This past Wednesday was my wedding anniversary, and I had done absolutely nothing to celebrate. To be sure, Beth and I had a little trip to New York in the works to celebrate. However, as for the day itself? Bupkis. Nada. The null set. I mean, I hadn’t gotten a card or flowers or even a $1 bill.
Perhaps, however, I could still make reservations for dinner somewhere decent.
Her favorite restaurant here in town, regardless of price, is a French brassiere on Southside which almost never disappoints. So, during lunch, I went online, and reserved a table for 2 at 7:30. Easy peasy, nice and easy. There was plenty of availability, especially on the patio, where I could basically pick whatever time I wanted.
If you are reading this from outside of the Birmingham area, you might be thinking so much of so what. Okay, you ate at a French restaurant last Wednesday. Big deal. However, if you ARE from the Birmingham area, and you recognize the restaurant in question, that last paragraph might be a little surprising to you.
Sure, it was a Wednesday night — and yes, the heat has been brutal lately. However, not long ago, getting a table at this place required booking exactly two weeks in advance. You couldn’t reserve further out, or it would have taken even longer.
Getting a table the same day and at the time I wanted? Even on the patio, that would have been highly unlikely. Having any availability at any time inside the restaurant? On the day of? Nope. That simply would not have happened.
However, it did, and we had a lovely dinner.
Further, last Wednesday, I made reservations for another dinner at another French brassiere, this one in midtown Manhattan for this past Saturday. Again, I won’t say the name, but it is on West 54th Street, which is pretty desirable real estate.
As with the other reservation, it couldn’t have been any easier. Table for 2 at 8:00? Done. However, had I wanted to go at 7:00, 7:30, 8:30 or really whenever, it wouldn’t have been a problem. Mind you, this isn’t Le Bernardin, but it DOES have a 4.7 star Google review rating.
Finally, for grins, Beth and I decided to go another favorite of hers for lunch on Saturday prior to the matinee we were attending. As with the other two restaurants, I won’t divulge what it is/was other than to tell you it is located on East 60th Street, has its own Wikipedia page and is known for things like ice cream sundaes and milkshakes.
Regardless, I think you know where this is going.
On Thursday morning, I checked availability for Saturday, and opted against making a reservation. From opening until our theater time, I could get a table at any 15-minute interval I wanted — no kidding. So, why would we constrain ourselves with a reservation? If we decided to go there, great. If not, so be it.
And to think, the last time we went there, admittedly a few years ago, we waited in line for some time, outside, to get a seat. The reason why we waited outside? That’s right, because we couldn’t get a reservation.
Sure, sure, it gets hot in Manhattan during the summer, and everyone hits the bricks on the weekends. I get it. The rich go out to the Hamptons, and the rest of us go “down the shore,” or whatever they call the beaches in New Jersey.
Still, everywhere I look and go, things just don’t seem to be as crowded as they were a few months ago. For whatever reason, valid and/or invalid, they simply aren’t.
Believe it or not, this week’s newsletter isn’t going to be a rant about how the official economic data doesn’t match with my reality. To be sure, that would be easy and, well, true. However, I feel like I have been there and done that one too many times over the last couple of years.
No, the remainder is about the fine line many small business owners straddle. Their results are in real time, and aren’t “seasonally adjusted” by someone at the Bureau of Labor Statistics or the Federal Reserve. I know that because I am married to a small business owner.
Her landlord wants the rent at the start of the month. Beth’s other vendors don’t take the summer off either. Further, when a client doesn’t show up for an appointment, there isn’t a phantom pile of cash in the “back room” from which she makes up the loss of that revenue. Finally, when people don’t pay for services rendered (and it happens), it means my audiologist works for free, and neither one of us likes it when she does so.
So, ample availability? Empty chairs? Those are real costs for small business owners, and a lot of restauranteurs are just that….small business owners. Hey, the landlord wants the rent. The utilities need their checks. The workers want their pay. The city and state want their license(s) fees. The green grocer and butcher don’t work for free. All of it.
Whether anyone shows up or not, small business owners have a lot of dough going out the door.
Not that long ago, a local pizza place closed up shop. It occupied some seriously high-end real estate — probably out of step with what it was selling. Even so, the food was solid, and it was mostly crowded much of the time. It just wasn’t slammed all of the time
That was a problem. In a less pricey area, no worries. However, when the landlord jacked up the rent to something like $15K/month, the business owner didn’t have any real choice but to shutter the doors. Perhaps they will take a chance on another location, and I hope they do.
But $15K/month just for rent? For a pizza joint? Getting those numbers to work, in 2025, is going to be a struggle anywhere. It is just math.
The Math
Let’s assume their $20 pies have a variable cost of $10. It could be more or it could be less. That means they make $10 per pizza. As such, on pizza alone, they have to sell 1,500 pizzas/month just to cover the rent. Again, just to cover the rent. If they are open 6 days a week, that works out to be 26 days a month, on average.
As such, they have to sell 57-58 pizzas each and every day just to pay the landlord. The rest of their overhead? Fuhgeddaboudit. Any sort of meaningful take home pay for the owner? That will have to come later.
Of course, they hope to sell a lot of beer, wine, sodas, mozzarella sticks and salads. They want the kiddos to drop a lot of quarters in the video games. All of it. However, the four-top table which orders a single cheese pizza and waters? While better than an empty four-top, sure, but if everyone orders like that? Well, I think you get the picture. Unless, of course, they have a lot of tables and are slammed all of the time.
In essence, any availability at any time is a problem for the small business owner, even if their hourly workers might like it.
Just keep this in mind the next time a restaurant charges a small fee for no shows. It is a nuisance, and no one wants to pay for something they don’t use — but please understand an empty table has a real cost. If you make a reservation and don’t show up, that is a cost the owner had not anticipated and a server that isn’t getting a tip. One which might have a bigger impact on their finances than you can imagine.
The same goes for small businesses of all types, including your dentist, doctor, accountant and even your audiologist.
Obviously, this week’s piece doesn’t have much to do with the markets or the official economic data. In this writer’s humble opinion and from the data of Bloomberg Financial, that stuff was sort of on autopilot. However, empty tables at a few popular restaurants? Well, that seemed more like news to me.
Have a great week.
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this and every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
Chief Investment Officer
Please note, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as well as those of our Investment Committee, is subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.