- More retailers are growing their restaurant businesses.
- Department store chain Barneys New York will open another Freds location at its Boston shop in the fall.
- As retail sales lag, food could bring some companies a boost.
This fall, a new restaurant will open inside the Barneys New York department store at Copley Place in Boston, Massachusetts. It marks another step in the march of retailers into the restaurant business.
Freds, the high-end department store chain's restaurant brand, has origins that date back to the 1920s, when — under a different name — it was a counter-service operation selling roast-beef sandwiches at 17th Street and Seventh Avenue in Manhattan. Now, there are five Freds restaurants up and running in Barneys stores — two in New York and one each in Beverly Hills, Chicago and San Francisco.
And there's plenty of room for the retailer to continue to grow in the food-and-beverage industry, Barneys CEO Daniella Vitale said. Like other retailers, Barneys is looking for ways to keep pace in an era of online shopping.
"If you asked me five years ago if we were in the restaurant business, I would say, I don't know if there was a strategy behind it," she said. "In hindsight, we should have moved much more quickly to make sure there were restaurants in all of our stores. ... We won't do a project anymore without a big restaurant component."
On a Wednesday in May around noon, the Freds dining room at Barneys on Madison Avenue was packed with a lively lunch crowd.
Businesspeople picked at truffle oil-embellished focaccia bread and grilled calamari appetizers. Women ahead of an afternoon shopping excursion munched on $38 Palm Beach Shrimp Salads and sides of Freds' famous, $12 Belgian Pommes Frites dipped in mayo. Parents sipped from wine glasses, while rambunctious kids dug into margherita pizzas.
"When we first opened [Freds] downtown, quite frankly we lost money because we needed the restaurant to get up and running. We had to make sure we had the right amount of service, the right bartenders, that the quality was exceptional," Vitale said. "We did that, and now we make money."
Barneys could certainly use the boost, as its sector is suffering. America's department stores are increasingly losing market share as more consumers are buying directly from brands and skipping trips to the mall. Barneys also got hit with a brutal rent hike at its flagship store on Madison Avenue in January.
And Barneys isn't the only retailer growing its food business.
Neiman Marcus is serving up craft cocktails, house-made pastas and seasonal potluck at its restaurant called The Zodiac Room at the Hudson Yards mall in New York. Nordstrom's new flagship store for women, opening later this fall in New York, will have six eateries inside, including a cocktail bar on the shoe floor and a space called Jeannie's that's "ideal for families" and serves pizza and salads, according to the company.
Beyond the department stores, Restoration Hardware has six U.S. restaurants, including a glitzy eatery and rooftop sitting area at its recently opened New York store, headed up by restaurateur Brendan Sodikoff, the man behind Chicago's popular Au Cheval. RH CEO Gary Friedman has told analysts the New York restaurant is on pace to bring in as much as $12 million in sales annually and closer to $17 million when food can be served on the outdoor patio, which currently isn't allowed.
Ralph Lauren has three Ralphs coffee shops in New York and three in Asia. And Urban Outfitters' Anthropologie brand has seven Terrain Cafes in the U.S., including three in California, serving fried cauliflower sandwiches at brunch and roasted chicken with farro grains for dinner.
"Retail in general needs to stimulate a person's senses — all five of them," said Jared Epstein, vice president and principal at New York-based real estate developer Aurora Capital Associates. Epstein worked on RH's roughly $250 million deal for a 15-year lease in the Meatpacking District.
"But not every retailer has the brand awareness, brand positioning or the capability to manage and operate a food-and-beverage establishment," he said. "If you are a brand like Gap — what is having a Gap restaurant going to do? ... You need to have the ability to get people in their seats."
Luxury jeweler Tiffany & Co. thinks it can do just that.
It opened a restaurant called Blue Box Cafe at its flagship location on Fifth Avenue in late 2017. It serves a full-day menu of smoked salmon bagels, cheesy, mushroom-covered flatbreads and a $52 "Tea Time" option with finger sandwiches and scones. The furnishings are styled with Tiffany's iconic blue. And reservations are to this day hard to come by.
"We are always looking for new and exciting opportunities and concepts to engage our customers," said Richard Moore, divisional vice president of global store design and creative visual merchandising at Tiffany. "If we feel a dining experience will amplify and excite a new or current location, we will explore those possibilities."
More recently, in May, the retailer tested a pop-up eatery at its store in Beverly Hills for just two days. Moore said Tiffany will continue to explore similar opportunities to introduce more people to the brand — people who might not be able to afford its $15,525 platinum diamond band ring but can afford its $32 avocado toast entree.
"We may selectively introduce dining concepts to other flagship stores around the world, but true Tiffany Blue Box Cafes will only ever be considered where we can offer a truly elevated luxury dining experience in our most important locations," Moore said. "Bringing in a dining experience gives our customers yet another way to immerse themselves in the Tiffany brand."
Back at Freds, the dinner crowd isn't as strong as at lunch, something Barneys wants to work on next, Vitale said. The brunch menu at Madison Avenue on the weekends — offering up a $20 plate of huevos rancheros topped with guacamole and a $17 French challah toast entree — tends to bring in more tourists than locals. But customers are customers.
"As we've started to see more traction in all the restaurants, we've realized we have this incredible jewel in our organization," Vitale said.
She said another thing Freds will focus on, in addition to trying to pull more people in for dinner, is to better use the customer data of people who visit the restaurant but don't buy something from Barneys. The company wants to understand why that is and to try to convert more sales in stores and online.
"If they aren't shopping with us, we aren't communicating with them," Vitale said.
Meanwhile, the new Boston restaurant opening in the fall will have a much larger bar space as a "focal point," according to Vitale. Barneys is also considering opening a standalone Freds restaurant in Miami, she said. And a Freds will open up at the Barneys still under construction at Triple Five Group's American Dream mall in New Jersey.
"If you don't have good food and dining in a neighborhood, the neighborhood starts to decay," Epstein said.
Maybe retailers will be the ones to remedy that.