THE RESTAURANT BUSINESS: A MENU OF COSTS
They call it “meanwhile use” in property developer shorthand. It’s the market or cafe that slots itself temporarily into a building earmarked for redevelopment. Rent is low and terms are flexible. Cheap space is hewn out of a lull. Cool creative things happen. You don’t need the backing of a private equity fund or a multinational developer to set up a cafe or restaurant. No one is asking for a six-figure sum just to hand you the keys.
During the downturn, much of Dublin’s city centre was “meanwhile use” territory, mothballed until big money could see a return for its investment. Landlords were lucky to find tenants. In the bleak conditions the market wheeze that was “key money” evaporated. The economy tanked but restaurants grew like poppies through the cracks. Chefs worked harder and a new generation found footholds where they could, as one restaurateur puts it, “spend the money on all the nice stuff”. Food in Dublin got noticeably better.
That era has gone. Landlords are back in the driving seat. Between the canals the key money, a once-off upfront payment just to get the keys, is mind-boggling. The pace of new openings seems relentless and “not particularly sustainable”, as one industry insider puts it: how many burritos do you have to sell when you’ve paid €500,000 upfront, before the costs of fitting it out, staffing it and paying the rent?
Dave Gallagher and his wife Claire O'Boyle Gallagher didn't have deep pockets when they negotiated a deal with a "very fair landlord" who could have charged a bigger rent to a Centra or Spar, "but he wanted to add something to the village". The village in question was a strip of shops on Terenure Road North where they opened Green Man Wines in 2015 in the empty shell of a former takeaway. They used wine bottles and boxes to decorate the walls.
There was no key money. Three years later chef Keith Coleman arrived at their newly refurbished kitchen, turning the shop into a wine bar in the evenings serving delicious food.
"It would be very difficult now. If I was to be looking now I would definitely struggle," Gallagher says. Just up in the road in the now closed Eaton Square restaurant the key money, he was told, was €45,000.
It’s a sum that looks relatively modest if you compare it to what’s happening closer to the city centre.
"Key money has gone through the roof," Vanessa Murphy says. Along with her partner Anna Cadrera, she owns Tapas de Lola on Dublin's Wexford Street.
For the past two years they’ve been looking at opening a second restaurant within walking distance. “We put offers in on about four places and had to walk away. There are bigger players with deeper pockets. We’re a Mamma’s and Mamma’s business. It’s been heartbreaking,” Murphy says. The nearest they got was when they offered €150,000 key money for a small premises that needed work. They believe it went for key money of between €350,000 and €400,000.
“You’ll never see that money come back. That’s a hell of a lot of tapas we’d have to sell.”
After key money, building contractors are hard to find and their costs are soaring. “I know one restaurant where the contract works have doubled,” Murphy says. “It’s breaking every body’s hearts.”
Dublin has a long history of entanglement between restaurants and property developers. And one of those is now dominating the scene
Tiger 2.0 comes with another sting in the tail for staff in restaurants, many of whom are on minimum wage. “We’ve found it’s increasingly difficult for our staff to find somewhere to live,” Murphy says. “Many of them live in hostels for six months to a year. Tenants have got smart and have started to Airbnb their spare rooms. It means the rooms that would have been available to rent are few and far between. One team member was paying €600 a month for a bed in a kitchen. We knew he’d be gone home in no time.”
The liveability of Dublin is not a new question. Twenty-five years ago, I interviewed artists and residents in Dublin's Temple Bar about development plans for the area. A massive "meanwhile use" seed bed had spawned under the cloud of a CIÉ plan to site a bus terminal. Sculptors, painters, students and seamstresses lived and worked within the damp walls of old buildings, a great tapestry of people with their own histories and connections to the area. A semi-State developer, Temple Bar Properties, was set up to try to turn it into Dublin's left bank (or west bank as Bertie Ahern famously put it) without wrecking the spirit that mushroomed in its ramshackle corners.
Destruction of grooviness
In a comment book alongside a scale model of plans for Temple Bar in 1993, someone wrote: “Grooviness cannot be created. But it can be destroyed.”
The idea that gentrification and a rise in property values wrecks creativity was crystallised by one woman who influenced a generation's thinking about what makes cities great. The late American writer and activist Jane Jacobs argued that urban areas needed "healthy micro villages" and that those villages evolved more naturally in the spaces untouched by developer's blueprints. Her ideas were summed up by the New Yorker in the line: "if you don't build it they will come".
In her 1961 book,The Death and Life of Great American Cities, she identified four elements common to successful urban areas: a mix of old and new buildings, frequent streets, a mixture of activities from clothing manufacturers to artists' studios and a high density of residents. On the Jacobs sliding scale, Dublin city centre is far from a successful urban area. Activities are less diverse than they were in the 1990s in the city centre and residential density is still nowhere near the norm in other European cities.
Not all Dublin’s new restaurants in the downturn were small chef-owned operations. Throughout the recession new restaurant openings were funded by property cash. The growing Fallon and Byrne empire was set up by property developer Paul Byrne who moved from houses to harissa in 2006 – comfortably before the crash – with his wife, former journalist Fiona McHugh, and restaurateur Brian Fallon.
The city has a long history of entanglement between restaurants and property developers. And one of those is now dominating the scene. Talk to anyone involved in the business and one name comes up in the conversation about rising rents and key money.
The Press Up Entertainment group is run by Paddy McKillen jnr and Matthew Ryan. It grew out of Captain America's, Dublin's first burger restaurant opened in 1971 by Mark Kavanagh, the property developer who developed the IFSC.
Kavanagh sold Captain A's to property developer Paddy McKillen snr in 1992. "He wanted to buy it because it was where he had met his wife," Kavanagh told The Irish Times in 2011. Other people celebrate anniversaries by taking their spouses to the restaurants where they proposed. Property developers buy the restaurant.
Nothing happened for a long time. Captain America's expanded to Cork, Tallaght and Blanchardstown. Then on Friday, November 13th, 2009, the Press Up group came into being.
Press Up hit the ground running and then sprinted. From an upstairs burger restaurant on Grafton Street, it now controls more than 40 cafes, bars and restaurants, all but three of them in Dublin. At an average of 100 covers per venue, the group controls more than 4,000 seats in the restaurant and bar industry.
Last month, they opened the Stella Diner in a former Bank of Ireland building in Rathmines. Later this year they'll open the Devlin Hotel in Ranelagh, the former Residence on Stephen's Green (being renamed The Grayson), two more Union Cafes in Churchtown and the Beacon South Quarter, and an Italian-themed restaurant in the Hibernian Way on South Anne Street. The rent on this restaurant (owned by Friend's First) was said to be "likely to be more than €330,000 a year" according to a report in The Irish Times. It's a figure that only a well-resourced chain could find.
So are the deep pockets of the Press Up group spoiling it for the small guys? "Absolutely not," a spokeswoman said in an email response to questions from The Irish Times.
“Press Up very rarely competes on the market in auctions and does not go into bidding wars, or deal with ‘key money’ for properties, therefore we do not drive up rents on commercial properties as we are simply not bidding on them,” the statement says.
Some would argue it's better to have ambitious creative Irish companies leading the city centre land grab rather than generic international cookie-cutter franchises
This tallies with anecdotal stories from the commercial rentals market. Press Up comes in with large offers and others walk away. As one restaurateur put it: “If we hear Press Up are interested we don’t even bother putting in an offer.”
The group says that “over 50 per cent of Press Up properties are owned and not rented”. So presumably somewhere approaching 50 per cent of them are rented?
“The majority of units we take are usually off market and generally have planning for other use, such as retail or warehousing. We source these units and change the planning to restaurant use, thus increasing the supply of restaurants in the city, not increasing the demand for available rental properties.”
A local authority is the only body that can "change the planning to restaurant use" and that's not always as easy as it sounds. Last year the group ended up in the High Court over disability access and fire safety in Roberta's and the Workman's Club venues. The dispute, which threatened to close the places down, was quickly settled, and both remain open.
In some ways Press Up has been doing precisely the kind of development Jane Jacobs would have liked. They’re bringing life back to forgotten buildings other developers would prefer to demolish. Although it’s a more commercial version than the artists-in-the-garret-and-butcher-in-the-ground-floor version Jacobs eulogised so beautifully.
Press Up is proud of its projects. "Just look at the Stella Theatre," the statement continues, "originally built in 1923 and was granted permission to be demolished by Dublin City Council in 2007, or The Lucky Duck, which had been sitting derelict on Aungier Street for over 20 years, or Peruke & Periwig on Dawson Street, another protected structure abandoned on the upper floors for years, or Dollard House, partially vacant for 20 years, and the Devlin which was an abandoned abattoir sitting in the heart of Ranelagh."
‘Tooth and nail’
But the breathless pace of Press Up’s growth has had some observers wondering whether it’s a company more interested in assembling a property portfolio than managing a demanding, many-limbed food and drinks enterprise. Does the group have a long-term interest in running restaurants and bars in Dublin?
"Absolutely. Running restaurants and bars is what we have done for 26 years since we bought Captain Americas in 1992. We fought tooth and nail to go on to open fun, welcoming and innovative businesses during the recession years, continuing to employ people and reinvest throughout very tough years of business. We are proud to have come through this and contribute, albeit in a small way, to the vibrancy and atmosphere of Dublin, and are now in a position to continue to open more venues and bring more life to our home town. We are crazy passionate about what we do, and everything we do, and we are here to stay."
They are not the only young men who are crazy passionate about what they do. Ex-Ulster rugby player Andrew Maxwell and his brother David, from Belfast, bought Boojum, a chain of five burrito bars for €3 million in 2015 backed by private equity firm Renatus Capital Partners. The chain now runs nine bars in Dublin, five in Belfast, and one each in Cork, Limerick and Galway. The students who queue up for Boojum burritos are probably not aware they're contributing to the pension plans of high net-worth individuals.
But Boojum is also bringing some big money to the table. The chain was recently said to have paid €500,000 key money for its new George's Street burrito bar. Asked about the deal, Boojum managing director David Maxwell said they "don't release the amounts we have paid to secure sites in Dublin but on occasion we have paid key money to secure a site where we believe a Boojum store will trade well. Thankfully to date our assumptions have been correct and we are seeing healthy returns on the additional investment over and above the fit-out costs."
The vibe is the same: design flourishes made for Instagram, a cocktail-focused bar menu made by mixologists, and little reference to the city the bar has just opened in
Maxwell said the competition for restaurant units between “a number of strong, well-funded operators” looking for the same premises is driving up key money and rents. “Dublin planning restrictions often prevent new planning applications for restaurants being granted in areas most operators would deem preferable.” He said Boojum’s long-term plan was to have 25 outlets in Ireland “and also take on the UK challenge” .
Some would argue it's better to have ambitious creative Irish companies leading the city centre land grab rather than generic international cookie-cutter franchises. Much of our cityscape, including one of our most Dublin of cafe brands, is now in the hands of multinationals. US catering giant Aramark now owns Avoca.
In the end, the Dublin diner gets to vote with their feet. But if the city centre gets swallowed by hungry enterprises then their choices will be narrowed. The lull is over. The big boys now decide how Dublin's food scene looks and tastes. Catherine Cleary
BARS AND CLUBS: DEMOGRAPHICS AND DRINK
When is a boom a bubble? Across the capital, millions of euro are being ploughed into bars in expensive refurbishment projects and new openings. The impact this is having, and how sustainable it is, depends on who you talk to. For some, the proliferation of new places to drink, and a feeling that Dublin is no longer typified by the closed shutters that pockmarked the city during the recession, are a positive thing. For others, the homogenisation of design, high alcohol prices, and the sense that opportunities for smaller operators and independent business owners are being stymied by big investors with much deeper pockets, are pronounced.
Among independent promoters, club bookers, and bar owners, the transformation of Dublin is the main topic of conversation. Unlike other European cities, where cutting-edge nightlife is seen as a positive force, where licensing laws are more progressive, and where clubbing is appreciated as culture, Dublin is instead experiencing an echo of the accelerated development that occurred during the Celtic Tiger, with the DIY nightlife that prospered during the recession giving way to high-end bar projects.
With tourism numbers rising and the cost of living creeping up, city pubs are pivoting towards those who have high incomes or holiday budgets to blow. Increasingly glamorous bars compete for a growing number of tourists and well-heeled Dubliners, as young people and lower-income creatives are being pushed out of the city due to rising housing costs.
Last year was a record year for tourism in Ireland, but 2018 looks set to beat that. In 2017, 146,000 cruise ship passengers stopped in Dublin, an increase of a third compared to 2016. Already this year, overseas visitors to Ireland grew by 273,300 between January and May before the peak summer season hit, according to the Central Statistics Office, which is a 7.6 per cent increase on the same period in 2017, including 82,000 more American and Canadian visitors, a 25.6 per cent increase of visitors from Germany and 16 per cent from Italy.
One major impact this focus on tourism is having is on nightclubs. Hangar, a nightclub on Andrew’s Lane in Dublin closed at the end of May, and the site is being developed as a hotel. District 8 on Francis Street in the Tivoli Theatre is also closing in 2019, and a hotel will be developed on the site. The site is one of the city’s largest dancefloors for electronic music, and one of the most important places in the country for street art. A stipulation of its demolition is that photographs are taken of the existing graffiti, cold comfort to street artists. Planning permission was recently granted for a 184-bed hotel to be added to Vicar Street’s site, although the venue will increase its capacity in the renovation. The upshot of this and more is sanitisation of the city’s nightlife, with slickness replacing edginess, and shininess replacing grit.
So who are the big players?
In Dublin city centre, NolaClan owns 9 Below, 37 on Dawson Street, Xico and The Oak (which had to change its name when The Ivy made its intentions of establishing a restaurant in Dublin clear). With 9 Below, NolaClan bet big on a small-capacity venue for high-end tourists (a pint of Guinness costs €8).
The Mercantile Group owns Whelans, Opium, The George, Mercantile, Cafe En Seine and Nolita. The Mercantile Group split with publican Frank Gleeson, the upshot of which left Gleeson’s city centre portfolio with two restaurants – the Green Hen and Marcel’s – as well as the bar and restaurant Farrier & Draper, which itself used to be the bar and club SPY – on South William Street.
The Mercantile Group is focusing on expensive refurbishments, spending between €20 million and €30 million across its bars and hotel.
Opium on Wexford Street underwent a revamp reported to cost between €2 million and €4 million, moving away from the live gigs held in The Village – which formerly occupied the building. Instead, the focus is on cocktails and pan-Asian cuisine.
Meanwhile, the group is spending €3 million to revamp the Dawson Street bar, Cafe En Seine. The June auction of Cafe En Seine’s interiors read like a list of Celtic Tiger-era regrets; a wooden replica of an E-Type Jaguar, a stuffed grizzly bear, 35 vintage fairground horses, a 1940s petrol pump. Some €2 million was spent on the vast Nolita, a bar/restaurant on South Great George’s Street, while a further €1 million would be spent on sprucing up Whelan’s on Wexford Street and The George on South Great George’s Street.
Meanwhile, the Press Up group currently owns Bison Bar, Everleigh Garden, Garage Bar, Kennedys (Mount Merrion), Mary’s, Peruke & Periwig, Stella Cocktail Club and cinema and diner, the Liquor Rooms, the Lucky Duck, the Workman’s Club, Vintage Cocktail Club, the Dean Hotel and others.
The impact these groups are having on the city is large. In terms of bar interiors, Press Up has raised the standard of decor and design, concentrating on high-concept interiors. While many of the bars opening in Dublin over the last few years may feel different to each other, ultimately, the vibe is the same; an expensive and impressive fit-out that could be at home in any European or American city, design flourishes made for Instagram, a cocktail-focused bar menu made by mixologists, and either little reference to the city the bar has just opened in, or a historical reference dredged from the past.
Earlier this year, theatre collective THISISPOPBABY ran the Where We Live festival, responding to the changes in the city and beyond. One of the speakers was London Night Czar Amy Lamé. She spoke about the resources available to her, given that London has a directly elected mayor, including her role as the person responsible for clubs and bars in danger of closing. The Dublin crowd listened enviously.
To run a massive hospitality operation takes skill, focus and attention to detail. If people think you are not up to it, they will let you know online, and they will not come back
The American writer and activist Sarah Schulman gave a keynote speech. Before she came to Dublin, I interviewed her in New York, where she told me, “I think gentrification is caused by suburbanisation. Prior to the second World War there were no suburbs. People lived in small towns, which is completely different than a suburb. Suburbanisation [is]racially stratified, conservative, privatised families living in identical housing where there’s chain stores and car culture. It’s not an organic village that grows over time. This produced a certain kind of person that never existed before, because historically people from small towns came to cities because they wanted freedom. They wanted to have sex, or make art, or get away from religion, or whatever. They would come to the city and they would get urbanised and enter into city life. But suburbanites, people who grew up in a gated community mentality, they didn’t come to New York to become New Yorkers, they came here to change New York. So you see that generation, that’s who gentrifiers are, children of the suburbs. They really trust authority, and they believed in policing, and they brought a gated community mentality. They like homogeneity and they are more comfortable with it. They’re threatened by the mix.”
However, some smaller city operators are still focusing on creating that mixwith a ground-up approach. John Mahon is co-owner of Lucky’s on Meath Street, a small bar that opened in January and is gradually pulling in a loyal and curious crowd that feels Dublin city centre is offering them less and less.
Mahon cites the licensing process as the most prohibitive obstacle to entry. Generally, a bar licence must be extinguished from an existing pub that’s closing down, and transferred to another premises via the courts. Because of this unusual market, the prices are high, with the initial license cost about €65,000-€70,000 according to Mahon. There are a lot of other costs related to this, including legal ones. “You’ve all these hoops to jump through,” Mahon says, “You’d have no change from €90,000, never mind the fit-out. That’s why there’s no new generation of publicans. Personally, I think the boom in independent coffee shops is a response to that. There’s a lot of people who opened independent coffee shops who a generation ago might have opened a bar. The path to opening a coffee shop is far, far easier.”
Lucky’s is devoid of the frills that feature in many other bars opening right now. “There’s a crazy race at the moment for the best fit-out and no expense is spared. It has raised the bar,” Mahon says, “Press Up are responsible for a lot of that. They’ve addressed a demand stemming from travel, Instagram, people seeing things internationally in terms of style, look and feel that wasn’t really being addressed here, and they came along with things done better in terms of that higher standard of aesthetic.”
But, across the board, Mahon says, “Homogenisation is the word. Too many places are going for broke with the fit-out, and hoping that it’ll develop substance with people who go there becoming regulars, and with the staff and so on. But you can’t buy people being loyal to a bar. If you go large with the design and making them attractive places to be, I wonder how long that will last if the economy turns?”
Trevor O’Shea is the chief executive of Bodytonic (The Bernard Shaw, Wigwam, MVP, the Back Page, The Square Ball). “We are a bit busier year on year, and that’s been going on for four to five years now,” he said in an email. “Not sure I’d call it a boom but patently it is for some others, because they are growing like gangbusters. I tip my cap to them in many ways, because to run a massive hospitality operation takes skill, focus and a militant attention to detail. You don’t ‘get away’ with much in this game, if people think you are not up to it, they will let you know online, and they will not come back. Is it sustainable? No. At some point supply will outstrip demand. Or more likely, there will be a shock to the economy/sector and demand will dip. I’ve seen it happen twice in my time since Bodytonic started, and it will happen again, it’s just a question of being prepared as best as you can for it, when it strikes. That’s all you can do.”
The shortage of chefs in Dublin is well-documented, but the number of venues opening has also sparked a huge demand for bar staff. On closed Facebook groups, such as the Dublin Bartender Exchange, potential staff are greeted with multiple offers of jobs by bars and restaurants scrambling to recruit.
Bars looking for staff this week include Dtwo, The George, Nolita, the Dylan, Oscars, Oliver St John Gogartys, Odeon, Dakota, Doheny & Nesbitts, Fire, Cliff Townhouse, the Stags Head, Cafe En Seine, Vintage Cocktail Club, Opium, the Black Door, Lemon & Duke, the Marker Bar, the Clarence Octagon Bar, the Quays, the Cellar Bar at the Merrion, Fade St Social, House, The Grayson (formerly Residence), Bar Rua and others.
The rumbling discontent in Dublin is not unlike what happened during the boom, with those looking for an edge left disillusioned with the city's flashiness. This latest upswing is certainly more tasteful, but it's also notable that many new bars are generally catering to the same demographic. "There's no reason for people with alternative interests to go to the city centre," Mahon says, "Town is closed off unless you're interested in generalised stuff. It's all about money, money, money at the moment. Have cash? Sure close down a club and build a hotel. This stuff doesn't get considered until it's too late." Una Mullally
This article was edited on July 9th, 2018.