New York Bagel - Entrepreneurship in Wild-East 1990s Budapest - part 1
Updated: Sep 6, 2022
"Never in my career have I worked so hard for so little profit" - Robert Brooker, co-founder, NYB, 30 years on.
Photo: A touch of 1990s Americana in Budapest - the New York Bagel branding recreated on balloons for last July's reunion party.
Introduction: After meeting Robert Brooker in mid-July at his New York Bagel reunion party (see KesterTester81 and 83), I quizzed him about the project. I confess it had almost entirely passed me by, not least because I, like thousands of others, was under the impression that it was the Hungarian arm of some US behemoth corporation. (I was also very busy at the time with the utility companies' privatisation plans.) Whatever, I missed a really interesting story - the very essence of roller-coaster entrepreneurship. Robert set up New York Bagel with two other co-founders, Andrew Bednar and Adam Weiss, in 1992. He had graduated in 1989 from Harvard College with a degree in economics, Weiss with a degree in art history.
Here is a glimpse into the business venture, or perhaps better put, given the conditions prevailing in the crazy 1990s, business adventure.
Photo: Robert Brooker greets the guests at the NYB 30th Anniversary Party, at the Tranzit Art Cafe on July 17. Giving the event some gravitas is United States Chargé d’Affaires ad interim in Budapest, Margaret MacCallum (in the yellow dress).
Once upon a time - at Ferenc körút 20, on Budapest's (less than) Grand Boulevard It was one day in 1993 when the New York Bagel gang opened their first small outlet, in Budapest's district IX. True, it was a rather unfashionable location, but the team members were all ready to sell the first bagel in modern Hungarian history - and were eagerly awaiting their first customer. It turned out to be a little, elderly lady who wanted nothing less than …. an onion. “We pleaded with her to try a bagel, but she wouldn't. So we found an onion back in the shop and sold it to her,” Robert Brooker, co-founder, told me in July. True, the shop, at Ferenc körút 20, was on Budapest's Grand Boulevard, but Ferencvaros, then, as now, was somewhat down-at-heel. As he put it: “People in Budapest asked me, 'Couldn’t your parent company, the big American New York Bagel Corporation, afford to get you a better location?' I had to confess that there was no big corporation behind us, it was only the three of us scraping together whatever money we could from investors." Shortly after NYB opened its first “forlorn store”, as Robert terms it today, renowned restaurateur Ronald Lauder showed up unexpectedly and said that he had independently had the idea to open a bagel shop in Budapest under the name, you've guessed it - New York Bagel. As Robert tells the story: “You saved me a lot of time,” Lauder said. He proceeded to finance a large portion of our expansion to 14 stores. His partner at Gundel, the wonderful George Lang, became our adviser in the food service business." "About a year later we had secured a location for another New York Bagel shop that had a first and second floor. At Ronald’s suggestion, we approached George Lang with the idea that Gundel could sublease the second floor from us to operate a “Kis Gundel” restaurant there." "I’ll never forget George’s response, “I grew up very poor. My parents had nothing, and I had no financial inheritance. But I did have an inheritance in the form of advice. My father told me, ’never open a restaurant on the second floor.’" " "Oh and I should mention that we trademarked the name “bagel” in Hungary around 1992 or 1993. Perhaps I could bar anyone else in Hungary from calling their product a bagel. But that would seem heavy-handed to me. I am not sure that such a claim would survive a legal challenge, but who knows?" Of course, Budapest was awash with western European and American adventurers taking a look at 'exotic' and previously semi-forbidden eastern Europe in the 1990s. Some stayed for a month or two, some, such as Rick Bruner, the first editor of Budapest Week, arrived and decided to found businesses after getting caught up in the rush to employ competent English speakers. But Robert Brooker and his fellow co-founders scouted the scene before intentionally targeting and flying to Budapest. Nonetheless, he admits it was something of a mad adventure. “Really we were young kids in our twenties who behaved without a great deal of logic or research. I later learned that there is a phenomenon in psychology that people make decisions based on emotion or impulse, and then afterwards construct logical arguments to justify their impulses.” “Although we did make the argument that Hungary had more advanced infrastructure than other Central European countries, and would be a good launching point to expand elsewhere in the former eastern bloc, I think that mostly it seemed like a romantic idea to go to this faraway place and introduce a product that we loved and hoped had potential. Of course we already saw the success of McDonald’s, Burger King, etc. and saw Starbucks making great strides in the US, and thought we could get ahead of the next trend.” At the very beginning, the team had contemplated expanding into neighbouring countries, indeed Rob Siedlecki came from the US as part of the team to help set up New York Bagel in Prague. As Robert puts it: “We had the misguided notion that expanding from Budapest to Prague would be like expanding from New York to Chicago. We quickly realized that it was much harder and had to scale back our ambitions. So Rob was with us only for a few months.” The NYB team were not the only entrepreneurs at the time who found cross-border expansion was not as easy as first thought. Robert points to the different languages and legislation as some of the main factors hampering any such moves, certainly in those turbulent days. “It was all new legal work [in each country], the company setup, bank accounts, and the like. In short, there was little or no leverage from one country to another.” “The supply chains also had to be replicated. All of our food supplies came from Hungary and would have to be replicated in other counties. McDonald’s was really good at making these investments, but they had much larger scale and capacity to make long term investments. An irony of eastern Europe was that our customers’ purchasing power was low but our costs were often higher than the US, because there was so much work involved.” Sure enough, all this created inefficiencies which ate into the bottom line. “When Stan Goldfarb arrived - he was the master bagel baker of Clark Bagels in Clark, New Jersey - he said “in New Jersey I just told our supplier what we wanted to have delivered each day, and a white van delivered everything we wanted the next day.” in Hungary, everything we wanted had to be procured separately and laboriously, and we bore the logistical expense.” “I used to joke that we lost so much money in our first bagel shop that we had to build 13 more shops just to earn the smallest of profits. We were running out of money and had to marshall resources just to make Budapest succeed. Therefore, we had to sacrifice Prague and everything else outside Budapest and its suburbs. Never in my career have I worked so hard for so little profit.”
To be continued