EHS Newsletter Issue No. 7: The Neighborhood Restaurant Business Model
FRONT PAGE NEWS
July Sales Sizzled While Profits Simmered
Summer heat wasn't the only thing rising in July. EHS restaurant performance showed encouraging trends across the board, with overall sales up compared to last year and most operators posting a gain, while a smaller share saw a dip.
Profitability told an even better story. Net operating income climbed at most restaurants, outpacing sales growth in many cases. A handful of spots did see profits slide even as sales grew, a reminder that a busier month doesn't always mean an easier one.
The takeaway: July brought a real sales boost, but cost pressures made sure that growth didn't translate into profit automatically. Operators who kept a close eye on their controllables came out ahead.
What's for Dinner?
How Neighborhood Restaurants Win When Everyone's Competing for the Same Plate
There's one question that runs through everyone's mind on a daily basis: what should I eat for dinner? These days, grocery stores, delivery apps, and restaurant chains answer that question just as often as the place down the street. Here's how your neighborhood joint stands out anyway.
Be there. Patrons love seeing and meeting the owner. It won't drive customers in on its own (that's still all about great food and service), but when people know who their money is going to, they're more likely to build a relationship with your restaurant and come back.
Make your story known. Your website's "about us" tab can only do so much. The real storytelling happens in your decor. Every detail in the room is a chance to connect with your guest before they even see the menu.
Know your audience. This one's mostly for before you open your doors, but every restaurant is a brand, and that brand needs to live somewhere that gets it. Make sure your values match your neighborhood's.
Invest in your familiar faces. Your people are your success. Neighborhood institutions run on staff who stick around, and nothing proves you care about a community like employees with real tenure (and great personalities, we're sure).
Be nimble. Independent restaurants can jump on trends faster than chains ever will. Better yet, you can start one.
Deliver consistency. This might be the most important one on the list, since it's exactly what keeps people going back to chains. Build a reputation that people can count on, and there's no reason for them to go anywhere else.
Show up beyond your four walls. Be an active part of the neighborhood you serve. Sponsor a local team, show up at community events, partner with nearby businesses and back a local cause. Invest in the neighborhood, and it'll invest right back in you.
Last Call for the Old Playbook
It feels like the drinks world is really having a year. These were the three headlines this month that we were talking about at EHS.
On the distribution side: Republic National Distributing Company, one of the country's largest beverage distributors, filed for Chapter 11 bankruptcy, and the court filings are ugly. RNDC owes north of $400 million to roughly 100,000 unsecured creditors, with the biggest single debt (nearly $94 million) owed to the maker of Jose Cuervo. The company had been bleeding major suppliers for years, including Brown-Forman and Pernod Ricard, and lost accounts worth more than $3 billion in annual revenue in under three years. For operators, this is a reminder to keep an eye on your own distributor relationships and payment terms, especially if RNDC touched your supply chain in any way.
On the consumer side: The New York Times went deep on what's actually being lost as people cut back on drinking, not just the calories or the hangovers, but the social glue that a shared bottle or round of drinks used to provide. It's a good read for anyone rethinking their beverage program, because it's not just about swapping in mocktails. It's about designing a whole new kind of social experience for the table.
On the supply side: Meanwhile in California, winemakers are literally burning their own pinot noir vines. Pinot production is down 30% since 2021, wineries are producing more white wine than red for the first time in decades, and tasting rooms are seeing traffic drop year after year. The "Sideways" boom of the 2000s has fully unwound.
Put it together, and the message for operators is the same one we've been talking about all year: build the non-alcoholic program now, keep pricing and portioning flexible, and don't assume your usual distributor relationships are as stable as they used to be.
What Are We Drinking?
We may be numbers nerds, but we also love food and drink and are always out and about. Some of the folks we feature here are our clients, and some aren't (YET!)
Straight from our own team: Our very own Amber Pike, who helps us with all things invoices, is also a whiz behind the stick and moonlights behind the bar at Ox Bar & Hearth (and she's been busy!)
The food menu at Ox has always leaned hard into seasonality, and now the cocktail list is catching up. Two new additions just landed: a spicy watermelon mezcal margarita for the last stretch of summer, and a black cherry vodka cocktail with fresh basil for anyone (like her) who can't resist an herb in their drink.
Our favorite move, though, is the kitchen crossover. She started pulling lacto-fermented celery and horseradish juice, a byproduct sitting in the kitchen, and using it to punch up the Toma-tini, their Bloody Mary-inspired brunch martini. It's a small tweak with a big payoff, and a great reminder that some of the best bar ideas are already sitting a few feet away in the walk-in.
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