The New Economics of Pop Up Restaurants
The owners of Wise Sons Jewish Delicatessen started their business with a dream: to bring traditional Jewish foods such as hand-sliced pastrami and house-smoked trout, to San Francisco.
But the economics of opening a location—costs can range between $300,000 and $500,000 for a 1,500 square foot space with a liquor license in San Francisco—pushed the young restaurateurs to launch with a more temporary approach: the pop-up.
Until recently, Jewish deli food was hard to come by in San Francisco’s foodie scene. But after launching a pop-up restaurant to test the concept, brand, and audience, Wise Sons deli won the confidence of investors and gained the experience it needed to open a permanent location.
Pop-up restaurants—temporary eateries that set up shop for a few days, weeks or months in spaces such as hotel lobbies or other restaurants that close for the night—are morphing into a multipurpose tool, used by different strata of the restaurant industry to test concepts, market new brands, engage with a younger audience, or prove to landlords, lenders and investors that they are worth the risk.
Since first appearing in London in the mid-2000s, when a handful of restaurateurs began staging culinary “happenings,” pop-ups have become so integral to the high-end restaurant scene that there are now pop-up production companies that help chefs and companies stage events and restaurant spaces that serve as homes to a continually shifting schedule of pop-ups.
As the $372 billion restaurant industry emerges from the recession, which saw inflation-adjusted sales shrink slightly in both 2009 and 2010, and stay flat last year, it is growing modestly, at about a half-percent per year today, according to market analyst Technomic. There is no official count of how many pop-ups have taken place nor a gauge of how they are affecting the industry, but, like that other recession-era restaurant fad, the food truck, they are an increasingly popular and low-capital tactic.
Leo Beckerman and Evan Bloom, the founders of Wise Sons, believed they had lit upon a gap in the market for classic Jewish deli food and began practicing making smoked pastrami and rye bread at home. Neither had experience in the restaurant business.
The Wise Sons’ Wise Beginning
The owners of Wise Sons Jewish Delicatessen opened a fixed location just a year after starting their business as a pop up.
Then, in January of 2011, the partners jumped at a chance to start a pop-up on Saturday mornings in a cafe that was being used by a food-truck business only for its bathrooms, Mr. Beckerman said. Start up costs: About $2,000 to $2,500 a week, which covered rental space in a commissary kitchen, ingredients, and liability insurance, and was equivalent to what the partners, who worked without pay, earned during each service.
The Wise Sons pop-up soon began gathering crowds and garnering attention in the local press. In late February, just over a year since starting the pop-up, the partners opened a fixed location in the city’s Mission District.
The pop-up was “trial by fire,” but well worth it, Mr. Beckerman said. “We got to test our ideas and get the word out and prove our capabilities,” he said. “It’s doubtful any of this would have happened without the pop-up.”
Pop-ups also appeal to established restaurateurs such as Bill Chait, managing partner of Sprout LA, which operates six Los Angeles restaurants. Mr. Chait became a pop-up impresario in August, 2010, when he closed a poorly performing restaurant for a few months while developing a replacement concept. In the meantime, Mr. Chait rebranded the space “The Test Kitchen” and hosted a series of pop-ups with some of the city’s top chefs.
When his new restaurant was ready a few months later, the Test Kitchen closed. But Mr. Chait has continued staging “mini Test Kitchen events,” he said, in his existing restaurants. In October, in a space that will be used for a new restaurant, Mr. Chait plans to relaunch the Test Kitchen for a month.
Pop-ups are an ideal way to reach a youthful audience, he said. For Mr. Chait, who was already paying for the location and some of the staff salaries, input costs were minimal, and he made a margin of about 20% on each event, he said.
“The circle of people we have in this universe, it’s our target market. It’s social-media driven and younger,” Mr. Chait said. A mailing list of more than 4,000 names accrued through the pop-ups “are big diners at our restaurants” now, Mr. Chait said.
For Alan Philips, the pop-up is more of a stage than a kitchen. Mr. Philips, principal of Guerrilla Culinary Group in New York, staged his first pop-up in April 2010. Today, he produces events that promote restaurant groups including Todd English Enterprises and Le Cirque, with sponsorship from brands including Argentine clothing company Etiqueta Negra and Grey Goose Vodka.
Mr. Philips said a three-to-four-night pop-up in Manhattan typically costs $30,000 to $50,000 up front to produce. To keep the location budget down, he may offer a hotel or existing restaurant a percentage of bar sales. He searches for liquor companies to provide the booze, and trades other sponsorships for publicity. He also hires public relations firms to make sure the event is announced on blogs and in local papers.
“You have to presell it on buzz,” Mr. Philips said.
John Fraser, chef at Dovetail in Manhattan, opened a pop-up called What Happens When in February last year, where he and his team tried three culinary concepts. Mr. Fraser said the team exhausted itself and only broke even with the four-month long pop-up, but he learned a lifetime of lessons
He learned, for example, than when tables for two are set with small votive candles, “it makes you want to lean in and talk softly,” he said. With long candles, “you tend to lean back and you project your voice more,” he added. Such insight might have taken Mr. Fraser, 36, decades to garner, he said; instead, the pop-up condensed the lessons into a kind of “boot camp.”
Increasingly, big brands want some of the shimmer. New York’s venerable Le Cirque, owned by the Maccioni family, which has eight restaurants in New York, Las Vegas, Dominican Republic and New Delhi, did a pop-up late last summer, produced by Mr. Philips, in a hotel on the city’s Lower East Side.
In a play on the location, the event was called “L.E.S. Cirque,” and took place in the penthouse of the Hotel on Rivington. Grey Goose was a sponsor, so vodka cocktails were flagged on the menu. In a display of trend-consciousness, each night focused on an ingredient in season locally: Menus were built around watermelon, heirloom tomatoes, lobster and sweet corn.
The event was so successful as a marketing tool, Le Cirque expanded its commitment to pop-ups.
In March, Le Cirque will stage a series of pop-ups in country clubs in nine cities, including Houston, Chicago, Atlanta and Los Angeles. For $150, diners will eat the restaurants signature dishes, hobnob with members of the Maccioni family and receive a copy of an autobiography by patriarch Sirio Maccioni.
The pop-ups could eventually lead to “ventures across the country,” said co-owner Marco Maccioni. “It’s a way to get to know those markets,” he said.