16 Dec 2013  HBS Cases

D’O: Making a Michelin-Starred Restaurant Affordable

Under the leadership of Chef Davide Oldani, the Italian restaurant D'O balances Michelin-star-level quality with affordable prices. In the following story and video, Professor Gary Pisano explains how Oldani does it.

 

For restaurateurs, receiving a Michelin star can be a mixed blessing. Certainly it's a rare and celebrated honor—the French company bestows its one-, two-, and three-star ratings only to a select few restaurants worldwide. However, a star begets expectations of quality. To avoid the disgrace of losing the rating, a starred restaurant often invests more money than ever on high-quality staff, flatware, wine, and ingredients. The result: higher prices. Dinner tabs in France or Italy often skyrocket to more than 120 per person, for instance. Frugal patrons look for affordable alternatives, and the restaurant, failing to fill seats nightly, starts operating at a loss.

But then there's D'O, a restaurant in Cornaredo, Italy, that opened in 2003 and received a Michelin star only one year later. Under the leadership of chef and owner Davide Oldani, the profitable 35-seat eatery serves dinners at around 45 to 50 per head and lunches for half that. D'O not only is filled to capacity year-round, but there's an 18-month waiting list to dine there. Understandably, this piqued the interest of a veteran organizational strategy scholar.

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"Davide Oldani completely changed the cost/quality tradeoff for a Michelin-starred restaurant," said Gary P. Pisano, the Harry E. Figgie, Jr. Professor of Business Administration at Harvard Business School and the lead author of the HBS case study Chef Davide Oldani and Ristorante D'O. "And I'm always interested in how leaders use operational innovation to manage the tradeoff between cost and quality. It's an issue you find in every business, whether you're a chef or an executive at Mercedes or BMW or Apple."

In November, Oldani visited Pisano's second-year Operations Strategy class to discuss the case, which details the success of the 10-year-old D'O and poses questions about Oldani's plans for growth. Both the chef and the professor met with Harvard Business School Working Knowledge to talk about the secrets to Oldani's success and his potential plans for the future. (Oldani spoke in Italian, and Pisano's wife, who is bilingual, acted as interpreter.)

STAFFING FOR PEAK OCCUPANCY

For many restaurants, some nights of the week attract more customers than others. A bistro packed with customers on the weekend might be half empty on a Tuesday. For Michelin-star restaurants, that utilization curve poses a staffing problem.

"Following the season is the most important thing to do in the applied economics of a restaurant" — Davide Oldani

"The people who work at this kind of restaurant are not part-timers coming in for four hours a night or only on weekends," Pisano explained. "These are professionals. The waiters who work at a Michelin-starred restaurant are professionals. The cooks are professionals. These are 40-hour-a-week jobs, and you hire them for a full week. If you're a Michelin-starred restaurant you have to staff for the peak. You have to staff for the Thursday and Friday night load. And as a result you carry a very high cost."

Michelin-one-star-rated restaurants in Europe have an average of 36 employees on the payroll, according to the case. D'O keeps a lean crew of 14 by multitasking. Oldani does not employ any professional waiters. Rather, the chefs at D'O take turns waiting tables. (In fact, when Pisano first dined there, Oldani was his waiter.) This leads to a significant reduction in labor costs, even while allowing Oldani to pay his staff higher-than-average wages. Still, the chef insists that the strategy is less about finances than about customer relations.

"You can't fully explain a dish that you haven't prepared yourself," Oldani said. "When a cook explains a dish, he can explain it very well because he made it. He doesn't explain what he heard about a dish, he explains what he made."

FOLLOWING THE SEASONS

Oldani espouses the philosophy of "POP cuisine," which aims for accessibility to a broad audience, in terms of both taste and cost. He maintains that he keeps food costs down and flavors bright simply by buying ingredients only when they are in season. "Ingredients are less expensive and of higher quality when they are in season," Oldani said. "Following the season is the most important thing to do in the applied economics of a restaurant."

The chef also is fervent about not wasting food. The case includes a lengthy list he keeps in his office at D'O, detailing the edible portions of some 70 ingredients. A sea bass has an "edible share" of 47 percent, compared to 60 percent of a hake, for example. A fig: 90 percent. A strawberry: 99 percent. A lemon: 26 percent (juice) + 2 percent (grated lemon peel—only the yellow part, of course).

Table settings receive similar consideration, both sensory and economic. On the sensory side: He has designed several eating utensils, including an espresso spoon that sports a hole in the middle so as not to break up the continuity of the crema on top. On the economic side: "He chooses glasses based on breakage costs," Pisano said.

"You talk to this guy and you think he's a production engineer" — Gary Pisano

The precise attention to detail is also key to creating a menu that the chef describes as harmonious.

"The more harmony in the menu, the better the cook can work," Oldani said. "To get to that harmony, you must avoid repetition on the menu. You cannot repeat the same cooking styles or the same sauces. Not two red meats or two white meats. You cannot have two carbs. A main dish of pasta can't be followed by a dessert made mostly of flour. This is important for modern cooking. We have 22 dishes on la carta, and in every dish there is not one ingredient that's identical to another. They're all different."

Pisano believes that managers and management scholars alike can learn an important lesson in Oldani's ability to marry creativity with intense, practical attention to detail.

"A lot of times we get this ridiculous false dichotomy made in management: that there are creative people, and then there are disciplined people," Pisano said. "Well, the best chefs in the world are both. They're both incredibly creative and incredibly disciplined. And this challenges the idea that it has to be one or the other. In the innovation literature, it's always about creativity versus discipline. Well Oldani shows that it's not versus, it's and. You talk to this guy and you think he's a production engineer."

REMEMBERING PASSION

As a guest in Pisano's class, Oldani listened as students discussed his historic success and his possibilities for expansion. They differed in opinion about whether he should open another D'O or a new, more accessible venture that took POP to a new level. Some argued that he should stick with a successful brand, letting one of his trained chefs take the helm at a new D'O location. Others thought a new venture with a name like "POP by D'O" would be a good complement to the flagship restaurant. But they agreed in terms of the nature of their arguments, which, understandably, focused on finances. (One student crunched the numbers and recommended that Oldani increase D'O's menu prices by 18 percent. Oldani demurred, citing Italy's recent economic woes and their effect on Italian wallets.)

Afterward, Oldani told the students that they had forgotten to mention the factor of passion. "Everything I do, I do it because I want to do it," he said. "Passion has to come first. It leads you to all the things that lead to success."

Asked what he actually plans to do next, Oldani gave an answer that may help to explain why D'O has such a low turnover rate. (According to the case, only three employees have left since the restaurant's opening 10 years ago, and all three happened to be hired as temps.)

"I'll definitely start another business," Oldani told Working Knowledge. "I want to see what my team says. And depending on what we all decide to do, we'll determine what kind of business to open. I want to help the team grow and learn. As the team manager, I want to encourage them to get involved in decisions."

About the author

Carmen Nobel is senior editor of Harvard Business School Working Knowledge.

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Comments

    • Kunle
    • Oil and Gas Analyst, ND Western Ltd

    This is a timeless piece on passion, teamwork and understanding one's market.

     
     
     
    • Peter Lee
    • Mg Consultant, Remuneration Data Specialists Pte Ltd

    Yes an interesting article about focus and commonsense.

    Often F&B outlets think it is mainly about the food or ambience or price. Actually it is the whole customer experience so they are actually in the entertainment business; hence the right people/product and how the whole experience is delivered makes all the difference. Therefore it is a no brainer that the right people employed & the mgmt must have the passion so that all the details are properly looked into.

     
     
     
    • Anonymous

    Great combination of left n right brain usage..

     
     
     
    • Alexis
    • Grad student at F.W. Olin School of Business., Babson College

    Greatness is defined as brining your passion to light in order to impart grace on others. Oldani represents someone following what feels right and incorporating discipline and creativity to delight the world with culinary creations. He is pragmatic and honest with who he is. Think we can all take away a lesson from this man.

     
     
     
    • Ranganatham
    • life long student of management, university of life

    wonderful insight about how to run a business successfully hands on marrying customer insights gathered first hand, attention to details, avoiding wastage in the entire process and listening to the team members involved.

     
     
     
    • meghana ahuja
    • visiting faculty for class XII, progressive education

    Oldani's cost-cutting certainly is commendable. However, I wonder if it actually helps to this extent by purchasing in-season ingredients and styling utensils. Of course one must remember that he has retained most of the permanent multitasking and expert staff. Do I dare say that committment on part of the staff is almost as crucial in this case as oldani's own passion for the job! We can have more such stories will real team spirit and equitable growth opportunities for all.

     
     
     
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited

    Creativity, discipline and optimum staff productivity coupled with result obsessed and understanding top management can lead to success for any business. The way Oldani is managing his restaurant - particulary the costing of his offers - have naturally led to the overflow of customers. Further, his strategy to have full-time professional staff at all levels, who seem to be devoted to their roles, is commendable. In such situations healthy team spirit thrives and there follow the good rewards of the efforts involved.

     
     
     
    • Rajesh
    • Product Manager, IT Firm

    "Know Your Customer, Know Your Business, Know Your Domain (Market) with Passion, Human Centered Design and Trustworthy can lead to True Success" !!! Great piece of learning...Thanks - Rajesh Apparao

     
     
     
    • Amit Chandiramani
    • Head Sales & Marketing, Yu Mobile

    Lots of learnings on how to create a successful operations. You can feel the personal touch, passion and the involvement of the Oldani at every stage of designing, planning and running the restaurant. It speaks of his signature presence everywhere.

    However, more than the financial considerations, I wonder will Oldani be able to translate his focus, style, vision and passion, if he ever wishes to expand to multiple units. It is always a challenge to keep alive the same spirit/culture of the organization when the management moves from the Owner (a small unit / one set up) to Managers(bigger organization).

     
     
     
    • Suman
    • Manager, WBSEDCL

    Business focused on larger scale of customers are very much demanding for the present day market needs.To meet the steep competition and operation in low margin one have to plan to go for cost cutting wherever it is possible maintaining quality & the reputation.In this procedure many recognized big chains have also open low budget restaurants to grasp the opportunity but they are not much successful due to lack of small scale operation experience & cost management.This opportunity is taken by the start ups.
    So its a very appreciable move by Oldani keeping operating cost low by its approach for operation & creating its Brand which will help them to run much longer.