Out of One Frying Pan, and Into Another
One afternoon in February, Ahmass Fakahany, a financier by training, was contemplating the economics of forks. Baguette forks, to be precise — two silver ones on a table at Osteria Morini, a redoubt of one of New York’s pasta gods, the chef Michael White.
To the untrained eye, the forks looked identical. “The difference,” Mr. Fakahany said, reaching for one, “is this one costs $4.50 less.”
It’s not what you might expect in this refuge of Emilia-Romagna, where the talk tends more toward lumache al verde and petroniana than to the price of flatware. But then, Mr. Fakahany isn’t what you might expect here, either.
After a lucrative — and quite controversial — career at Merrill Lynch, Mr. Fakahany, 53, is bringing a Wall Street sensibility to a business that can make investment banking seem easy by comparison: running restaurants. And, so far, he’s been very, very good at it.
In three years, he and Mr. White have a swiftly growing restaurant empire rivaling those of the celebrity chefs Mario Batali and Daniel Boulud. Mr. Fakahany and Mr. White now run acclaimed Manhattan restaurants like Marea, on Central Park South, and Ai Fiori, tucked away on the second floor of the luxurious Setai Fifth Avenue hotel. They have expanded to Hong Kong, and there is talk of Istanbul, too. This year, they hope to open at least five more restaurants, in locations as varied as the East Village of Manhattan and the Las Vegas Strip.
What is so remarkable about their success is that, in the restaurant game, failure is as common as kitchen burns. Nationwide, most new restaurants close within their first year — industry experts put the failure rate at anywhere from 60 to 80 percent.
How have these guys done it? It helps that Mr. White is widely considered to be one of New York’s hottest chefs. But it also reflects what Mr. Fakahany, the money man in this operation, is doing outside the kitchen.
Consider those forks. By switching to the cheaper ones, Mr. Fakahany said, Osteria Morini, in SoHo, would save thousands of dollars.
But that’s not all. He has hired back-office staff from places like Goldman Sachs and Bain Capital to help him watch expenses. Some general managers and sommeliers receive deferred cash bonuses, à la Wall Street, in order to reduce turnover. To hold down bills for cabs, black cars and couriers, Mr. Fakahany hired his former driver at Merrill Lynch to shuttle around most everything, from clients to crates of wine.
And, because he knows that a blowout on the expense account can irk corporate bean counters, he’s willing to cut executives a bit of slack. In Wall Street fashion, he is sometimes willing to do a trade — his food and wine in exchange for something other than cash or credit. For instance, he recently turned a $4,500 dinner bill from a group of British Airways executives into nine plane tickets. He used those tickets to reward his staff at the Alatamarea Group, the restaurant company that he and Mr. White run out of a SoHo loft.
Altamarea is growing so fast that some industry insiders even wonder whether it will turn out to be the Merrill Lynch of the city’s restaurant scene — a company that, like Merrill, ends up overreaching, with disastrous results.
Mr. Fakahany says that’s nonsense. Since 2008, he says, Altamarea’s revenue has surged roughly 250 percent a year. In 2011, the company, which is privately held, had revenue of almost $50 million, up from just $3 million in 2008, he says. Marea, its flagship, generates $50,000 to $60,000 in revenue a day, and Ai Fiori isn’t far behind. As for profit, Mr. Fakahany says the company has double-digit margins, but he wouldn’t elaborate.
After starting with high-end restaurants, the company is adding more mid-range restaurants, like Nicoletta, a pizzeria in the East Village that is expected to open in May.
“I am believer in what we are doing,” he says. “We are developing distinct brands where we can open multiple restaurants, lowering costs as we go.”
IT’S been quite a journey for Mr. Fakahany, who saw the financial crisis up close at Merrill. He was a top deputy to E. Stanley O’Neal, who was in charge during the firm’s disastrous push into mortgage investments.
“I have a lot of regrets, and there are things I wish we would have done,” Mr. Fakahany says. “There are no heroes in the Merrill story.”
Still, Mr. Fakahany did well for himself at Merrill, where his posts included chief financial officer and co-president. Last year, he won a $1.2 million arbitration award against the firm, which is now part of Bank of America, over his compensation. Since 2004, he has sold shares in Merrill that are valued at $13.1 million, according to Insider Score, which tracks stock sales of corporate insiders.
None of those figures take into account his salary and cash bonuses — including payouts in boom years, when Merrill seemed to be minting money as it plowed headlong into dicey mortgage investments.
Even at Merrill, Mr. Fakahany had a passion for good food. When clients and bankers complained about the food in the dining room, people looked to him to fix it.
“It was basic stuff,” he recalls. “You can’t serve a Caesar salad followed by a vol-au-vent. We needed more fish, and we dumped the steak and lamb.”
He also built a wine collection for Merrill, mostly of wines he was buying for himself. He says he rarely paid more than $100 a bottle. Merrill board members, he says, “were real foodies,” so he would offer to bring the wine to board dinners that, in the boom years, were held at the grand St. Regis hotel on Fifth Avenue, and the B.Y.O.B. policy saved Merrill thousands of dollars. After Merrill collapsed into the arms of Bank of America , executives at the new owner privately criticized the wine collection as excessive. Bank of America eventually sold it.
But before all of that, Mr. Fakahany often entertained Merrill clients at Fiamma in SoHo. It was there, in 2004, that he met Mr. White, Fiamma’s chef.
“I am a CNBC junkie,” says Mr. White, 40. “It was cool to talk to him, and I got to meet people like Stan O’Neal.”
Before long, Mr. White was asking Mr. Fakahany for business advice. One evening in late 2006, Mr. White rode a private elevator to the 32nd floor at Merrill Lynch and told Mr. Fakahany that he wanted to open a restaurant in Bernardsville, an upscale hamlet in New Jersey.
“I have 10 to 15 investors lined up,” Mr. White told him.
“I will do it,” Mr. Fakahany replied.
Mr. White was stunned.
“All of it,” Mr. Fakahany continued. “I don’t like to work with other partners.”
With that, Mr. Fakahany became a restaurant investor. He put up $1.2 million to open a restaurant called Due Terre. In February, it was converted into an Osteria Morini, similar to the one in SoHo.
Not long after that investment, Mr. Fakahany personally negotiated Mr. White’s contract with another restaurateur, Chris Cannon, who was looking for a chef for two Manhattan restaurants, L’Impero and Alto. Mr. Fakahany included clauses that would enable Mr. White to exit the venture early and to pursue other opportunities.
By 2007, however, things at Merrill were crashing down. That autumn, Mr. O’Neal resigned as chief executive. After Mr. O’Neal’s departure, Mr. Fakahany says, he knew he was a “dead man walking.” He resigned, and his last day came on Feb. 1, 2008. He had a 3 p.m. appointment that day to say goodbye to Gregory J. Fleming, then Merrill’s co-president.
Mr. Fakahany says he waited and waited, but that Mr. Fleming never showed up. At 6 p.m., he pulled on his blue Dior winter coat and walked home.
“And that is how my 21-year career at Merrill ended,” Mr. Fakahany says. (Mr. Fleming, now a president of Morgan Stanley, declined to comment.)
Mr. Fakahany received job offers on Wall Street. But he, Mr. White and Mr. Cannon were soon investing in Marea, and he decided to leave Wall Street for good.
And so it went, until early 2011, when the New York food scene began whispering that the trio was headed for a breakup. That January, the Altamarea Group announced that Mr. Fakahany and Mr. White were ending their relationship with Mr. Cannon.
Mr. Cannon kept two restaurants, Alto and Convivio, both of which later closed. Altamarea got the other restaurants, including Marea, its flagship.
At the Altamarea base in SoHo, Mr. Fakahany and Mr. White work in cramped offices next to each other at the end of a long corridor. “This is about half the size of the gym I had in my office,” Mr. Fakahany says, referring to his Merrill days. “Yes, I had a gym in my office.” Staff members refer to Mr. Fakahany as King Tut, a nod to his physique and Egyptian roots.
Mr. Fakahany is still all business. He recently dropped by W. H. Linen Rental, in Clifton, N.J., to renegotiate laundry rates, including those for the Egyptian cotton tablecloths and custom-made napkins used at Marea and Ai Fiori. While spending hours watching workers run the napkins through steamers — sometimes twice — to flatten them out, he noticed that the machines could be running the napkins faster — opening the door for him to save money on that item. He also negotiated a group rate for Altamarea’s restaurants for the first time.
At Osteria Morini, he tried to ditch the complimentary bread, figuring it would save $1,000 a week. Customers complained, so the bread returned.
And, speaking of customers, some prominent names on Wall Street frequent Mr. Fakahany’s restaurants.
Richard D. Parsons, who plans to step down this year as Citigroup chairman, likes Table 8 at Marea. The restaurant serves wine and olive oil from Mr. Parsons’ vineyard in Tuscany to his guests.
Lloyd C. Blankfein, the chairman and C.E.O. of Goldman Sachs, is a regular, too. Gary D. Cohn, the No. 2 at Goldman, dined at Marea last November, the same month that Mr. Batali, of Del Posto and Babbo fame, drew ire on Wall Street for mentioning bankers and Hitler in the same breath.
Marea’s general manager, Rocky Cirino, jumped at the chance to have a little fun at the Batali empire’s expense.
“Today is banker appreciation day,” Mr. Cirino wrote on Mr. Cohn’s check. He reduced the bill to one cent.
And when John A. Thain, who succeeded Mr. O’Neal as Merrill’s C.E.O., called for a reservation, the staff promptly called Mr. Fakahany to ask if he should get a table. (Mr. Thain got one.)
Whether Mr. Fakahany and Mr. White can maintain their breakneck pace is anyone’s guess. Others have made the jump from Wall Street to the restaurant business, and, while they profess to love the food business, they agree that it can be grueling.
“Running restaurants is harder than trading high-yield bonds,” says Sean Largotta, a former Lehman Brothers trader who is now a co-owner of a number of successful Manhattan restaurants, including the Lion in Greenwich Village and Crown on the Upper East Side.
Over at Marea, Mr. Cirino, the general manager, says he admires Mr. Fakahany’s focus on costs. But sometimes, old Wall Street habits — including a penchant for expensive luxuries — are hard to break.
When Marea opened, for instance, Mr. Fakahany ordered umbrellas embossed with Marea’s name for $7.50 a piece. They were gone within weeks. Another time, Mr. Cirino recalls, Mr. Fakahany took a dislike to the ties that the wait staff were wearing, so he went out and bought 25 Ferragamo ties, at $125 apiece.
“That was so Wall Street — and it was just crazy,” Mr. Cirino says.