The long-planned second diner concept from the owner of popular Russell Street Deli in Detroit’s Eastern Market is no more.
Deli owner Ben Hall sold a vacant building he owned on the outskirts of the city’s Corktown neighborhood, he told Crain’s on Wednesday. He’s leaving behind the never-fully-realized restaurant plan amid concerns about the industry in favor of growing Russell Street’s more lucrative wholesale soup business.
Crain’s Detroit Business
The former Steak Hut Restaurant on the edge of Detroit’s Corktown has been sold by the owner of Russell Street Deli, who had been planning a restaurant there called Lafayette Kitchen and Diner.
The building at 1551 W. Lafayette Blvd. sold for $535,000 on Dec. 18 to an entity affiliated with New York-based Goldmont Realty, according to city property records and Alex Lauer, an agent with Real Estate One who brokered the deal. More details on the buyer’s plans weren’t immediately available.
A company registered to Hall purchased the building in 2013 for approximately $212,000, according to city records.
That year, Hall discussed plans to open a 57-seat restaurant called Lafayette Kitchen and Diner in the former Steak Hut Restaurant building at the intersection of 10th Street and West Lafayette Boulevard. It was to build on the reputation of Russell Street Deli, the small, 30-year-old restaurant in a food-centric corner of Detroit’s greater downtown.
The west-side project was delayed over the years, and Hall said he entertained multiple purchase offers on the property.
Hall’s Russell Street Deli co-owner, Jason Murphy, left in August. He declined to disclose a reason.
Now, with a potential economic downturn looming and with Detroit’s crowded restaurant market making opening another restaurant a riskier and potentially less lucrative venture, it seemed time to officially “jump ship” on Lafayette Kitchen and Diner, Hall said.
Russell Street Deli is a mainstay in Eastern Market and a recognizable brand, but profit is on the decline there in recent years as more food options open around downtown, Hall said.
He echoed an underlying feeling of instability in the local industry — “although everybody is very excited, places have already gone out of business,” he said.
The long list of recently announced closings includes Hard Rock Cafe in Detroit, New Parthenon in Greektown and Pasquale’s Restaurant and Andiamo Trattoria in Royal Oak.
Those that haven’t folded continue to deal with a skilled labor shortage, rising costs and other restaurant industry difficulties that could contribute to a slowdown in 2019, Detroit Free Press food writer Mark Kurlyandchik recently reported in an analysis of the coming year.
”If we’re feeling the pinch and we’ve been there for 30 years, and there’s 200 restaurants, then how does a new restaurant survive in this constantly expanding landscape?” Hall said.
Nationally, restaurants have seen sales and customer growth in recent months, but operators are less optimistic about the direction of the economy and their expectations for the next six months are slightly lowered, according to the National Restaurant Association’s November 2018 restaurant performance index report.
About 60 percent of reporting operators said they saw sales increase between November last year and this year, up from 53 percent in October. Eighteen percent reported a sales decline.
Thirty-five percent said they expect to report a year-on-year sales increase in six months, while around 60 percent said they expect about the same and 6 percent said the expected lower sales. But only 15 percent said they think the overall economy will improve in six months — their least positive response since October 2016, according to the association.
Amid industry concerns, Hall said it’s time to invest in soup.
The Russell Street Deli restaurant takes up around 80 percent of Hall’s energy and the wholesale soup business — run under the same brand name, out of the same location — takes up 20 percent, he said. But he estimated that wholesale has accounted for 90 percent of Russell Street’s recent growth and returns.
And so, the approximately quarter-million profit from the Lafayette building sale will go toward expanding soup production for retail.
Russell Street’s arguably lesser-known revenue stream has grown from a Whole Foods Market contract in 2013 to its soup being sold at at 160 stores in Michigan today. Customers are fans of the line that includes chowders, Italian tomato vegetable and interesting vegetarian and vegan options.
To expand distribution this year, the team needs more space. It will outfit rented kitchen space at Avalon International Breads’ Detroit outlet location on Bellevue Street, aiming to start production there around Feb. 1.
Russell Street Deli via Facebook
Russell Street Deli has been serving up sandwiches, soup and salads in Detroit’s Eastern Market since 1989.
Russell Street makes an average of 3,000 gallons of soup a week in the winter and 1,000 a week in the summer, Hall said. He expects to start distributing in Chicago starting in March and then Cleveland later in the year, aiming to triple its current production in 2019.
Other soup clients are Busch’s Fresh Food Market, Zerbo’s Health Foods, Westborn Market and Detroit and Hamtramck public schools, among others.
Hall projects recording $1.6 million in revenue for 2018, up from $1.3 million in 2017, including wholesale and the restaurant.