ELV note: One of our “friends in food” (and high finance) forwarded this tidbit to us from the quarterly SEC reporting of a publicly traded company. Read it closely (preferably with a real estate attorney/accountant by your side) and you’ll get a feel for just how much $$$ these food factories rake in on a monthly basis. FYI: the “third party” mentioned in the first sentence is The Cosmopolitan Hotel and Casino:
“In January 2010, STK Vegas entered into a management agreement with a third party for a term of 10 years, with two five-year option periods. Under this agreement, STK Vegas shall receive a management fee equal to 5% of gross sales, as defined (“gross sales fee”) plus 20% of net profits prior to the investment breakeven point date and 43% of net profits thereafter (“incentive fee”). In addition, STK Vegas is entitled to receive a development fee equal to $200,000. The Company has elected to receive a credit against a portion of its obligation (estimated at approximately $387,000) to fund the build-out in lieu of receiving the $200,000. Management fees amounted to $1,321,430 and $1,240,408 for the three months ended March 31, 2015 and 2014, respectively.”
Now you ALSO know why many of these places don’t give a rat’s ass about your complaints of high markups and excessive pricing.
P.S. This is pretty much the standard deal that most celeb chef joints make with the big hotels (5% of gross sales + a nice % of net profits thereafter – after the hotel covers all of its costs, labor, equipment, etc.)….although the numbers for these big-ticket, always-full, beef and booze emporiums dwarf those of the non-steakhouses.
P.S.S. How’d ya like to be Jean-Georges Vongerichten or Gordon Ramsay and have a $1,000,000+ check waiting for you in Vegas every quarter? No wonder these guys are smiling all the time:
I’m confused (which is one reason I’m not an accountant). Cosmopolitan owns the space. STK comes in with their brand, spends $387,000 to build out the space and the Cosmopolitan picks up $200,000 of that tab (as an enticement to get STK into the Cosmo?). This is the part I don’t get: the Cosmopolitan covers the cost for labor, food, equipment, office supplies, etc.? The employees are employees of Cosmopolitan, because that’s who pays them, or are they employees of STK? What is STK bringing/paying for besides their brand and the people they want running their brand? And for that, 5% gross sales and 20% net, then 43% net? Is this an example of disproving the adage, “If it’s too good to be true, it is?”
Now the followers of ELV’s fine commentary blog can understand my comments over the years regarding the obscene pricing and cost of eating at these “fine” establishments. Of course I recognize the expense and venue overhead of upscale Strip restaurants and that they will charge whatever the traffic will bear. Never the less it has become increasingly difficult to justify the cost or value at these places except for the occasional special event or celebration where you know you will be treated like a raped ape! Having said this there is no place like Vegas to partake of world class dining “at a world class price”! Just be prepared to see your $300 “fine cuisine” floating in the porcelain throne the next morning as you reminisce on the previous evenings bill of fare.