[r7000]

A company that starts small but grows very large could describe exactly the 'Italian Restaurant' sort of startup. On the web you have a much bigger neighbourhood than any Italian restaurant. The limitation on a landscaping company, for example, is its ability to scale and the geographic area it can serve.

[tptacek]

I think Graham's analogy is more apt that he realizes. Here's where it takes us:

Yes, the majority of breakout chains/startups are started as chains/startups.

But, plenty of breakout businesses aren't built to scale out fast. Starbucks didn't break out for over a decade. Microsoft didn't get the DOS contract until '81.

Meanwhile, lots of small businesses are small deliberately. Thomas Keller isn't franchising Per Se. Grant Achatz isn't franchising Alinea.

So what does it tell us when a company runs a single restaurant for 10 years, or refuses to take VC funding or hire ahead of revenue?

Exactly nothing.

[menloparkbum]

Celebrity chef restaurants are not really businesses - they are more like old-school arts patronages. They are started with funding by rich finance guys who are looking for a hobby project to make themselves feel cooler. The only people who go there are also uber rich finance guys, other people in the celebrity class, and the occasional not-as-rich foodie. As soon as the rich people and celebrities get bored with the restaurant, it shuts down.

Alinea was funded by 8 futures traders who each put in half a million dollars.

[tptacek]

Also: be more right. =)

From the site:

Opened in May 2005, Mr. Kokonas says Alinea grossed $3.5 million its first year, an average of $14,000 for every night it was open. There are eight investors: The smallest stake was $75,000, the largest Mr. Kokonas', at just less than $500,000. Return on investment is expected to exceed 20% per year, he says.

This doesn't sound like an old-school arts patronage to me.

[mtts]

Not that I'm an expert on the celebrity chef restaurant business or anything, but I can name one example where this is at least partly true: Ferran Adria's El Bulli (voted best restaurant in the world a few years ago) actually operates at a loss. Adria supplements his income by putting out books and by selling some of the more unusual ingredients he uses.

(edit: typo)

[tptacek]

Charlie Trotter, Frontera, French Laundry, Babbo. All successful businesses. That there are unsuccessful businesses in the same category does not make them "old-school arts patronages".

[menloparkbum]

The economics of celebrity chef restaurants are so different from anything else that they resemble arts patronages more than they resemble the economics of other businesses, including other restaurants.

You have to already be famous to start one, you have to have met a rich guy who thinks investing in you will make him cool, you only cater to a class of people who in previous centuries would be known as "the aristocracy." Etc.

[tptacek]

Still wrong: Keller wasn't famous before French Laundry, Bayless is famous because of Frontera. Support claims with evidence.