'Business is about being brave, forming a team, and finding the right niche and money'

Over the last five years, hummus and falafel have made their way onto the menu of most restaurants in the centre of Moscow, and food trucks have had much better luck selling Middle Eastern dishes than warm Russian pirogies. Daniil Goldman, who is a graduate of the Higher School of Economics and the founder of Mitzva Bar, sat down with Success Builder to talk about what’s fashionable in Israeli culture, why intuition is important in business, and how a bar in Moscow differs from a bar in New York.

When did you first decide to get into business professionally?

I began working in my third year of undergrad. My first serious project came about during the first year of my master’s programme. As a senior, I began working as a PR specialist for Disney in the distribution division. This was my first real job. I probably would have stayed there, but I sat down with my boss and decided that I’d only be promoted when I’m done with school and can devote myself fully to my work. But I decided to go on and get my master’s; I wanted to advance more. He told me that I have to decide between work and school and deal with the fact that nothing would happen career-wise for two years.

I left as a result and got together with my business partners and friends Andrey Osipyants and Dmitry Itskovich to work on our own project – a student cafeteria at Stroganovka. After a year we opened up a second cafeteria at the Kvant factory, and we ultimately ended up selling both projects. This was a coincidence for the most part. We had direct access to Stroganovka’s rector. We live in Russia; this is how things work. The money was there – why not invest in an obvious project?

After the cafeterias, we teamed up with Anton Privolnov to create the café Pyure near Avtozavodskaya. We opened a bar a year and a half later, and at the end of September 2016 we launched the Mitzva fast food stop with hummus and falafel at the Usachevsky Market. We’re also opening up several other little hummus restaurants soon. I have to admit, practice is the most valuable teacher, and I don’t need any particularly theoretical knowledge for my work. But the institute did give me a nice background.

Why did you choose the food industry?

On the one hand, I’d always been interested in it. The food industry is at the interface of the classical aspects of the services and food industry. On the other hand, it just happened that way. At first glance, the restaurant business involves a very low barrier to entry, which attracts and always will attract a lot of people. We are all restaurant experts, but to go create your own is an entirely separate thing. There’s a legend that Moscow has an overabundance of restaurants and that it’s getting stuffy in the food service industry, but none of that is true actually. There are fifteen times fewer restaurants in Moscow than in New York if you count square meters per person.

Maybe we just don’t have a restaurant culture? Or a bar culture, for example.

In the U.S., the average family at any income level goes out to eat, but if you look at all of Russia, the average family always eats at home. In Russia, people only go out to eat if they’re celebrating something. Everything’s changing though, and new trends and habits are arising. In Moscow, things are already different from the rest of Russia. There is a huge group of people who do not eat at home, and they spend up to 50% of their income on going out to eat. This is normal around the world. Sure, we currently have fewer restaurants than in Paris or New York, but people are gradually realising that it’s not that important to buy the latest television set. They are altering their consumption habits and understand that one’s quality of life is more important and that it depends more on your day-to-day habits than on your most recent purchase.

To open a bar that serves food is it better to be a chef or a businessman?

I’m not in the consulting business; I sell experiences, not chef’s services. In order to work successfully in business, it’s important to have intuition, drive, the right character, and a desire to learn. In the end, you cannot learn business from a textbook. Business is about being brave, forming a team, and finding the right niche and money. You don’t need anything else. Your project does the rest. On the one hand, you have to take a risk, but on the other you have to be very careful. But preferably you’ll still know what investment theory is.

Have you made mistakes? This usually makes success come faster in business.

Each new project is a learning tool and new experience. When you carry something out, you learn, and the next project becomes that much easier. You learn how the whole system works from just one practical example. There are no entrepreneurs who never make mistakes. We never learn the answer to the question, ‘which way is the right way?’ beforehand. At the start of a project, there is a huge amount of risk and a lot of factors that can affect the process. Naturally, what you learn right away is how to be attentive.

For example, we made a marketing mistake at the beginning – I might call it a PR mistake – that caused half a year of difficult problems with the target audience. At the beginning, we were perceived as a restaurant, not a bar, and the first press release that was issued about the bar included very little information. This was due to a number of factors. The bar menu wasn’t ready in time for the opening, and we would make cocktails, but the team was ill equipped. We didn’t have enough dishes, but we needed to open. This is why the first revenue structure was at 50/50, while it’s currently at 80/20 in the bar’s favour, which is how it should be.

What I understood right away was that the biggest mistake businessmen make is being first. The firsts rarely win. They just remain a part of history. It’s important to be successful, not first.

How do you assess risk?

We are not an investment company, and we don’t have any formulas. We just understand the situation from an experience and intuition standpoint. Now, I can already imagine with a high degree of certainty what the potential revenues and expenses will be for the project, as well as what kind of turnover we’ll make and whether a specific location will be in demand. To do this, you just have to talk with a lot of people. It turned out that all of my forecasts that we started with have more or less proven to be correct.

We found the location for Mitzva Bar nine months before opening, and while the place was being renovated, a renaissance happened in Israeli culture. There were a lot of articles published about kosher products and trips to Israel because Egypt and Turkey were closed off at the same time. The project was initially intended for a well-off audience and people who wanted to experiment and try something new. There’s a new, active and young atmosphere now. The other things stem from there – price, the product mix, and the design conceptions that are aimed at a specific class.

A year and a half after Mitzva Bar opened, we started selling street food at popular locations where hip urbanites frequent. A large part of our audience at the Usachevsky Market is young, well-off people who think falafel is cool. The subsequent markets will be the same. And while we’re developing our street food business, Mitzva’s hummus menu will consist of food as obvious as burgers. Then we can open up a location at Moscow’s Mega Mall and in other regions after.

How does being located in a pedestrian zone affect the bar’s success?

I would say that of the world’s top 50 bars, no more than 10% are in a pedestrian zone. These zones have chain restaurants, while a good bar should be aimed not at a wider audience, but at a specific class. The majority of people are not prepared to pay that kind of money for drinks because they don’t understand the concept or atmosphere. It’s the opposite actually – extra people are bad for an establishment and it’s bad for business because it’s difficult to work with unsatisfied guests in both the emotional and financial sense. It’s better to sell something for 1,000 rubles less, but to someone who will come back.

A bar is a place where people are starting to go to more habitually. The point and objective of a bar is to become another place people go to after work, before work, instead of work... This is the goal of any establishment, while at the Usachevsky Market we have another objective – service as many people as possible.

What does ‘good bar’ mean?

Mostly ‘classic.’ It’s a combination of equipment, selection, approach, and service. There are clear and distinctive features as well – you can find any classic cocktail here, about 120 of them, and it’s a place with inventive bartenders who know their trade well. It’s a bar that tries to minimize its purchases and maximize its production. It says no to buying syrups, liqueurs, canned items, and instead makes its own. It’s a bar that factors in the time of year, develops unique cocktails, has a spot on an international map, as well as a local one. Our bartenders participate in international competitions; they complete internships and apprenticeships and more. We have guest bartending twice a month, which are global events where bartenders and chefs work at other friendly establishments. We’ve had bartenders from the Czech Republic, Germany, the U.S., and Israel. We’ve really become a part of the international bar community, and we can call ourselves a ‘classic’ bar. At least, we strive to do so.

Is your business not limited by the fact that Mitzva Bar is not a chain establishment?

No, it’s not limited. None of the world’s top 100 bars is a chain, and there is a huge difference between them and chain bars. A chain establishment never becomes the best, and the best never becomes a chain. The best has to be unique. But there are different scaling methods. We chose to develop a street food project under a related brand. The same can happen for a holding or factory; everyone has to resolve the problem of growth their own way.

A little about money – at what stage does a bar or eatery start earning money?

There are projects that have a positive cash flow from day one. On the first day of operations, a humus restaurant operates in the plus. This is a wonderful metric, but there are few of these projects. Much more abundant are projects whose waiting period can drag on for a really long time.

Do those kinds of project end up closing?

Not always. Everything depends on your goals and objectives, even when the project is knowingly operating in the negative. Bars and restaurants also have image goals. In business, not everything is measured by the results of your financial reports. There are a million different situations in which it’s beneficial to operate without earning anything.

What is the drinking culture in Moscow?

I can’t say that it’s much different from anywhere else. It’s probably more important to ask about certain drinking traditions in Russia, Europe, and the U.S. – traditions are different in different countries. This is especially apparent in Europe. People in Southern Europe drink differently from people in Northern Europe, with Moscow actually being more similar to Northern Europe. Until the large-scale implementation of distillation columns, which were introduced in the early 20th century and allowed for cheaper spirits to be produced, people drank differently than they do now. Distillates, including of the grain variety, weren’t cheap, and vodka was expensive. People drank bread wine, home-brewed beer or wine, and instead of vodka wealthy people would drink polugar [a type of Russian bread wine]. Then the distillation process was introduced, and in Soviet Times the government prohibited distillation completely, which killed the industry.

Only in 2015 was the distillation ban lifted. This is why we didn’t have Russian whiskey, gin, or brandy. A certain spirit diluted with water – vodka – replaced all of this, and this imposed its own restrictions on drinking culture here. Also, I don’t agree with people who say that vodka is trash. Vodka’s taste-related qualities are obviously pretty low, but vodka is linked to a large cultural stratum of people of the sixties and seventies, which cannot be ignored. Without vodka, we wouldn’t have Dovlatov or Yerofeyev. This unique bit of background is important to understand.

Of course, Russian drinking culture is currently undergoing changes, and less and less vodka is sold each year. There are two active areas that do not differ at all from global trends – the development of craft beer and cocktail culture. Wine is a more elite and ‘leisurely’ product, and there is also a certain intellectual involvement to it. Six years ago, it was harder to find a Negroni in Moscow compared to now. Nowadays, you can even get a cocktail at Shokoladnitsa. But there is a big difference between Shokoladnitsa and Double B as far as coffee is concerned, just like there is a difference when it comes to the quality of a cocktail at a good establishment versus the bar around the corner.

In your opinion, how long can we expect the trend of Israeli culture and Israeli food to continue?

Currently, places like Rynok and Obshchepit Shuk near Novoslobodskaya are opening up. This is a global project that can be replicated. It’s obvious that the trend is expanding. Israeli food is becoming a part of our culture, just like sushi, burgers, and Georgian food has become a part of our culture. When we go to a sushi bar, we don’t expect to get a taste of Japanese culture; we go to eat typical Moscow food. I hope that the same thing will happy with Middle Eastern cuisine.