and New York stores, with one to come in London, with a long-term view. His hope is to attract younger customers to buy from the store who “five years from now might be our core customer base”. He has also established a space for people to shop the cafés’ ceramic cups and other homewares that are sold in store and online.   

Different locations drive different results, says Baldaszti. From the company’s observations, the window café in Budapest draws passersby, while in New York, the café — situated in the middle of the store — influences customers to spend more time and money. 

As high-touch customer service becomes a point of differentiation for luxury brands, restaurants serve a new purpose. Chanel’s Beige restaurant helmed by chef Alain Ducasse on top of the brand’s 10-storey Ginza building in Tokyo was originally designed to encourage clients to spend more time in the building when it opened in 2004. Since its 2018 renovation, the restaurant more primarily is used to foster goodwill with important clients.  

“What do you do with good customers? They buy a lot of products, so what can you give them that is different from their experience?” says Chanel Japan’s president Guillermo Gutierrez. “We invite them to lunch or give them a voucher and when we want to do something for the brand, we close the restaurant for a special dinner, for example, which is something that you cannot pay for.” 

The restaurant also provides Chanel with extra opportunities for branding. The lounge’s tweed club chairs, the chocolate praline biscuit topped with chocolate mousse shaped into the brand’s signature camélia for dessert and the beige decor, one of Coco Chanel’s favourite colors, all act as an extension of the brand’s aesthetic. 

Running two businesses at once

With razor-thin margins, running a restaurant is a difficult business even in the best economic times. The ways fashion houses operate their restaurants help protect their bottom lines from the finicky nature of the industry. Chanel’s restaurant is a joint venture with Ducasse run as a separate business, C&D KK, with a separate set of accounts, while Forty Five Ten’s eateries are run by parent company, Headington Companies, taking pressure off the retailer itself. Joe Coffee runs Todd Snyder’s café.  

Jonathan Rubinstein, founder and chief executive of Joe Coffee, says being in a fashion store for the first time has eliminated risks usually associated with restaurants as “they build the space. The big risk is in the capital,” he says.

Maison Kitsuné founders Gildas Loaëc and Masaya Kuroki’s are developing its Café Kitsuné business as a stand-alone unit after casually launching the concept seven years ago. “[It started as a place] to hang out, have meetings, meet friends,” says Loaëc. The category now contributes 10 per cent of overall revenue through seven stand-alone eateries, including a restaurant and wine bar, and two in-store cafes with 10 more planned in cities like Doha and Manila.

Fine-dining experiences also make for good social media moments, which helps make these spaces popular as “it’s more interesting for people to tell a story with a nice cake and coffee to show on Instagram,” says Loaëc. There is a reluctance to use the café to drive sales in stores. “We don’t over market things.” he says. “It’s a less cool thing to do. People can do their own research.”

Not all fashion restaurants survive. The neon Marc by Marc Jacobs café in its 3,100 square-foot Milan store, with its well-stocked bar, has shuttered, along with the diffusion line and plans for a location in New York as the brand has cut back. (The company declined to comment for this story.) Restaurants that are fully owned and operated by the brand bring to light just how hard of an industry it is to make money in. Carla Sozzani, founder of fashion and art concept store 10 Corso Como, has been running restaurants in her stores in Milan, Seoul and New York for nearly 30 years. The café is the most difficult part, she says, even though the eateries turn over 25 per cent of revenue in Milan and Seoul and 20 per cent of revenue in the 18-month-old New York store. Hiring, consistency and the nature of dealing with food pose challenges apparel stores don’t face.

According to Nanushka’s Baldaszti, cafés in stores take around two years to break even; the brand’s café in its Budapest store lost money in its first 18 months, he says, but they can work. Snyder opened a café in his Madison Square Park store “to pay the rent”, and says it now drives 10 per cent of the store’s revenue with traffic counter data showing that 30 per cent of the café customers also visit the store. 

London-based women’s shoe designer Sigrid Gelati-Meinert runs a weekend coffee takeaway through a side window of her shop, Peponita. She says the sideline adds £15,000 to £20,000 to her business over a year, covering the coffee cups, barista wages, business rates as well as 10 per cent of turnover. “It brings in a different kind of person who wouldn’t necessarily be drawn to the shop,” she says, as even men can spend a hundred pound’s worth on socks, badges and other knick-knacks as they wander in to drink their coffee.  

“If the café pays for itself, it’s not expensive,” says Chanel’s Gutierrez.

Correction: An earlier version of this piece stated Café Kistuné opened five years ago, in 2015. It opened seven years ago, in 2013.

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