The nice thing about 18 months is that it should take around that long to find a property and complete the build-out. All done just in time to open as the 18 months elapses!

Gypsy Boy wrote:The nice thing about 18 months is that it should take around that long to find a property and complete the build-out. All done just in time to open as the 18 months elapses!

Saichel! Or not.

But if one followed the money trail, these guys just didn't act very sharp from financial POV.

Oy vey (my grandma used to say quite often)

pudgym29 wrote:I notice all the areas in their 'non-compete' area are in Illinois. There is nothing preventing them from opening a restaurant in Munster, Indiana, just outside Cook County

That's a good idea/suggestion, but I wouldn't be surprised if the Sun-Times list wasn't exhaustive of the restricted areas in the contract. There could also be other geographic boundaries such as mileage (3F's is <30 from Grace), that would work as an impediment.

Gypsy Boy wrote:nice thing about 18 months is that it should take around that long to find a property and complete the build-out. All done just in time to open as the 18 months elapses!

I don't specialize in restrictive covenants, so I would defer to any experience you have, but wouldn't that potentially violate the "investing in" provision? The reporting doesn't read like they're receiving any severance, but if they were, it would be reason enough to go for a declaratory judgment before getting involved in a new project. It would comfort co-investors if nothing else.

Not my industry or area of expertise as a lawyer , but 18 months isn’t terribly long to start a new concept in Chicago is it? And they aren’t competing until they take in money right?

How Grace went from dream restaurant to kitchen nightmare

I thought Eater.com's article had some interesting quotes from others in the biz:

How Grace's Shutter Sent Shockwaves Through Chicago

pairs4life wrote:Not my industry or area of expertise as a lawyer , but 18 months isn’t terribly long to start a new concept in Chicago is it? And they aren’t competing until they take in money right?

I'm sure it can be argued in court that even engaging in talks without any transfer of money can be considered 'investing in' another business. With that said, as many others have mentioned already, we don't know the full details of the non-compete agreement and the full nature of the restrictive covenants in their contracts.

I work with employers on non-competes all the time and I can't imagine that a non-compete that restricts a chef and sommelier/manager from cooking/sommeliering /restaurant-managing (their entire livelihoods) in any area not requiring them to move themselves and their families would be enforceable in IL. There is no near-permanent relationship with the prior company's customers nor is it likely that the investor/owner could show that they used confidential info to compete against him (recipes are notoriously non-copyrightable, as are most of the other things that they would use to continue working.) Sure, they won't be able to replicate things like the Grace menu or, maybe, the decor, etc. But doubtful that they would anyway. They may not be able to actively solicit the customer base. BFD. And, of course, none of this precludes the owner from trying to mess with them by attempting to enforce the more onerous provisions of the agreement, which could get expensive. But, it's highly unlikely, unless the guy is really vindictive, that it will it come to that. Once things quiet down, I'm guessing there will be some kind of settlement and, before too long, we'll be seeing Grace 2.0.

Behavioral wrote:

pairs4life wrote:And they aren’t competing until they take in money right?

I'm sure it can be argued in court that even engaging in talks without any transfer of money can be considered 'investing in' another business. With that said, as many others have mentioned already, we don't know the full details of the non-compete agreement and the full nature of the restrictive covenants in their contracts.

It's ironic in that the staff's walk out (IMO appropriate; I wholeheartedly support labor solidarity) forcing the owner Olszewski to close the restaurant and start fresh on a new concept, has made the anticipated investment/planning actions of Duffy/Muser more competitive than they would be if Olszewski's restaurant had stayed open. Now they are both in competition for the same pre-opening services.

The general perception of the owner I get from media reports (and having enjoyed Duffy's food at Grace 4 years ago) leads me to hope the restrictions can somehow get struck down or withdrawn, and everybody can move on for their own betterment.

This whole deal is starting to remind me more and more of the chef character in the series Treme (Janette Desautel, played by Kim Dickens), modeled after real life chef Susan Spicer. In it, Chef Desautel strikes a deal with a money guy to open her dream restaurant, only to find that the guy is a snake and things weren't working out as rosy as her dream. She quits, but has a non-compete, so she couldn't work. She lawyers up and ends up settling with Mr. Snake (sorry, can't remember the character's name), but loses the right to use her own name when she opens her next restaurant.

Will life imitate art? We shall see.

Chicago restaurant owners see correction, a lot more closings, coming in 2018
http://www.chicagotribune.com/dining/ct ... story.html

I wish I had known this drama a month and a half ago. Grace was probably the single most disappointing dining experience my wife and I have had in the city. I spent the whole meal trying to decide if it was "me" or if nothing really tasted that great....

"The money man behind now-closed Grace tells his side", from Crain's

nsxtasy wrote:"The money man behind now-closed Grace tells his side", from Crain's

From the linked piece, which is definitely worth a read . . .

chicagobusiness.com wrote:For food-loving Chicagoans, 2017 ended with a shock: Grace, one of the city's two restaurants to earn three Michelin stars, closed. Its acclaimed chef, Curtis Duffy, had left the restaurant, and most of the staff followed him. Its sommelier, Michael Muser, had been fired a few weeks earlier by owner Michael Olszewski. Muser's termination agreement, obtained by Crain's, indicates he was fired for chronic absenteeism, failure to produce required reports on time and using the company credit card for non-company expenses, among other things.

Olszewski, a real estate investor and developer, says he invested $3 million in Grace, which opened in December 2012. It was his first venture into the restaurant business, a "team concept," says Sam Toia, CEO of the Illinois Restaurant Association, who knows Olszewski professionally and personally. "The investor is one of many on the team," Toia says. "It's his or her responsibility to make sure there's financial stability."

Grace did well, Olszewski says: It was profitable eight months after opening, and he has recouped his entire investment. This year, Duffy and Muser were scheduled to participate in revenue sharing with Olszewski, with profits divided evenly among the three. Olszewski says the pair would have been earning "substantially more" than each of their $160,000 annual salaries.

Through a spokeswoman, Duffy and Muser decline to be interviewed. Their employment contracts spanned an initial 10 years and then were renewable every year after that, with any party allowed an exit by giving written notice at least 30 days prior to the end of the term.

=R=

man... this is a tough one. Tough because I've been chef, I've been owner, I've been in both shoes...granted, my shoes are minuscule compared to the likes of a Michelin starred restaurant, and our budget was far from $3 mil (ever, in any spot) to open - but the dynamic is the same... I've had a chef walk from his job - only because he couldn't fulfill his original deal at the agreed upon terms - no notice.. that sucks.. I had to turn down diners the day that happened.. I had to rebuild from scratch.. and I had done nothing wrong . It's just the wrong move - ALWAYS.. I don't know all the details of this situation, and with only one side talking - neither do you (anyone)... what I do know is it is an awful thing when this much work, dedication, trust, and talent gets washed out in the name of money/greed... money is such a poison, it really skews ones reality.. If I invested $3mil into a business that had little chance of success, I would want a big return too! Certainly more than a buyout after a mere 5 years in.. If I was chef, I'd feel slighted if when we all rolled the dice and it was 7 I didn't get the same lions share as the guy who put the money on the table... I get all the angles... I think in the end though, walking out is always the wrong move.. I just don't believe in it... my two cents... RIP grace, I'm sure everyone will rise from the ashes..

rubbbqco wrote:man... this is a tough one. Tough because I've been chef, I've been owner, I've been in both shoes...granted, my shoes are minuscule compared to the likes of a Michelin starred restaurant, and our budget was far from $3 mil (ever, in any spot) to open - but the dynamic is the same... I've had a chef walk from his job - only because he couldn't fulfill his original deal at the agreed upon terms - no notice.. that sucks.. I had to turn down diners the day that happened.. I had to rebuild from scratch.. and I had done nothing wrong . It's just the wrong move - ALWAYS.. I don't know all the details of this situation, and with only one side talking - neither do you (anyone)... what I do know is it is an awful thing when this much work, dedication, trust, and talent gets washed out in the name of money/greed... money is such a poison, it really skews ones reality.. If I invested $3mil into a business that had little chance of success, I would want a big return too! Certainly more than a buyout after a mere 5 years in.. If I was chef, I'd feel slighted if when we all rolled the dice and it was 7 I didn't get the same lions share as the guy who put the money on the table... I get all the angles... I think in the end though, walking out is always the wrong move.. I just don't believe in it... my two cents... RIP grace, I'm sure everyone will rise from the ashes..

It is quite likely, the restaurant was losing money in 2018... that's after three years profitability(he recouped $3 Mil). Follow the money trail and you get to the truth. They were supposed to split the future profits starting 2018... or split the losses.

Lenny007 wrote:
It is quite likely, the restaurant was losing money in 2018... that's after three years profitability(he recouped $3 Mil). Follow the money trail and you get to the truth. They were supposed to split the future profits starting 2018... or split the losses.

Then either Crain’s misinterpreted Olszewski‘s comments or he was misrepresenting the facts.

“Olszewski says the pair would have been earning ‘substantially more’ than each of their $160,000 annual salaries.”

scottsol wrote:

Lenny007 wrote:It is quite likely, the restaurant was losing money in 2018... that's after three years profitability(he recouped $3 Mil). Follow the money trail and you get to the truth. They were supposed to split the future profits starting 2018... or split the losses.

Then either Crain’s misinterpreted Olszewski‘s comments or he was misrepresenting the facts.

Yea, if Duffy didn't have any capital contribution, getting him to split losses (beyond not taking a salary, which for accounting/tax purposes he would likely have to take) seems nearly impossible. There's also no discussion of how Muser's unclaimed third would have been split.

The abrupt nature of Duffy's resignation described by Olszewski as having occurred Dec. 19, is in conflict with prior reports that it was around Dec. 1. Reading between the lines, Duffy likely saw Muser's replacement to be a crony-like figure to Olszewski, and didn't want to stay in that situation. There is no way in hell that restaurant was facing unavoidable losses.

Per Crain's interview restaurant revenues started falling rapidly as 2017 progressed.
-10%, -20%, -30% monthly sales declines. Obviously, the property/business owner is in control of accounting, but with such brutal declines it is impossible to have real profits.

Yes, it is that simple.

So you accept the article's statement about sales declines but not the one about Muser and Duffy making more than their salary.

scottsol wrote:So you accept the article's statement about sales declines but not the one about Muser and Duffy making more than their salary.

Perhaps, when your imaginary restaurant sales drop by 30% you will still be profitable.

It is quite possible that a restaurant can be profitable after its revenues drop 10-30 percent, just not as profitable as before that. It is also possible that it is no longer profitable at that point. Without access to the books, we just don't know, and any speculation is mere conjecture.

Lenny007 wrote:Per Crain's interview restaurant revenues started falling rapidly as 2017 progressed.
-10%, -20%, -30% monthly sales declines.

Well, there's no doubt in my mind that if Olszewski says so, it's true.

Lenny007 wrote:

scottsol wrote:So you accept the article's statement about sales declines but not the one about Muser and Duffy making more than their salary.

Perhaps, when your imaginary restaurant sales drop by 30% you will still be profitable.

I think most people would rather their restaurants with rapidly declining sales and no shot at profitability be imaginary than real.

Anyone without behind the scenes information who is picking sides is just doing so based on guesswork, opinion, and emotion. If you hate rich people you will with Curtis and Michael. If you think chefs are bad businesspeople you're going to side with Michael Olszewski.

The only known information is that Grace is now closed, and it's a pity that such a world-class restaurant didn't make it. Curtis Duffy is a talented chef - Michael was a great host.

One thing is also for sure - the city and country are watching Curtis. And Chicago is going to watch that space to see what goes in there.

Who knows if we will ever know what really went down. Curtis, Michael, and Michael may not even truly know every detail.

Gypsy Boy wrote:

Lenny007 wrote:Per Crain's interview restaurant revenues started falling rapidly as 2017 progressed.
-10%, -20%, -30% monthly sales declines.

Well, there's no doubt in my mind that if Olszewski says so, it's true.

There is no doubt in my mind that Olszewski is an idiot because Gypsy Boy said so
Hey, but it is quite simple. Market is naturally running out of food "high rollers" and Duffy decided it is a right time to scare his investor and steal the place with low ball offer. Olszewski lost trust in these guys and got rid of one for starters. Reminds me very much how Bill Ackman got rid of Monty Moran - Chipotle.

I think everyone involved has a unique--and biased--viewpoint. And yes, that includes Messrs. Duffy and Muser. I think that even after all the parties involved (including some we haven't heard from) have finally all said everything that they intend to say about this, we still won't know what happened. And, on some level, it doesn't really matter.

What I object to is Mr. Olszewski's dogged efforts to dominate the media, to selectively release documents to show that he is right and they are wrong. As a matter of human nature, the desire to defend (or explain) yourself is understandable but it is possible to defend yourself without having to criticize everyone else. Increasingly, that seems to be a national disease: why give a reasoned and thoughtful explanation of my position when it's so much easier to say the other side is scum? But I digress.
It is extremely unlikely to be the case that it's as simple as Mr. Olszewski suggests. It never is. I'd be similarly critical if Duffy or Muser were engaged in such transparently self-serving shenanigans.

I decide disputes for a living and, in my experience, the side that's kicking and screaming often does so at the expense of (and sometimes to distract from) the pertinent facts. Not always, but frequently enough to make it a fairly safe rule of thumb. The mere fact that Duffy and Muser have kept their mouths shut (publicly at least), speaks more highly of them in my opinion. It doesn't mean that they're "right" and Olszewski's "wrong," but his behavior isn't doing him any favors. IMHO.

Gypsy Boy wrote:I think everyone involved has a unique--and biased--viewpoint. And yes, that includes Messrs. Duffy and Muser. I think that even after all the parties involved (including some we haven't heard from) have finally all said everything that they intend to say about this, we still won't know what happened. And, on some level, it doesn't really matter.

What I object to is Mr. Olszewski's dogged efforts to dominate the media, to selectively release documents to show that he is right and they are wrong. As a matter of human nature, the desire to defend (or explain) yourself is understandable but it is possible to defend yourself without having to criticizing everyone else. Increasingly, that seems to be a national disease: why give a reasoned and thoughtful explanations of my position when it's so much easier to say the other side is scum? But I digress.
It is extremely unlikely to be the case that it's as simple as Mr. Olszewski suggests. It never is. I'd be similarly critical if Duffy or Muser were engaged in such transparently self-serving shenanigans.

I decide disputes for a living and, in my experience, the side that's kicking and screaming often does so at the expense of (and sometimes to distract from) the pertinent facts. Not always, but frequently enough to make it a fairly safe rule of thumb. The mere fact that Duffy and Muser have kept their mouths shut (publicly at least), speaks more highly of them in my opinion. It doesn't mean that they're "right" and Olszewski's "wrong," but his behavior isn't doing him any favors. IMHO.

See your own posts at the beginning of this thread.

nsxtasy wrote:It is quite possible that a restaurant can be profitable after its revenues drop 10-30 percent, just not as profitable as before that. It is also possible that it is no longer profitable at that point. Without access to the books, we just don't know, and any speculation is mere conjecture.

My homework tells me they had below $10 Mil annual sales, likely closer to $8 Mil. Of course, I could be slightly wrong too. BTW, restaurants have to report monthly sales to municipality & state and transfer collected sales taxes regularly to avoid penalties.
Of course, earnings and free cash flow from operations may vary because the owner is allowed to depreciate the assets (non cash expense ). Since we don't know his depreciation schedule it's a bit of speculation.

Two months have passed since Grace, one of Chicago’s most-acclaimed and luxurious fine dining restaurants, suddenly closed and now its former chef and GM are suing their former boss

https://chicago.eater.com/2018/2/22/170 ... uffy-muser