Palmer's People

When Charlie Palmer was a 23-year-old star chef at the glamorous River Cafe, he had the garlic to ask the owner for a piece of the place. "I felt I was an integral part of the River Cafe, and I wanted it to be my restaurant as well as the owner's," he says, jabbing a thumb toward his chest. "I got shot down." So then Palmer went out on his own--determined to treat his staff differently.

When Palmer opened Aureole in 1988--still one of New York City's most dazzling restaurants--he created incentives unheard of in the Old World realm of haute cuisine. First he gave his key people cash bonuses for performance. As his business expanded, he gave them something better: a chance to invest with him in new ventures. That could be another restaurant, a florist, a catering operation or a cutlery maker--all part of his growing $36 million-a-year gastronomic empire. "With European chefs," he explains, "the owner owned the place, and nobody even knew whether the restaurant was making money." In his office at Aureole, he slaps on his desk a one-day balance sheet from Metrazur, his new place at Grand Central Terminal. "Here, every manager in every restaurant gets a flash report every day." He points to a column of figures: the percentage of food cost to food sales that day. When the figure drops below 32% (35% is good), the chef--there are 16 across the company--gets a bonus based on the saving. Over a year's time these bonuses max at 30% of salary. The percentage this day is 26.89. "This chef must be jumping up and down," Palmer says.

Expansion in any business demands loyal talent. But restaurants are notorious for their disposable alliances. The annual rate of churn for managers can be as high as 80% to 100%, says consultant Ron Paul of Technomic. "But even a well-run, independent, high-end restaurant has 25%-to-50% turnover," he notes.

Two years ago, as Palmer began to expand to Las Vegas--a town where loyalty rents by the hour--he knew staffing would be critical. "I realized I needed help," he says. "So I needed to offer them the same kind of growth I want. Why would anybody want to do more work for the same money?"

Got that right, Charlie. That's when he created his inner investment group. "In any business deal I do going forward," Palmer explains, "I offer [the staff] an opportunity to invest in any project on the same terms I do." If, for example, Palmer invests $200,000 to buy 30% of a business, the group might invest $100,000 for an additional 15%. Now numbering 22, the group can choose to invest or pass. And members decide which employees can join.

The first three--his controller, general counsel and sous-chef--bought into a cheesemaker, Egg Farm Dairy. Later came Astra Ridge water and Charlie Palmer Steak. Most recently, the group has taken points in Astra West, a restaurant-catering operation to open this fall in Los Angeles, and the Hotel Healdsburg/Charlie Palmer's Dry Creek Kitchen in Sonoma County, Calif., scheduled for the summer.

Once they're in, members keep their stake even if they leave. "But," he notes, "if they stay, they have more incentive to support the new ventures. I don't think we've lost anybody yet." That's what happens when the pastry chef has a piece of the pie.