Daniel Satinsky: Okay, so we are resuming the interview after an interval, so for those of you watching this on the tape we won’t be dressed the same, but we’re going to pick up where we left off, which was where you were talking about joining the group that formed Uncle Guilly’s steakhouse. And I want you to just talk a little bit more about how that got opened, your operating issues and outcomes, and then slide into Starlight Diner. Hopefully then we’ll get into your financial career, okay?
Bernard Sucher: Sure. So just to reset a little bit of context. There was really no restaurant scene in Moscow in 1992. Rostic's had just started on his path. [Rosinter restaurant group. See interview with
Henrik Winther] I believe his first restaurant was a Spanish themed venture in the corner of the Moscow Hotel. The TrenMos Joint Venture between a couple of guys. I believe it was Shelley Zeigler, if I’ve got it right, from Trenton, New Jersey, and some local characters had launched, I believe, in 1992.
Daniel Satinsky: I think they launched earlier than that. I have an interview with them, and so we’re going to be including that in the archives as well.
Bernard Sucher: Oh, good, because those are very colorful stories, and I had a number of really excellent meals at TrenMos in Kropotkinskaya. But when we opened Uncle Guilly’s I believe it was the sixth restaurant with a white tablecloth, you know, come as a businessperson and expect decent food and decent service. I think we were possibly the sixth restaurant in the city outside of the hotels.
And the way we got to Uncle Guilly’s was that I had gone back to a gentleman named Dominique Berhouet, who was a food and beverage manager at the Penta Hotel on Olimpiyskiy Prospekt
*. I had met him in 1991 briefly at a brunch that he had staged at the Penta Hotel. I remembered him, and I had this idea of starting a 24/7 restaurant in a city that was beginning to live 24/7, at least for some people. And Dominique told me that he had already developed a relationship with another food and beverage manager, Paul O’Brien at the Radisson Slavyanskaya, and that Paul had a young Russian friend, Oleg Bardeev, and that they together were working on a specific project in the center of the city, and they’d be happy to hear about a diner, but I should meet them and take a look at this new project. That was at 6 Stoleshnikov Pereulok
*.
It was a place that was already well-known as Café Stoleshnikov. It was one of the very first Soviet era new style dining experiences, and it was inhabiting a basement that was, I believe, in a 300-year-old building, and it was about as clean as a basement in a 300-year-old building. And what this group needed wasn’t my insight as a restaurateur, they needed money. And so at the end of the day we made a deal, and the deal was that I would put up the cash to build out this underground place to renovate Café Stoleshnikov, we would turn it into a steakhouse. And I invested, if I recall properly, $146,500, mostly in Italian imported kitchen equipment, and a lot of cleaning. And that became Uncle Guilly’s, which began informally to serve meals in April of 1994.
But the other part of the deal was that as soon as the group had gotten on its feet with Uncle Guilly’s we would figure out a way to build Starlight Diner. We didn’t know that’s what it was going to be called at the time, but my idea, with their food experience and our collective growing understanding of how you work in the Moscow restaurant industry, such as it was in 1993 and ’94 — under the banner of Flying Foods — which is what we called it, led us ultimately to opening up, in late 1995, Starlight Diner.
So, on the way I prevailed upon the same group to build a gym. I like working out, and all that great steak at Uncle Guilly’s which we were importing every week through another partner of ours, a partner who came later and became the most important member of the group—he became the CEO of the group, Shawn McKenna. Shawn was a supplier to Uncle Guilly’s, and when Shawn joined us I asked him to help make sure that we built a gym so it would help work off all this fine food that we had.
And that project opened in 1995. It was called the Moscow Beach Club. It was also in the center of town, in the back of Pushkin Square, in the theater building that was called the Lenkom Theater, next to the nightclub Two by Two. It was quite a scene in the Lenkom Theater back in those days. So, we had three projects, conceived very early. One of them, Uncle Guilly’s, up and running, and cash flowing. I think I made my money back in less than eight months.
Daniel Satinsky: You got paid back out of the profits in less than eight months.
Bernard Sucher: Yeah, right. And that was very encouraging. But it helps when you have no competition. As I said, there were but a handful of restaurants that were open in those days in Moscow, and the increasing flow of international visitors to the city, business-minded visitors, as well as an increasing number of local people who had money and were beginning to appreciate a restaurant experience. Again, bigger context, going to restaurants was not a thing, and so restaurants were not places that people generally went to.
Dining out was very exceptional. Most people ate their meals in someone else’s home if they were celebrating something. And so there was even, back in those days, this kind of underlying, unanswerable question, would Russians want to eat in restaurants, were we building these businesses for a limited expatriate and diplomatic community audience or were we going to see, over time, growing numbers of increasingly sophisticated Russian customers, and how long would it take if that in fact was the path that we were on. That happened very, very fast.
Daniel Satinsky: That balance changed.
Bernard Sucher: Yeah. And it was accelerated by the pioneering Russian restaurateurs who were incredibly creative, I would say courageous. One of the early examples that I’m talking about was a Ukrainian restaurant that was built kind of like a human terrarium, where everyone was participating in a mockup of a Ukrainian village. The food was great, and the feeling of sitting in a barnyard —
Daniel Satinsky: What was it called?
Bernard Sucher: My brain is straining for this, but…
Daniel Satinsky: Not Sam Prishel?
Bernard Sucher: No. No-no-no.
Daniel Satinsky: Okay.
Bernard Sucher: It was the first restaurant in a complex of restaurants that were dominated by a single entrepreneur, whose name I also cannot — I’m very unhappy to say I can’t recall right now. But to the extent that, you know, I’ll come back to you with that, and if you want to edit it in, we’ll edit it in. [Shinok]
Daniel Satinsky: Yeah, okay. So, this was in the wild and crazy times in Moscow, and so it was cash businesses, had to deal with local criminal groups, and having to have krysha
* or a cover. And so how did you deal with that?
Bernard Sucher: So being a new guy in Moscow, and very self-consciously being the only one in our group who had any money at all to put at risk in an investment project, I was not only concerned about the risk to the principal, I was concerned about the risk to
this principal. I didn’t want anyone outside of our group to know that I was the source of financing for this restaurant or for any other project. And I asked my more experienced expatriate colleagues what they knew about the way restaurant businesses were covered — covered by Mafia groups, covered by rogue agents of law enforcement, or what?
But it was perfectly obvious from the get-go that the food industry, which had existed before in the Soviet Union, had its industry Mafia. If we were going to be opening a new restaurant, we were going to be entering somebody else’s territory. And the question was whose territory, what were the rules of the game, and how were we meant to limit our risk and preserve the commercial viability of the business while—it was not small matter to me—maintaining our own ethical standards. And frankly speaking, my colleagues had no idea. They were working in hotel food and beverage concepts with international owners who were international, multinational companies. And to the extent that this grubby bit of business of protection was a reality in those establishments, it was not the responsibility of the F&B manager.
So we went to our young Russian partner, Oleg, and we said Oleg, what do you know about this? Well, he didn’t know anything either. So, I replied, now look, guys, I’m not putting a penny into a project where we haven’t done sufficient due diligence on our obvious risk factors. And not only is this perhapstheobvious risk factor, it’s frankly speaking the one that scares me the most, so we better do some research. And I did very little of it myself. I took it on faith. But after a reasonably short period of time — we were in a hurry to get this restaurant up and running —Oleg came back with his description of the security situation for the restaurant industry.
And as I recall, it boiled down to the following. First there was an incumbent Soviet era Mafia that had established rights over any restaurant properties in central Moscow, the implication being that if you were going to try to do something on their territory, in their vertical, they had the right, recognized by all stakeholders, presumably including the authorities, to collect some kind of fee or tax on your operation, or a known quantity. There was a second group. They were the challengers to the incumbents. That group was going to be very aggressive. They were thought to be even murderous, ruthless, and unpredictable. They were growing fast. They had understandably a fearsome reputation. It turned out that that group became known to the wider world as the Solntsevo Mafia. And then there was a third alternative, which was the local police. They too were trying to expand their sources of revenue and had apparently decided that the restaurant business, despite the competition from the dangerous assaults of the Mafia and whatever the incumbent group was, that that competition was something they could manage and make a buck off.
So with this map in mind, we had to make a choice: do we find some way to deal with one of these groups, which group, what are the terms of trade, or if we are going to say we don’t want to have anything to do with this, then most likely we just don’t bother opening our business. In fact, with that logic, we hit upon something that seemed to us to be a reasonably ethical position, but at the same time be pragmatic. And at this point Shawn McKenna, who had only recently joined us as a leader of Flying Foods, Shawn McKenna suggested that we approach our preferred group with a contract, and the offer being here’s a piece of paper, it says we need protection. And in fact, we really did. I mean, that wasn’t something theoretical.
Daniel Satinsky: Right.
Bernard Sucher: We need protection, and we’ll pay for it. And we’ll pay a fixed, agreed fee in advance, and we will have a legal contract. You provide us security services and we will provide the required money, and we will grow our business, and we’ll have a predictable income, and we will have an opportunity to prove this concept out. The decision was to go with the young and aggressive, potentially notoriously murderous group Solntsevo.
Daniel Satinsky: How do you spell that group? Do you remember?
Bernard Sucher: It’s commonly spelled in English as—it’s a neighborhood. It’s a region of the city of Moscow on the east side. S-O-L-T-S-E-V-O, Soltsevo [Solntsevo].
Daniel Satinsky: Soltsevo, okay.
Bernard Sucher: I think there might be an N in there, S-O-L-N. And I’m looking back, and thinking was I just being prudent, or was I being cowardly. But again, I was the source of the money, and I didn’t want to have anything to do with these negotiations. So it was actually Shawn and Oleg, and it’s possible that Paul O’Brien was part of it as well, but as I recall Shawn and Oleg went to a meeting, a series of meetings, and Shawn’s purpose was to persuade the young man that he was talking to, a guy in his early 20s — and it was always some small group of young men.
His main objective was to persuade these folks that they should accept a contract. And going back to the logic, we could feel that if we secured a contract, a legal instrument, that we will not blatantly be contributing to the problem of corruption in the country. We were instead providing an example whereby with agreed terms in advance entrepreneurs could size the risk, price that risk, and decide whether or not it made sense to put money into a project and try to build a business. And at the same time, with such an instrument, our counterparts on the security side would in effect have a new kind of business, one that would be ahead of the curve of the developing legislation in a country which, at that point, was essentially lawless. So we thought that was a genuine win-win.
One of the big fights was our potential partners wanted not a fixed amount of money every month, they wanted a share of the profits, or even a share of the revenues. This meant they were going to have to look at our books. We did not want to invite any outsiders, under any pretext, to look at our books. We wanted to run our business, and we wanted to have a clear expense in mind in advance. We resolved that matter in our favor, although we did have to give up, if I remember right, a corner booth in our bar in Uncle Guilly’s for every Thursday, Friday and Saturday night. In other words, if they wanted it, then they could have it, and we’d be paying for whatever they would order. That was a very big expense. Sometimes that corner was very busy. But that’s how I got comfortable with the risk of entering that arena, and that’s how we established a precedent that allowed us to grow from one restaurant to a number of restaurants, and not to mention —
Daniel Satinsky: Yeah, so you followed that precedent.
Bernard Sucher: — the Moscow Beach Club. Yes, exactly.
Daniel Satinsky: Yeah, you followed that. Do you know if others in the business followed that model?
Bernard Sucher: Well, a lot of people asked us for advice over time, like how did you do that? What are you doing? How are you handling this? This was one of the most obvious questions. So, if Uncle Guilly’s was the sixth restaurant in the city outside of a hotel that reached some kind of acceptable international standard in a very short period of time with, by the way, no break from the 1998 crisis. Restaurant openings just kept on motoring up.
Daniel Satinsky: Booming, yeah. So did you ever have to call on them for their services, or was the fact that you had a contract —
Bernard Sucher: I recall only one time. Well, actually, it might make sense to go back just a second. Building out the restaurant was not that difficult. It really was you had to clean it and wait for the Italian equipment to clear the border, install it and get going. So in a very short period of time, in other words, from late summer of 1993 to April of 1994, that was the period of time it took us to get the restaurant basically up and running, and we started serving among friends in April of 1994.
But once it became clear to the outside world, just by the activity around the building, the construction teams going in and out, that there was going to be a new something there, pretty regularly there would be a knock on the door. This was a knock on the door leading downstairs into the basement, where the restaurant was. And this was the appearance of people in either organized or opportunistic extortion rackets, protection rackets. And what they were probing for was who is, if anybody, covering this wannabe establishment. And once we had made our agreement, we were given the instruction that if anyone should knock on your door and ask, just give them this phone number.
So, I wasn’t there every day, but again, my memory of what the guys were telling me was that pretty much every day for the first couple of months somebody would be knocking on that door. And we wouldn’t have a conversation with these folks. We would just hand them a little piece of paper with a phone number on it and tell them in fluent Russian or bad Russian, call this number. And those people didn’t come back. And after a couple months nobody bothered knocking on the door.
So, flash forward a couple years later, on a very busy Friday night, not only was—there was no knock on the door, there was just the march of many heavy booted feet coming down the staircase and filling up the very small bar. And this was a group that had decided that they were going to establish their rights on the property. Entirely unannounced, a very unpleasant surprise, very scary for any of the guests who were aware of what was going on. And we had to call that number. So I received a phone call from somebody in the restaurant saying you better get down here, because we’ve got a problem.
And by the time that I made it, basically just about a mile away from my house, what I saw was— the Stoleshnikov was effectively a walking street. There’s a road through it, but it’s a small connection street in the very heart of Moscow opposite the mayor’s office, Mossoviet, and on one end of the street facing Mossoviet was an infamous Georgian restaurant that the Georgian Mafia [had run] going back to Soviet days. At the other end of the street very limited traffic flow around what later was the government Duma—well, was the government Duma at the time.
But both ends of the street were blocked off by Mercedes and BMWs with lots of young men facing off between lines of these cars. Mind you, this is right opposite the official mayor’s office, which is itself guarded. But the legal authorities were not really in any evidence at all. This confrontation between two groups was taking place, and it was even, but for all to see on the entire Stoleshnikov street. And once our guys arrived there was a tense standoff, which lasted about 90 minutes. I didn’t go past that line of men and the double line of cars. But they cleared it up. They cleared it up peacefully. As far as I know there were no adjustments to our contract. Nothing like that ever happened again. So in short, this way of doing business, which is clearly not ideal, and certainly open to argument about whether it’s a right thing to do or not, this worked. It worked for our business.
That sort of thing seems to have worked for most businesses. And this contract that Shawn was able to implement, in one form or another, seems to have become, faster than you would have thought, the legal standard in the capital city of the Russian Federation.