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David Morton On Thinking Big With Small Ideas

David Morton, of the Morton’s The Steakhouse family in Chicago, is owner of DMK Restaurants. They recently opened The Landing restaurant in New York’s PENN District development.

Many years ago, we entered a relationship with the Chicago Bears as a premium restaurant partner. They had so many great other potential partners. But I think what really cemented the opportunity was the Bears’ interest above and beyond food, and how to apply creativity and hospitality to the overall fan experience.

That was the beginning of DMK working with real estate partners, and then it started to snowball. We’ve had a partnership with Vornado in Chicago at the Merchandise Mart for some time. And again, the same rules applied. They were excited about our desire to collaborate and to solve what was, at the time, thought to be a really difficult problem, which was how to activate real estate off grade. We caught lightning in a bottle, and it’s been wildly successful. Obviously, we had to pause during COVID for a minute. From there, it’s just bloomed.

Coming out of COVID, I think our industry is on the eve of an incredible renaissance. My belief is rooted in not only how we’re working with real estate companies, but how we’re working with technology companies and others that you probably won’t read about, on how to use the strategies and tools from the pandemic to serve hospitality in wholly different areas.

These partnerships we work on are often very large and complex. Of course, all of our partners want something a little bit different, as they should. From a creative standpoint, certainly, there’s eagerness on our part to do a lot of listening and understanding, because from the real estate side, they’re thinking about it from a bunch of angles that historically we would not have. For example, how does a restaurant affect the leasing strategy? Or, we’ve partnered with folks that are interested in the disposition of an asset, as opposed to leaving it in a portfolio. How could that inform our decision-making?

When we started the company—I think we’re in our 13th year—we were heavily influenced by New York. We were mesmerized by the use of small spaces. But also, we were interested in the intersection between casual and fine dining.

Now, we’re a lot more agnostic. We’ve broadened and put some thought into our menus, as opposed to where we started in a very narrow place. We’re very deferential to guest preference. We have a lot of different ways to think about it. Like any great business in restaurants or otherwise, we’re continually pivoting in subtle, small ways towards what our customers and partners ultimately want.

In New York, Vornado has been working on the PENN District for a while. We got involved during the pandemic to create The Landing restaurant there. Even with the pandemic, we were heading down the path already of doing lots of these deals. We’re not in the business of making decisions today for next year. We’re thinking quite a bit farther down the road. There has been banter about what is going to happen with return to work. We’ve remained confident about some return to normalcy, if only by looking at the moves that lots of folks in a broad expanse of industries have made to secure newer, better, and larger footprints in urban centers.

A bunch of stuff about The Landing was new for us though. We were asked to collaborate on bringing food and beverage into an Industrious space next to us, to the tune of about 100,000 square feet. We had to figure menus for everything from these really beautiful, bespoke private conference rooms, to people that just might want something a la carte at their desk. We’re working and collaborating with some other companies, as well as Exos, a fitness operator that is just remarkable, in my opinion. So that was definitely a new frontier for us.

The Landing restaurant. Photo: Fernando Sandoval.

Office Hours, which we opened before The Landing, was our first foray into gourmet grab-and-go. It’s been a super interesting and delightfully successful experience thus far. That was an interesting nut to crack, because I think a lot of us had lost trust in the qualitative aspects of something premade that we buy off of a shelf.

One of the challenges that Vornado wondered about was, given our interest in source and product quality, going into an area that’s a bit of a food desert in Manhattan—how was it possible to pull that off? We were able to join this incredible co-op of 120 regional farms. I wish something like this existed in Chicago. I’m delighted by the incredible quality of product we are able to get through a larger partnership like that.

In terms of labor markets, Las Vegas is a city of hospitality professionals who go there to seek not a job, but a career in hospitality. New York is a close second to Vegas in terms of talent. Opening a restaurant in New York—it’s like I was setting up a new NBA franchise and only had All-Stars to choose from. Even with the labor shortages, one of the big surprises was how deep the talent pool remains. The hardest decision was how do we choose—we were inundated with applications.

What we’re seeing in all markets is the continuation of an interest in source and origin, a desire for a highly qualitative product at a fair price, and a desire for discovery and exploration as part of a dining experience. What we’re seeing more recently is an interest in people getting together, larger group dining, and for using restaurants as a way to celebrate occasions.

But the biggest area of change in hospitality is the use of technology. I don’t mean if a menu can appear as a QR code. Instead, it’s about how we can activate different experiences for different constituencies. And it’s so funny, because for the longest time I used to go to the restaurant show in Chicago back in the day. Every year I’d leave my colleagues and I would say, “I’m going to go hang out in technology.” And it was always a little disappointing. There was nothing enterprise-level about it. It was all these disparate technologies, nothing necessarily worked together, and it was hard to understand.

That industry has flourished since, and I think it has come so far over the last several years—including during COVID. Our ability to have different tiers of reservation systems, to broadcast internally to a population on a property, or through a property—it’s been super interesting. It’s something I’ve been keenly interested in for a long time. How those trends collide from the technology side within our industry, as well as on the user side and on the demand side from both our real estate partners and our guests, has become a huge part of our overall thinking and planning for how we develop and design this business.

One of the things my dad taught us back in the day was that 99 percent of restaurants fail before they ever open. It’s so true. We’ve been very, very cognizant of how we set up these businesses. In spite of all the tumult that the industry has been through, I think you can say that there are many streets in America that just don’t need another restaurant. Our portfolio has always been about trying to identify areas and pockets where a restaurant would be a nice addition. That gives us some competitive advantage, but we also find that the structures of those deals are much more favorable. They involve more entrepreneurial landlords.

I thought the industry was going to go through some type of bust a long time ago. Never in my wildest dreams would I imagine it would have come via a pandemic. But if you look at the history of booms and busts—at any cycle from autos in the 1920s, to real estate more recently—ultimately the strong survive, and the game is played at the balance sheet level.

Operating without debt as an organization has been super central to not creating any compromised situations for us like so many people have experienced. It’s going to be interesting to see what happens. Back in the day, restaurants were the last of people’s interests, from a landlord perspective. With the rise of Amazon and e-commerce, obviously they became much more in demand. And I do think there is going to be a need for a more symbiotic relationship between tenant and landlord.

If you ever wanted to go shopping in the restaurant industry, I think you’re seeing a window now that you are not going to see again. It’s an incredible time to be going out and finding opportunities and making deals. We have other businesses as well—real estate and tech and stuff—and I always try to see how small we can make our ideas. For people that are expanding or those that are new entrants to the restaurant game, my advice is to see how small you can make your capital investment.

It goes back to the days of my first business that I started at the University of Wisconsin in Madison promoting rap and R&B concerts. We made a deal with Cypress Hill to bring them up to Wisconsin. I wasn’t the biggest rap and R&B fan at the time. But I felt like Madison wanted to be a lot more urban than it was because it had such a large Chicago and New York contingency. I asked my dad, “How do I think about this?” And he was like, “If you do half as well as you think you’re going to do, and can break even, then I would move forward.” That was pretty good advice. And I would encourage others to consider a similar strategy.

For our part at DMK, our real estate footprint from pre-COVID to the end of 2022 will grow by threefold—maybe more. But we’re very low ego. One thing I’m not crazy about is that the credit seems to come back to me, but we’re eager to put our team out in front of us, as opposed to us putting ourselves out in front of our people. Lots of companies out there are connected to a chef or brand name. We’re just as eager to celebrate and recognize everybody—chefs and various other leaders. We’re very eager to share that stage.