BERAL, INC.
Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944
E-mail: mlikar@aol.com

Recorded Interview

With

Zach Erdem, President
Of 75 Main Street Restaurants of Southampton and Del Ray Beach
June 20,2012
 

  

Andrew You are the President, I trust, of the largest restaurant in Southampton, 75 Main Street, and you know another restaurant in.
Zach In Del Ray Beach, Florida – yes.
Andrew First, could you describe yourself and your background.
Zach Yes, I am Zach Erdem – 31 years old from Istanbul, Turkey. I have been in America almost 10 years and I worked. I work every day – 7 days – double shifts, and 75 Main is my first ownership. I bought it May 2010 and my second location is in Del Ray, Florida which just opened April 2012.
Andrew Let me ask you – are we today in an economic crisis or not?
Zach I wouldn’t say so. People always need to eat; people always spend money for food.
Andrew In other words, you are optimistic about the restaurant industry?
Zach Yes
Andrew Why
Zach People, like I said, always need to eat. It is something that you must have all your life and you can’t escape. You have to survive. You have to each something.
Andrew Now, your family, is still in Turkey?
Zach My family is in Turkey; my family is in Istanbul.
Andrew What do they do?
Zach My family – I don’t think my father ever worked a day in his life and my mother is ladylike and raised six kids – a house mum. She never had a chance to work; we were six brothers so she helped all of us to grow up – all of us brothers. It is not easy to raise six boys.
Andrew Well, President Roosevelt’s did, Governor Romney’s did – so your mother is in great company. When you came to America, what did you have?
Zach Nothing – nothing – nothing.
Andrew So what did you do as an immigrant?
Zach I worked – I went to school, first.
Andrew When?
Zach In 2002 when I came to America.
Andrew Where did you go?
Zach New York, in Manhattan – Zoni Language Center – It was an English Language school.
Andrew And did you study restaurants?
Zach All over the world. My clients are from all over the world – from Russia, from Istanbul, I’m Turkish – from Germany, from France. All over the world I have clients come from.
Andrew May I ask – you have had Main Street for 3 years.
Zach Three years – almost – yes. May 2010 – yes.
Andrew How much revenue does the …
Zach Does good numbers; I can’t really tell – I would say $3 …
Andrew $3 million?
Zach $3 million - $3.5 million.
Andrew In this location?
Zach Yes, in this location. It could be better. In the winter season it is slow here and if we can get more attraction for the town in the winter time it would be better.
Andrew Let me ask – do you have – is this profitable?
Zach Of course, always.
Andrew And how much capital has to be tied up in 75 Main Street?
Zach What would you say – what do you mean capital?
Andrew Working capital – how much working capital do you have to have …
Mohan I would say $1 million
Andrew And you own the real estate?
Zach No I’m working on it to buy it – I want to buy the real estate.
Andrew why?
Zach Because I guess I am working for – paying high rent and I’d rather own the place – pay my mortgage to own the building in a year or so.
Andrew How much is the building worth?
Zach As far as I know the guy who bought this place 5 years, $5.5 million. He is asking for $6 million – just to cover the expenses and the money he spent.
Andrew Do you see that Southampton is developing? Recovering from the recession?
Zach Absolutely – Southampton is getting bigger and larger than all the Hamptons. It’s the town of action – all the celebrity come especially 75 Main. If you go on line and look at 75Main.com then you will see that like all action, the people who – that come to the Hamptons.
Andrew In 3 years’ time what would change here.
Zach I would say more people, more families. Southampton would get more popularity and Hamptons is just very unique in the world. Like everyone thinks about the Hamptons – I want to be in the Hamptons. It is very unique – this part of the world. In Istanbul – anywhere you grow up – you know the Hamptons is very exclusive place for the rich people. Everybody wants to be here and wants to come and see the Hamptons. What the Hamptons are about.
Andrew Can you foresee 3 years’ time this restaurant would do $5 million?
Zach I would say yes. Definitely – I would say absolutely yes. I have seen all over the world people come every year – different faces, different people with the big money. Russian – more Russians would be in the Hamptons.
Andrew Celebrities are important?
Zach Important – yes – I mean who have place – gorgeous in the world – in Istanbul, Turkey – go somewhere else. The most beautiful place in the world maybe you could say – nobody knows. Because no celebrity goes there. The Hamptons is most gorgeous place in the world too. It is more exciting – celebrities – Madonna has a house in the Hamptons, Brittany Spears, Jennifer Lopez ….
Andrew How about Caroline Kennedy?
Zach I don’t know about Kennedy. I’m not think about politician….
Andrew And Rudy Guiliani?
Zach Yeah – he has a house in Easthampton. Yes – I’ve seen him in my restaurant – Guiliani – yes. The Vice President – Joe Biden – comes any time he is in the Hamptons, they will stop by my restaurant.
Andrew In other words, if America comes out of the recession and developing you would automatically benefit that more people are here, prices are higher – in other words your cash flow gets….
Zach It’s not that we get more people, it always more cash flow – there will always be more money.
Andrew Now – let me ask you – going to Florida – can you describe ….
Zach Florida is better location – it’s a great location – the restaurant I have – similar to my first restaurant here at 75 Main – same concept. Clientele is more the same because people come here all summer, same people in Florida in the winter. The same people in West Palm Beach, Boca Raton or Del Ray Beach which is close to my restaurant. And 75 Main is very well known – it’s a destination place.
Andrew In terms of numbers, what do you do in Del Ray
Zach $4 million - $4 million a year
Andrew And it’s more profitable?
Zach Yes, Del Ray is more profitable than here. Hamptons are more expensive – you have your kitchen payroll, expenses more than in the food costs, your – everything is – employee cost than in Del Ray. Taxes.
Andrew In other words, you have $7 million revenues which can support $5, $6 million mortgage.
Zach Yeah. I would think so – absolutely – yes. When you think about it – yes.
Andrew And at the moment, what do you do with – you have a surplus cash flow now between the two restaurants.
Zach Say that again.
Andrew You have now a surplus cash between the two.
Zach Yes
Andrew And if that can be demonstrated on a monthly basis – so we have surplus cash flow $7 million – at the beginning of an economic recovery in the United States and the beginning of your career in restaurants.
Zach That’s correct
Andrew If you pick up the real estate, the value of the two restaurants with real estate is probably over $10 million – more than $10 million.
Zach It would be more than $10 million.
Andrew And that’s the beginning. You’ve got the money and you can write off the mortgage; if you’ve got a very year you can pay off more. So in other words, you free up your capital.
Zach I would say yes.
Andrew What are your plans afterwards?
Zach First to buy this location. Make an additional will. It’s the smartest idea. I would love to have my own place. I would love to own this place and to make it more successful, I would have my upstairs – make it nice, lounge – private dining room to make more income in this way (some other party speaking) absolutely – when I took over this place, I would like to get more bigger and bigger – like upon another one in LA or another one in Las Vegas and another one in Istanbul – London, Paris – worldwide restaurant.
Andrew So in other words, this decade if you own more real estate which makes the company more stable. We look for an increased revenue from the two existing locations – with a better economy and – which means that you can knock off the mortgage – pay off the mortgage much faster and at the same time if you use your knowledge, team, everything expand in other direction. It would be a meaningful restaurant company.
Zach Like everyone else, these people have so many restaurants. And I know some people have 20 restaurants; I know some people who have 50 restaurants – I know some people who have 100 restaurants – all over the world. And I want to be one of them. I want to be really successful and have restaurants all over.
Andrew Well I am pro-immigrant –
Zach I am too
Andrew I want to thank you. I want to ask you one more thing – have you ever thought of going public?
Zach In the future yes when I am big and bigger – I would love to go public. But I have to get big first.
Andrew Let me finish with a real story …. I immigrated to American in 1964. And, was a big bull market so I did very well. And, my father came to visit me when he was 80 – and he was probably like your father a very comfortable person – a lawyer and a general from the 1st World War. But – he visited – he went around in New York and he found the Plaza Hotel. And he said, I found a very proper place. I said Dad, this is the most expensive place in New York City – and it was in 1967 – 3 years after I was in Phoenix, Arizona and I discovered a restaurant company – Ramada Inn. And nobody bought Ramada Inn shares until I studied it. So … I became friendly with the two owners and they said well Andrew – I’ll give you a good tip ! I said do you know Hotel Corporate America? Sure - $6. They have 34 hotels only 3 million shares – including the Plaza Hotel.
Zach They owned the Plaza Hotel?
Andrew Yes. So that was 3 times $6 - $18/$20 million. Including the Plaza. And I analyzed it and I said fellas we can go in that company. One of two said yes we should buy control. Eventually I became friendly Mr. Roger Sonalbend, Chairman of the Board. The three somehow owned a million out of the 3 million shares. So, I told the Ramada – it’s a very very cheap stock, but nobody can buy control – I became friendly with Roger Sonalbend and once he you know – things were very healthy – he started to sell hotels and distribute the cash which 1/3rd went to the family. And the total valuation – what cash which was distributed over a period of 5 – 8 years was $400 dollars… $400 per share. Instead of $6 dollars. So that’s the best hotel story I know.
Zach It’s great.

Disclaimer

Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.

 

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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail: mlikar@aol.com

Copyright © 2011 Andrew Racz. All Rights Reserved.

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