Outside the U.S., the Fine Dining Business Is Just as Challenging

The business of fine dining, largely defined by its chefs and cuisine, has its own challenges — in the United States and abroad.  While diners accept a higher price point in exchange for quality and service, higher food and labor costs challenge restaurants to maintain the right balance.

This is our next look inside a fine dining restaurant to dive deeper into the unique challenges and operational strategies of running these unique businesses. Read more, including an interview with chef Gabriel Kreuther, here, and a taste of New York City’s L’Appart, here.

Noel is one of the newest and already most pre-eminent restaurants in Zagreb, Croatia, a capital city that is quickly building a reputation for fine dining in Europe. The restaurant serves lunch and dinner, and offers an extensive wine list. The menu, which includes dishes such as steak tartare, prawn bisque and black Slavonian pig, is overseen by executive chef and co-owner Goran Kočiš. Wines, which range in price from $24 to $4,750 per bottle, are supervised by sommelier and co-owner Ivan Jug.

Kočiš and Jug told Skift Table how Noel has fared since it opened in September 2016, and the costs and strategies of doing business, paralleling plenty of the U.S.-based challenges to the fine dining industry.

Finding the Right People

Kočiš and Jug worked for seven years at Bistro Apetit, another Zagreb fine-dining stalwart. They initially wanted to team up to buy the restaurant, but the owners didn’t want to sell. So they decided to go in on their own venture, leaving Bistro Apetit in the spring of 2016. To secure financing, they partnered with a Zagreb-based businessman who is also a lover of gastronomy. The pair thinks it was a good decision. “We’re happier that we opened our own business instead of taking over another one,” Jug said.

The pair’s experience local experience certainly helped Kočiš and Jug built on their strong reputation from Bistro Apetit, and customers followed them to their new venture. That made it possible for them to open Noel with a base of potential customers. The first six months were busy, with diners curious to experience the duo’s new venture. While business slumped during the summer, when many city residents leave for vacation, it picked back up during the holiday season. Customers today are a mix of about 60 percent locals and 40 percent tourists. Jug also noted that Zagreb’s rising reputation for tourism has boosted those numbers.

Getting the Numbers Right

 “We’re doing our best to be at zero,” Jug said about the 15-month-old restaurant’s profit margin. While both Kočiš and Jug stressed that they’re making all their monthly payments to run the restaurant, they haven’t yet turned a profit. “When you make a serious project like this, I think a profit is impossible,” Kočiš said. “But the main thing is that we pay every month what we must pay.”

Taxes are a heavy burden on Noel, a common refrain in Croatia. Jug estimated that 35 percent of revenue goes to paying taxes and other fees. Additionally, labor costs account for about a third of revenue, partly due to high taxes on employee wages. Noel has 18 employees, and the partners cited labor as by far the highest cost of doing business.

Then there’s the food cost associated with a high-end restaurant. Kočiš has developed a culinary reputation for luxurious ingredients. Diners will find white truffles, veal, foie gras and turbot on the menu. “We are getting the best ingredients we can find in Croatia, but we are buying local,” Kočiš said. He keeps costs manageable by partnering directly with local farms when possible. The goal is to stay under a food cost of 27 percent. The four-course dinner tasting menu is priced at about $57, six courses at about $78, and nine courses at about $108.

Creative Marketing

Each month, Noel partners with wineries from around the world for special dinner events that must be pre-booked. The dinners have proven so popular that they’re often fully booked a week prior, Kočiš said. Much of Noel’s marketing is done on Facebook and Instagram, but the wine dinners have proven to be their own form of marketing: Kočiš said some customers try Noel for the first time at a wine dinner and return on their own.

Skift Table contributor Marcella Veneziale is a journalist and editor based in Zagreb, Croatia. For the past six-plus years, her work has focused on food and the business of restaurants.