Why top restaurants struggle with profitability

At “The Counter” restaurant, everything is geared towards an exceptional experience. The chefs blanch and fry as if their workplace were a theater stage. The guest does not sit at the table, but at a kind of bar from where he can watch the team led by chef Mitja Birlo. Of course, a visit here is extremely exclusive: there is space for a maximum of 23 guests. There is only one menu on the menu, it costs 295 francs.

“The Counter” in Zurich Central Station is a whiz on the Swiss gastronomy scene. Only opened last December, it received two Michelin stars this week.

The award is the most renowned seal of quality for top gastronomy. In Switzerland, 25 restaurants can be awarded two stars, only 4 have three stars, the highest rating.

From a culinary point of view, the restaurants may have reached the top. But with the prestige come the prices and the problems. And the question arises: Can a Michelin-starred kitchen even be profitable?

The better the cuisine, the smaller the margin

Valentin Diem is managing director of “The Counter”. He says: “We cook between 15 and 20 courses per guest. We have between 4 and 10 components per gear.” This means that the restaurant puts together up to 200 individual items into a menu for each guest. Diem says: “From a business perspective, it’s crazy.”

Because top gastronomy is one thing above all: meticulous craftsmanship. Where other restaurants rely on pre-processed food, in star kitchens the work is carried out on site. When it comes to serving, seconds sometimes count. This not only requires fresh products, but also a lot of staff.

Actually, the prices in top restaurants should be higher, says Diem. “But there are few people who are prepared to pay several hundred francs for a menu.”

The margins are correspondingly small. It takes time for a restaurant to make a profit. The calculation still works out, says Diem. “But only when we are full. The Michelin stars can certainly help.” Reservations have increased since Monday’s award.

Healthy instead of gourmet

Other chefs deliberately forego a star. One of them is Stephan Stalder from “Löwen” in Nänikon. He says: “I’ve been involved in this long enough. Today I lack the ego to consider such evaluations as my life’s goal.”

It was 26 years ago when Stalder opened the “Löwen” in Nänikon. He immediately received 14 points from Gault-Millau, later it was 17 points. Michelin also awarded Stalder a star.

With each award, pressure and costs have increased, says Stalder. “You need more employees who have to be better trained.” But the market for skilled workers has dried up, and in order to find good people you now have to rely on headhunters.

At some point he noticed that the guests expected something different from the “lion,” says Stalder. “The term gourmet temple put many people off.” Five years ago he decided to forgo the reviews. “A liberation,” he says looking back.

Now he can cook again what people actually want and not what the testers asked for. And so today there is value in the “Lion”; Stroganoff, Cordon Bleu, Zurich Geschnetzeltes. According to Stalder, the restaurant is doing better today than before, without any stars or points.

Everyone wants a piece of the fame

Are restaurants better off if they remain starless? A new study from the USA has examined how restaurants perform after they have been awarded. The result is sobering: of all the restaurants in New York City that received a star between 2005 and 2014, 40 percent had disappeared by 2019.

A Michelin star can certainly be positive: it increases awareness in one fell swoop. Suddenly everyone wants a table, and restaurants are often fully booked for months.

But the euphoria often doesn’t last. Top gastronomy in particular appeals to so-called foodies who make a pilgrimage from star restaurant to star restaurant – and then never come back.

And then there are other downsides, such as when the ecosystem around the restaurant wants to benefit from the fame. Then suppliers increase their prices and landlords increase the rent. And the employees also demand a better salary if they are not poached by the competition first.

Three models for success

So how can you survive as a star restaurant – and perhaps even achieve something like success? There are essentially three models:

The most common situation is that a top restaurant is located in a hotel. The best example is “Cheval Blanc”, which has confidently defended its three Michelin stars for years. It is one of three restaurants in the Basel five-star hotel “Les Trois Rois” directly on the Rhine. The shared infrastructure creates synergies and the hotel ensures a natural flow of guests.

Then there are patrons and patrons who support top restaurants by waiving their rent or financing investments. They often do it as a hobby, but it is not discussed openly. A well-known example is the Roche heirs Duschmalé, who bought the Basel restaurant “Stucki” ten years ago and had it renovated for the star chef Tanja Grandits.

And some chefs turn themselves into brands and use their name to create new sources of income. They publish cookbooks and appear on television shows. Switzerland also knows such a high-flyer: Andreas Caminada.

His “Schauenstein” castle in the canton of Graubünden is one of the most famous restaurants in the world. But Caminada is no longer content with that. He has built a top restaurant chain under the Igniv brand, which now has four branches. There are also other restaurants and a hotel. Many of these establishments already have Michelin stars themselves, and some are run by Caminada’s former students.

If you know how, even top-class restaurants can be financially lucrative.