The New Revolution

I have fairly low expectations of the business of running restaurants -- understanding all too well the lowest-common-denominator math involved in the profitable operation of a multi-unit empire. I've read Fast Food Nation and the Omnivore's Dilemma. I've managed the kitchens of chain outlets and worked in industrial production (those places where the food for multiple locations is prepped, packed and shipped). Hell, I've even driven the trucks and made deliveries, bringing tubs of salad mix and portion-controlled vac-pacs to chefs whose only real kitchen duty was the overseeing of rewarming and plating by a line full of cooks who weren't ever allowed to actually cook anything.

But what's happened at Piatti Locali (see review,) got me thinking all over again about the business of running restaurants. From the perspective of an owner, operator or corporate officer, giving local outlets control over their menus is ludicrous. It flies in the face of all conventional wisdom regarding chain restaurants, ignoring most of those presumed competitive advantages afforded by multi-unit concerns and economies of scale. The chain model limits food costs, maximizes labor and production hours, allows for below-market pricing due to cost controls, prizes consistency of product over specialization and demands top-down control of every aspect of the business. It is an autocratic system, fiercely controlled in the main, and generally successful as long as the despot at the top of the pyramid has some smarts, a little vision and very good accountants.

This is the model that has worked for decades, has been used by hundreds of companies with hundreds of billions of dollars in profit to their credit. And the Piatti Locali concept is a nearly pure refutation of all of it. Denver's Piatti Locali makes good food. But can the company that owns it possibly make good? To find out, I talked with both Susan Klos, a nine-year veteran of the Denver restaurant and now its manager, and Linda Salman, Piatti corporate's assistant director of operations.

I started out by asking Klos about the notion of corporate control and reporting -- the cornerstone of any chain restaurant's setup and the first step toward the standardization that's the ultimate goal of the multi-unit model.

"When I started," Klos told me, "there were a few core items on the menu -- maybe five or six across the chain." But in the early years, the Piatti brand was still finding its way, and individual locations were operated like fiefdoms. There was a king, and the king liked to know what was going on. For the most part, though, the day-to-day business of each outpost was left under local control.

That started changing in the late '90s, as the company grew and consolidated systems. "Things started getting a little more controlled by corporate," Klos noted. There was more oversight, more frequent contact with the home office, more orders being passed down from the top. "But we managers were entrenched in that kind of entrepreneurial mindset, you know? So we weren't comfortable with that."

And if that discomfort can be measured in the taste and menu and feel of a dining room on a Saturday night (which it can be), these were the years when Piatti began suffering, when everything about the place that had been so vital got snuffed.

The Locali concept -- locally controlled, chef-driven -- sprang directly from the dissatisfaction of the individual unit managers. "It was like coming back to the ideal," Klos recalled, and once control reverted to local managers and chefs, this Piatti's sense of individuality, its uniqueness, returned in a flood. "Something like this really inspires the chef, the staff. It inspires everyone to be even better than they are," she said.

True, there's still paperwork to be filed every day (Piatti corporate retains centralized control over bookkeeping and accounting -- the Locali model is groundbreaking, but not insane) and reports to be made weekly, but business websites that track such things assess the amount of time spent by local managers in direct contact with corporate at less than an hour a week. "I haven't spoken to anyone at corporate in more than, I don't know, probably not more than once a month," Klos said, and laughed. "I love it."

Allowing them their freedom made Piatti's managers and chefs happy, but what did it do for the corporate bottom line? Centralized ordering, distribution and menu control are one of the big reasons the chain model works. A standardized menu at multiple locations allows for standardized ordering from the large purveyors. Standardized ordering, in turn, allows a company to negotiate large-volume discounts from the suppliers that keep food costs low. One of the most common arguments against local control of ordering and sourcing product is that the moment a restaurant strikes out on its own, it becomes subject to the whims of the market and loses the advantage of bulk purchasing.  

And Piatti's chefs are encouraged -- required, actually, though none needed much prodding -- to shop the farmers' markets, to connect with local suppliers, small growers and the farmers themselves. They write their own menus, focusing on the product available close to home and on the tastes of their hometown customers. Ask any multi-unit restaurant manager and he'll tell you that disparate menus with no cohesive format will cripple an operation with crazy food costs -- because everyone knows that better prices can be gotten through big suppliers than through individual producers. But according to Klos, "Our costs have not gone through the roof at all."

Salman concurred. "We gave each restaurant a 1 percent boost [in its allowable food cost] to cover the difference in market costs," she said. "Across the company, they hit it right on. The restaurants have done a great job making connections with these local farmers and suppliers. We kind of expected there might be problems at first, but it was really surprising."

"A lot of it has to do with having relationships," Klos explained. At the beginning of the Locali experiment, her chef, Mario Godoy, was dealing with a lot of the co-ops that bought from local farmers and resold the produce to consumers. In time, both he and Klos realized that the best (and cheapest) way to get supplies was to go right to the local farmers. Today, Denver's Piatti still has a contract with Sysco (one of the largest restaurant-supply companies in the country), but uses it only for purchasing staples. Everything else in the kitchen, the pantry and the coolers is bought directly off the back of a truck at local markets or from the farmers themselves. Menus are planned around what is available in the stalls or in the fields.

And the resulting food cost today is just 23.5 percent -- which is a great number. There are plenty of restaurants out there not buying local, not going out of their way to cook seasonally and support area farmers, restaurants that are buying everything out of the Sysco order book or off the fax sheets from the big, national produce suppliers and still running 28, 29 or even 30 percent food cost; restaurants that are paying a lot of money for flash-freezing, for plastic wrap, for vacuum-sealing and the gas required to transport melons from Indonesia, beef from Argentina and asparagus from Costa Rica in the middle of winter.

Still, anyone who's ever spent time in a chef's office knows there are a million little ways to make your food-cost numbers look healthier than they really are, and the simplest of them is to jack up menu prices. Had Klos raised prices to keep those percentages looking so pretty?

Only at the top of the menu, she replied, where prices are up approximately two dollars (but still top out at no more than $25). "That's mostly for the different, more expensive cuts of meat or fish, though," Klos added. "And people will pay more for that quality."

On the rest of the menu, prices have remained fairly stable. And that's true across the entire chain, Salman insisted: Piatti began as a mid-priced, rustic Italian restaurant and remains a mid-priced, rustic Italian restaurant.

But with all the work involved in putting out these good, reasonably priced dishes, the labor and production hours had to have gone sky-high, right? All of a sudden, the kitchens were dealing with new ingredients and unprocessed product, creating and learning new menus with each change of season. That's a complicated, ambitious goal generally reserved for the world of fine dining -- whereas in a chain restaurant, the perfect galley would consist of nothing but robots working 24 hours a day, producing identical entrees across a thousand locations from freeze-dried food pellets that need only to be hydrated and microwaved for service. Ray Kroc, before buying his way into the hamburger business, made a name for himself by marketing a machine that could make five milkshakes at a time, and it was this innovation (along with about a million others) that transformed McDonald's from a little California drive-in burger joint into one of the richest and most powerful international mega-corporations in the world.

But production hours and labor statistics have remained stable across the chain, Salman said.

"It's simple food, prepared simply," Klos explained. It doesn't require that much effort to peel a carrot, to stem some basil, to make a good sauce. It doesn't take a lot for a cook to actually cook something -- because that's what cooks want to do. That's what they're built for. Give them the opportunity, and most will run with it. And those who don't? Well, they probably ought to be selling used cars. Or working at inventing a machine that can make six milkshakes at once.  

"We recognized that every market is different," Salman said of the Locali launch, which freed its dozen restaurants to cook specifically for their markets. "But it also gives them a little more direction. It makes it easier in a way, and it inspires them. It's that sense of pride when you're providing high-quality food and supporting your local markets and farmers. It has worked so well for us. It's been great. It's been absolutely great."

More than that, it's proved that something like this is possible. Moving in direct opposition to everything that was once accepted as fact in the restaurant industry, Piatti has seen dramatic success, an increase in business across the company, and brought a sense of decency to a part of the industry where it's been sadly lacking. This kind of program might not work for Olive Garden, but it's shown that there can be different ways to look at the food chain -- the way dinner is purchased, made and presented to customers -- and different ways for business to be done.

Although Salman hasn't heard of other chains following Piatti's lead, "the market is changing all the time," she said. "People are looking for something different. So who knows?"

There may yet be a new California cuisine revolution. And when (and if) it comes, Piatti Locali will be the new Chez Panisse -- the standard-bearer of a chain-restaurant rebellion, the vanguard of a new way of looking at dinner.

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