Original Article – https://la.eater.com/2022/8/8/23297112/crudo-e-nudo-santa-monica-sustainable-restaurant-business
Crudo e Nudo shouldn’t work. With only 32 outdoor seats and nobody to hand out menus, diners have to order at the pay station inside from a list of dishes posted on the wall. Its prices are pretty high for this stretch of Santa Monica’s Main Street, where burritos or onigiri run under $20 a meal. There are a few much more expensive restaurants on the block — Pasjoli, Chinois on Main, and Via Veneto — but they offer tablecloths, stemware, and full table service. Instead, Crudo e Nudo serves sustainable fish and seafood on compostable plates, and pours wine into canning jars. And yet, on August 2, it hit $1.2 million in gross sales for the first seven months of this year.
Even before the summer tourist season began, Crudo e Nudo was doing well financially. The restaurant had a 15 percent profit margin in May 2022, 50 percent higher than the industry’s standard goal of 10 percent, higher still than a four percent profit for a competitor in neighboring Venice that adopts a similar upscale casual menu.
Crudo e Nudo co-owners Brian Bornemann and Leena Culhane came up with a theory about how to rethink the restaurant model during the first year of the pandemic, and their revision, which invests more than usual in the food and scales for the rest, has succeeded — for the bottom line, employee culture, diner satisfaction, and, as far as they’re concerned, the very future of the restaurant business. The pandemic continues to challenge restaurants to be light on their feet; redefining success in a more modest way was the insurance policy Crudo e Nudo needed.
In March 2020, Bornemann and Culhane — partners in their personal life as well as in business — faced the vast unknown along with every other restaurant worker. Bornemann was furloughed from his job as executive chef at Santa Monica’s fine dining restaurant Michael’s, and Culhane lost a bartending gig when Ocean Park’s the Galley closed. After 10 months of scrambling at one pop-up location after another, they opened Crudo e Nudo in the spring of 2021, based on a strategy that sounds like Mies van der Rohe on minimalist architecture and design: Less is more.
It may turn out to be the mantra of the next generation of restaurant owners, who’ve endured enough stress to last a lifetime and have to decide how they want the future to look. The 32-year-old Bornemann, for one, is done with the old investor-driven model, what he calls the “go for gold” restaurant that involves a big room, big staff, and a big potential payoff. That’s only if it works, because if it doesn’t, it ends up an equally high-profile failure.
Like many ambitious young chefs, he was on track for that kind of future, until enforced time off made him reconsider. “I’ve driven a couple of yachts,” he says, referring to high-profile places like the Tasting Kitchen, in Venice, and Michael’s. “I wanted to own my own dinghy instead.” He’s since become something of a proselytizer for a different way of doing things — high-quality food first, and everything else, from the size of the staff to the compostable plates, defined in deference to that.
The partners budgeted an above-average 40 percent of sales on food costs, substantially higher than the industry average of about 30 percent, and reverse engineers from there to calculate for the rest of the operation. Bornemann created a small, niche menu of local, sustainable fish and seafood, most of it served raw, with a few composed plates and an array of vegan dishes to round out the list; he pours a selection of low-intervention wines at the “high-acid, mineral-driven” end of the scale to complement the food.
It’s food people don’t usually make at home — because they don’t have the same access to high-quality fish and seafood, because they don’t have the technique to make it look as appetizing as Crudo e Nudo’s Instagram-magnet dishes, and because they’d miss out on the parklet-dining scene, where people crane their necks and start conversations about the dishes that just landed at the next table. By necessity, there’s none of the high intensity of a serious dining room, which is part of the fun. Nobody seems to mind the compostable plates and wine in jars; the food comes out on Instagrammable serving dishes — ceramics, some of them made by Culhane herself — so that everyone can get the requisite photographs before they dig in.
The rest of the budget compensates for the food costs. Rent can hamstring a restaurant before the doors open, forcing a chef to scrimp on food and staff. The Crudo e Nudo lease is for $5,300 a month, two years plus a two-year extension, which is hardly ideal when the goal is to lock up a place and a favorable rent long-term. But the overhead is cheap enough to keep the focus on the food. “It was affordable,” says Bornemann, “if everything went to shit.”
In June, business was so good that the rent came to only 3.9 percent of sales, compared to over 10 percent, which is what restaurants of this size usually end up spending on it.
He and Culhane tried to do everything themselves at first, which meant a brutal couple of months. It also gave them time to rethink a labor model that had always frustrated Bornemann. Crudo’s 13 employees work four days a week in 10-hour shifts. They get 70 percent of their health insurance costs paid for, and make an hourly $25 on training shifts, including pooled tips, moving up to between $35 and $45 per hour once they become full-fledged employees.
“Because our labor model and occupancy costs are small, we can afford to put money into more expensive products.”
There used to be a sustainability surcharge added to each check, but the couple eliminated it after three months, concerned it might discourage decent tips. Additionally, employees can purchase the food and wine at cost. Workers get a bargain and in the process learn more about what they’re serving.
Everything is designed to ensure that the partners can sustain their commitment to the menu because Bornemann says he’s seen too many places whose menus shrink after the first six months because the operation can’t reduce rent or labor costs and something has to give. In comparison, Crudo’s menu has gotten longer. “Because our labor model and occupancy costs are small, we can afford to put money into more expensive products,” says Bornemann. “The rest of the operation supports the food we want to provide, and the enthusiasm from our staff when they sell our products leads to tips that are sustainable for employees.” Despite attempts to eliminate the tip model by restaurants large and small, including Danny Meyer’s Union Square Hospitality Group, Bornemann intends to keep that element intact.
Their formula leaves one thing out: Investors. Crudo e Nudo has none, which was always the plan. The owners got started on $20,000 from Bornemann and his family, $30,000 from Culhane, and $10,000 in pop-up earnings. They may be responsible to the larger community — customers, employees, neighbors — but they’re obligated to no one except a couple of Bornemann’s relatives when it comes to deciding how the business should look.
Bornemann recalls sprinting to the bank in the early days to deposit $8 in the restaurant’s account so they wouldn’t be penalized for falling below a $2,000 balance. By the end of 2021, they had $160,000 in that account, an amount that will be slimmed down once they pay taxes and see how much their next Los Angeles spot, which they hope to open in October, will cost. Their $40,000 salaries in the first year don’t feel like much for business owners, but they plan to take home a percentage of the net profits from that year as well.
Bornemann admires chefs who can make the big restaurant model work. He marvels at Evan Funke’s Hollywood restaurant, Mother Wolf, which has people clamoring for its more than 200 seats, and at the pressure that has to come with celebrity clients and with powerful, moneyed partners who might have their own ideas on how to run a business. It’s been the path to success for a long time, in many creative fields: “Artists have had patrons throughout history,” he says, “and maybe you decide you just want to focus on cooking and have partners to deal with the rest of the stuff, but that’s not for me.”
Bornemann thinks there’s a price to pay unless you’re one of the few chefs who are in demand from day one. “It messes with your head,” he says of having a business of that size. “You have big salaries from the get-go, and between that and big rent, if you start to struggle the only thing you can reduce is food costs, and then the quality goes down.”
And working with big-budget investors can make employees, even the chef in charge, second-guess themselves rather than disagree with the people who pay the way. “I think it makes other people in my position afraid to do something on their own because they’re used to being in the power dynamic of working for someone else,” he says. “You imagine what owners know that you don’t, which seems like a barrier to entry.”
In a still-uncertain restaurant economy, a smaller model that’s likely to survive, and the autonomy that comes with it, feels like plenty of success. Bornemann’s dream is to build around 60 to 80 seats. He and Culhane are scouring the Westside for a second space, determined to stay small because he knows of too many 100-seat places that are “paying to keep the wheels spinning” on the nights they aren’t full; he’s convinced it’s better to run out of tables than to risk empty ones. They’ve kept to that approach in what Culhane calls a “roommate” arrangement with Breakfast by Salt’s Cure owner Chris Phelps: Culhane and Bornemann operate the restaurant Bella Dea at night in a small space in New York City’s West Village, while Phelps runs Breakfast by Salt’s Cure in the same space from eight to three.
The partners prefer moderation in all things, including ambition. Bornemann and Culhane have a profitable small restaurant and enough money to start another without having to alter the model. They and their employees have some time for themselves — knowing the place is in good hands if he isn’t there on a Friday night, and having that fifth day of the week to hit the beach or go fishing, may not seem like a big deal to some, but it makes everything else more manageable. And the operation is healthy enough to think about improvements, though their dreams on that front are proportional to everything else about the restaurant.
Culhane knows exactly what she’d like to add to Crudo e Nudo. “A second bathroom,” she says.