Neighborhood Watch

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There's a saw in the restaurant business that anyone who wants to do something other than what he or she is doing opens a dining establishment. That makes for lots of amateurs in the business and for results that are often disastrous. Fifty percent of the restaurants that open in New York shut within three to five years, a failure rate that is even higher than the basic failure rate for businesses. Running a restaurant entails a daily outflow of cash much greater than that of a clothing store, in which the stock is replenished only when items are sold and the owner is the mainstay of the staff.

Moreover, restaurants have to obtain licenses, pass inspections and maintain considerably larger staffs. But if a restaurant becomes popular, it can generate profits of hundreds or thousands of dollars a day, depending on its size. To obtain such intangibles as ingenuity of cuisine and atmosphere, customers of restaurants are used to paying substantial fees.

In a small, garage-like building on Eighth Avenue, Pat Rogers and Bob Barbero are busy destroying their dream restaurant, Rogers & Barbero, and making way for a new one. About half of all new small businesses are begun by people whose previous small enterprises have not done well but who believe they've learned enough to do better the next time around. (See "Bouncing Back" for more on overcoming business failure.)

A labor of love that encompassed everything the partners liked in a place to dine, R&B opened in the fall of 1983, when the area was in the first flush of gentrification. Rogers & Barbero was a brave outpost of haute cuisine among bars and delis catering to the working-class poor, a lushly appointed, candlelit, romantic hideaway serving classic French and Continental dishes and featuring a formidable wine list, as well as one of the first computer systems in a restaurant. An article in The New York Times then put the cost of construction and start-up at a quarter million dollars; 10 years later, Barbero [says] the tab was closer to a half-million and included innumerable unpaid hours of the partners' own labor.

Theirs was an ingenuous gamble of considerable proportions, but the investment was rather rapidly amortized because, Barbero recalls, "We did very well at first." He was then 30 and hoped to leave his work in real estate behind forever. Rogers, the computer expert, was a bit older. Their restaurant drew a sizable dinner crowd. Lunchtime was profitable as well. Their best year was 1987.

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This article was originally published in the March 1998 print edition of Entrepreneur with the headline: Neighborhood Watch.

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