Everything Is A Product. Including A Failing Restaurant.
LoopNet Was Open On My Phone And Then Somehow I Owned A Restaurant
It started, as many questionable decisions do, with a friend visiting from New York in Spring 2024.
Her husband had been offered the chance to buy a dive bar in Park Slope. A place he loved, priced at what I can only describe as an almost criminal discount given the neighborhood, the foot traffic, and the fact that he basically lived there anyway. He was going to pass on it. He had a corporate job. It felt risky. He wasn’t sure.
I thought he was insane.
To make my point, I did what any reasonable person arguing about someone else’s life choices would do. I pulled up LoopNet on my phone and found a restaurant in my own neighborhood in Chicago. “Look!” I said, “even in my neighborhood, you can buy a restaurant for not that much money. Your opportunity is a steal. You’re crazy.”
I was right about him. I was also, apparently, talking myself into something I didn’t fully realize yet.
The restaurant sat there in my browser for longer than I expected, and definitely in my mind during hot showers.
Outside of the occasional fantasy, I’d never actually wanted to own a restaurant. I’m a product guy. I’ve spent my career building data platforms, managing product teams, doing technical due diligence on acquisition targets. Restaurants were not part of the plan.
But the feeling kept eating at me. pun intended :)
So I did what I do with anything that won’t leave me alone at 2 AM. I got curious. I asked for the financials. I also looked at the neighborhood demographics. I did the kind of analysis that sounds slightly absurd when you describe it out loud: I calculated the total purchasing power of the surrounding census tracts, estimated the discretionary spending fraction, divided it across the commercial corridor, and derived a reasonable revenue ceiling for any given business operating on that block.
The number I landed on was somewhere between $1 and $1.2m in annual revenue for a well-run establishment in that location. The restaurant I was looking at was doing somewhere around $400k. The only thing I thought was “how the hell is the annual revenue that low?!”
Looking at the opportunity
The previous owners were not bad operators. They were optimized operators. Careful about waste. Running a tight ship by the metrics they thought were important.
The problem is they were so optimized on cost control and waste management that they completely forgot to look at the upside. They had underpriced their menu relative to every comparable restaurant within 5 blocks. Not by a little. By enough that you’d notice if you ate there and then walked down the street and looked at the menu in the window.
And then there’s the service. The food was genuinely good. The space was beautiful. But the experience of being there, the pace at which food arrived, the tone with which staff talked to customers, the availability of items on the menu, all the invisible things that make a customer decide whether they’re coming back, those things were quietly eroding whatever the product quality was trying to build.
When I looked at the financials through that lens the story changed. This wasn’t a broken business. This was a business that had been optimized into a local minimum. The fundamentals of the location, the neighborhood, the product quality, were all there. The execution was the problem. And execution layers can be fixed.
I bought it. All cash.
But I want to be specific about one thing because it matters to how I think about running businesses. I didn’t hire someone to manage the restaurant. I brought in an operating partner, a good friend of mine who has a day job just as I do, whose compensation is entirely profit participation. No salary. 40% of profit at the end of the year, nothing otherwise. If the restaurant doesn’t perform, neither do we. I wanted someone whose incentives were identical to mine. That structure was a deliberate choice and it’s one I’d make again.
What the restaurant added was consequence. My money. My risk. Six or seven people whose employment depended on whether my thesis was right. A neighborhood that either had a good place to eat or didn’t.
Time to fix things up
The first year was humbling in ways I did not fully anticipate.
Revenue went from roughly $400k to $600k. By the end of last year we were tracking at $750k on a trailing twelve month basis. The neighborhood purchasing power thesis held up. The pricing adjustments worked. The service improvements worked. Customers started coming back and more importantly started coming back again after that.
What I did not anticipate was tariffs, which I realize sounds like something a person says when they need an excuse, but the COGs for a restaurant sourcing quality ingredients moved in ways my pro forma did not model. CapEx for back of house equipment was really important to focus on as far as re-investments go. Staffing hours scaled with volume because a two-three dollar sign restaurant in an affluent Chicago neighborhood has a service expectation you can’t shortchange without customers noticing immediately.
Net margin ended the year at 6-7% percent. Not the teens I wanted. Not yet.
The thesis was right, the diagnosis was right, and the execution mostly worked. The gap between what I projected and what happened was external and capital intensive, not fundamental. The business is now in optimization mode rather than turnaround mode, which means the margin expansion I wanted is still in front of me rather than behind me.
I’ve kept six or seven people employed through this. I’ve kept a genuinely good restaurant operating in a neighborhood that deserves one. These things matter to me more than I expected them to when I was doing the TAM analysis on my phone to win an argument about someone else’s bar and I’m really happy about that.
Making non-standard choices in life
I’m telling you this story because I’m still not entirely sure what to make of it.
I pulled up LoopNet to win an argument. I ended up doing a neighborhood TAM analysis, diagnosing an operational execution problem, negotiated a better price to buy the restaurant, and learning more about pricing psychology and customer retention in six months than I had in the previous several years of building software products. And holy shit, I actually bought the damn thing!
The framework felt familiar the whole time. The purchasing power calculation, the gap between what an asset is capable of and what it’s actually delivering, the diagnosis of whether a problem is fundamental or just an execution layer that can be fixed. I’d been doing versions of this in corporate settings for years.
What the restaurant added was consequence. My money. My risk. Six or seven people whose employment depended on whether my thesis was right. A neighborhood that either had a good place to eat or didn’t.
I find myself increasingly curious about where else this pattern shows up. Businesses with sound fundamentals and broken execution just under the radar of what PE wants to deal with. Things that are worth more than they’re currently delivering, if someone is willing to ask the right question and then actually do the work. That curiosity turns out to travel pretty well.