The Fat Duck opens and Blumenthal set to net $10 million plus: Who says there’s no money in hospitality?
Tuesday, February 3, 2015/
The Fat Duck opens its doors in Melbourne today and the restaurant’s temporary relocation is set to net Heston Blumenthal over $10 million, showing for the elite few, hospitality can still be a lucrative business.
The restaurant will only be open for a six-month period while The Fat Duck restaurant in the United Kingdom is renovated.
Diners applied by ballot for a seat at the table with Crown Melbourne confirming the ballot sold out with 14,000 diners paying $525 (excluding drinks) for the 13 course meal.
That’s a significant price bump on the £220 ($424) a head Blumenthal charges for the Fat Duck in the United Kingdom. However, it claims the increased cost is a result of relocating staff and kitchen equipment.
At $525 a head The Fat Duck Melbourne is set to turn over $7.3 million for the food bill alone.
The typical spend at a restaurant is 75% food and 25% on drinks, according to the Restaurant & Catering Association.
This suggests diners at The Fat Duck should factor in $131 a head in spending on drinks, adding an additional $1.8 million to Blumenthal’s turnover.
This is a conservative estimate given the high pricing of the Fat Duck’s wine list and the likely celebratory attitude of those dining there, but it brings the total restaurant turnover to $9.2 million.
Australian Bureau of Statistics figures indicate on average a restaurant makes 3.6% of its turnover in profit.
But Ken Burgin, of Profitable Hospitality, told SmartCompany for successful restaurants the profit margin is far higher.
“Unfortunately being such a cash industry those figures are unrepresentative, a good successful café or restaurant that is sustainable year in and year out has to be doing 15% to 20% profit, not the 3.4% that is declared to the ABS,” he says.
“We are an industry that doesn’t have believable benchmarks”.
On the basis of a 15% profit margin, Blumenthal will take a $1.3 million profit back to the UK with him at the end of the six months.
That figure fails to take into account the multi-million dollar payment industry insiders say Crown is likely to have paid to Blumenthal.
Crown and Blumenthal have remained tight lipped on the terms of this deal, which was sealed by Blumenthal and James Packer on Packer’s yacht in 2013.
Burgin says it is likely Blumenthal’s fee is part of Crown’s marketing budget and could include sweeteners like discounted or free rent or free fit out.
“The redecoration and chairs is chickenfeed for a large operation like that,” he says.
“Crown will have done well out of it as well. They are really the smartest big food and beverage operator in Australia.”
John Hart, chief executive of the Restaurant & Catering Association, told SmartCompany whatever Crown has paid Blumenthal, “it’s a very good deal”.
“He has obviously attracted a lot of people to Crown and reestablished them as the centerpiece of the culinary scene in Melbourne,” Hart says.
Hart says The Fat Duck’s success doesn’t indicate a broader improvement in economic conditions for the hospitality industry.
“The times aren’t getting better but you can probably make a buck if you charge $525 a head,” he says.
“But that’s not sustainable on an ongoing basis. It’s been done very cleverly as it’s available for a short period of time at a very high price, which builds the aspirational nature of the event, and I do think it is seen as an event.”
SmartCompany contacted Blumenthal and Crown for comment but did not receive a response prior to publication.