Digesting the loss of The Coffee Shop

BY MICAELA MACAGNONE | The Coffee Shop, the Brazilian-American diner, was a Union Square staple and a second home for models. After being open 28 years, it closed last October.

Forbes reported that Coffee Shop was one of the 100 highest grossing independent restaurants in the U.S. in 2017, raking in roughly $14.3 million in annual sales. Even so, the chic eatery was not able to break even.

Charles Milite, Coffee Shop’s co-owner and president, told Forbes that rent ate up 27 percent of the place’s gross revenue. Plus, he said, the $2-per-hour minimum wage hike that was set to take place last December would have added $46,000 to the restaurant’s monthly payroll, or more than half a million dollars a year.

After nearly three decades in business on Union Square West, The Coffee Shop closed last October. (Photo by Google)

“When a restaurant is one of the top-ranked restaurants in America, sales-wise, and can no longer afford to operate, you have to look at that and say there’s a shifting paradigm in the business,” he told Forbes.

Some part of the former Coffee Shop space will now be turned into a Chase bank branch. An application for the bank was approved by the U.S. Department of Treasury on June 4, Jeremiah’s Vanishing New York blog first reported.

Andrew Rigie, director of the NYC Hospitality Alliance, described Coffee Shop as an iconic New York City restaurant whose closure is another example of the city’s expensive and complicated regulatory environment. He stressed that systems that protect small businesses, like the restaurant-industry tip credit — which allows restaurants to pay $10 an hour if employees’ tips meet or exceed minimum wage — must be preserved. Rigie said eliminating the tip credit would be an enormous financial burden for small businesses on top of their normal operating costs.

Rigie added that Mayor de Blasio’s recent push for two weeks’ paid time off for employees, “on top of the already existent one week paid time off, ” should not move forward.

“De Blasio should be figuring out how to support our small businesses, not how to make it harder for them to survive,” he said.

Rigie added, though, if people view two weeks’ paid time off as a moral imperative, then the city should subsidize it.

“We cannot address large societal issues on the backs of small business owners,” he emphasized. “Vacant storefronts and big chains are unrecognizable from what New Yorkers love.”

Rigie’s NYC Hospitality Alliance represents restaurants and nightlife venues throughout the five boroughs. He said he would love to see another local restaurant in the Coffee Shop space, because that is what makes New York special and gives us our culture. He said while a Chase bank is great if you want to deposit money, it will never replace the culture created by New York businesses, like restaurants and nightlife.

Gail Fox, former co-chairperson of the Union Square Community Coalition, said she was disappointed by Coffee Shop’s closing, yet was not viewing its demise “so broadly.” She noted the place closed, in part, because one of the owners was moving out of the city. Asked if she saw the loss of the hot spot as part of a larger trend, she said no since it was not solely an issue of rent and there have been many restaurants that have “moved on” from the still “vibrant” Union Square community.

That said, she hopes the Chase bank is small — an ATM would be enough for her — and that the space remains a food business, like a small food court.

“You were surrounded by aspiring actresses and models,” Fox recalled fondly of Coffee Shop. “The owners were most gracious to the community. And the food was the kind that would make you want to stop in.”

She hopes that what enters the space lends itself to the community in the same way Coffee Shop did.

Jennifer Falk, executive director of the Union Square Partnership Business Improvement District, declined to comment on the Coffee Shop space. A BID rep sent a list of new businesses in the neighborhood, and cited the BID’s Q2 Biz and Broker report, which said, “The BID’s  ground-floor retail vacancy rate remains one of the lowest anywhere in New York City, at just 4 percent at the beginning of the second quarter of 2019.”

19 Responses to Digesting the loss of The Coffee Shop

  1. Look at all the vacant store fronts popping up, costs are too high, people are not coming into the area as much, and now they want impose congestion pricing as well. A 70s style depression is coming soon, if the current city and state administration doesn’t wake up and stop killing local businesses with oppressive policies. You hear that Cuomo, Deblasio, and Corey Johnson?

    • So you’re claiming that businesses close because of congestion pricing even before congestion pricing has been implemented?

      • Just saying, it’s getting bad now, but congestion pricing is just going to make it worse by driving customers to other less taxed areas. Everybody but the pols know the biggest contributor to traffic in recent years has been the unregulated over proliferation of ride share vehicles.

        They’re the ones killing the yellow cab industry.

        Diminish the ride share vehicles and you’ll decrease traffic, without the need for congestion pricing.

        • But all these people riding in the FHV are also customers of the businesses in the neighborhood ? They just don’t drive their own vehicles. What does it matter who owns the vehicles?

          • Most of the fhv vehicles are driving around empty waiting for fares. Because of their abundance, their are causing congestion and starving themselves and the yellow cabs.

            There needs to be yellow cab medallion style (or other ways), to regulate the supply of fhv, otherwise we have the present state: traffic and too many cabbies and fhv that can’t make a living

  2. I really, really take issue with Charles Milite's blaming the closing on increased wages. For years the business has profited on the back of hard-working people whose wages remained stagnant for over a decade as expenses, especially apartment rents, have risen. The employees most likely spent more than 30% on rent (before taxes) and can't take a write-off for that expense.

    Bottom line, commercial rents have reached a plateau, and the many vacant storefronts and big brand names closing locations are a testament to this insanity.

    As a long-time customer at the Coffee Shop (I even went to Jason's diner before that a few times), the place had an unusual amount of staff and many of them not very skilled or efficient. Of course, we never went there for the service. In the USA as a whole, the hospitality industry is not run in the most efficient ways.

    Compared to Europe, workers there receive living wages that a lot higher than the increased wages here. Restaurants are not overstaffed as they are here and still, people are not nearly as overworked and have scheduled breaks required by law. One of my relatives is a French-trained EU chef who consulted and worked in multiple high profile restaurants in NYC. Being EU-trained, he was able to draw comparisons first hand.

    Of course in EU the rents are mostly not nearly as high as here. I don't understand what kind of math retail business owners apply when then open a storefront/restaurant only to close 6-18 months later. Maybe it is only apparent to some of us but the constant harping on the already measly wages of workers, hell no!

    • I agree with you, i was in the restaurant and hotel business for 40 years here in the business. most of the staff is poorly trained, the restaurants have high turnover, Back of the house layout and poor and outdated equipment is labor expensive. Plus the concept are the same than at the opening 28 years ago. its called sleeping on the wheel. most restaurants have no proper businessplan, do not work on an established budget, Have poor management, who does not know hat their Budget is. A full service restaurant should have lease cost of 15% of the revenue, 5% in utilities, 25 payroll and related expenses. The rest is Food and Beverage cost and profit, plus return of capital. just one sample of the poor restaurants are organized. On 1998 we where in Paris and had dinner in a regular bistro, when I asked for the bill the waiter had a handheld terminal, I gave him my credit card and 15 second later I had my invoice. In the USA i have to flag down the waiter, give give me the invoice, than i proofread the invoice, put my credit card in the folder than flag down the waiter again, who picks it up and goes to a terminal to make the credit card charge, and brings back, wehere i sign the slip, take my card. add a gratuity and add it. and sign, the waiter than had to go to the terminal to close the check. I would day a 10 to 15 minute procedure. and I always thought the waiter is a sales person and server. Or try to pay in a full service restaurant with apple pay or google pay. most independent restaurant have never heard of menu engineering, how to maximize profit.

  3. When will Andrew Rigie, stop fronting and distracting for the real estate industry and start supporting legislation giving rights to business owners when their leases expire. All the fake programs and initiatives mean nothing if the business closes. The one sided grossly unfair commercial lease renewal process will force every business to close in NYC.
    If the community wants to stop the closings and save their businesses , elect new lawmakers not under the control of the real estate lobby.

    • A very small point, but the coffee shop lease still had some time on it when it closed. I'm not saying anything more than the coffee shop isn't a good example for your point.

      • Big point, commercial leases are so one sided that businesses are closing faster because of the rising
        landlords property taxes which the tenant is forced to pay if they want a lease. When will lawmakers understand
        business owners can no longer pay the exorbitant rent increases and their landlord's growing property taxes and make a profit. Lawmakers enjoy giving themselves a raise or give their friends high paying jobs but its the small business owner and their employees that are paying for it. Lawmakers stalling for 10 years to give rights to business owners are responsible for long established businesses closing.

        • Yeah a rent hike isn’t always the cause of a closing. It’s just not. Be honest with people.

          • The combination of paying sky high rents and paying the landlord's sky high property taxes is killing the future of all NYC small businesses, and that's ok with lawmakers. You want honesty , you got it.

  4. The shuttered Coffee Shop is exhibit A of what happens when politicians want to legislate business and economics. A former bartender there might take note.

  5. The other Union Square killer closing was that of the popular BLUE WATER GRILL, which had hung in on the corner across from THE COFFEE SHOP for over 20 years – and then, come January of this year, was suddenly gone. One heard the rent was being raised?! So it, too, now stands empty. Why do landlords find that a more profitable arrangement?

    • Because they can write it off as a tax loss while awaiting a mega-paying tenant. Look at Eighth Street. It has been proposed before that if a storefront remains closed after two years, then owners should not be allowed to take a tax write off for that property.

      • I have read this in other places but it's not true in actuality. The only benefit would be that the property taxes are based on the income, and since the income is lower so would the taxes. But that is phased in over 5 years.

  6. I recall when this Coffeeshop opened, and we all said, 'there goes the neighborhood." It was one of the 1st high-end places to open on Union Sq., so not sure why we're supposed to cry about it now. And heck, almost 30 years in business — makes it hard to say that businesses can't survive in this environment. It had a better run than most restaurants. It had an excellent run for such an over-priced tourist trap. Same for Blue Water Grill!

  7. Sidebar comment: In New York city, a commercial lease just gives one the right to pay rent!

  8. It behooves NYC landlords to kill small business storefronts because they can then inflate the value of the property by declaring to banks that the market value for the space has greatly increased. This helps them obtain new loans to buy more buildings.

    When combined with the tax incentives the storefront is worth more when empty than it is when rented.

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