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Restaurateur's Vision: All-Vegetarian Fast Food

Step aside, McDonald's. This businessman is unwrapping the future of faux meat.

When James Tu tells people he thinks most vegetarian food tastes awful, it might not sound like such a big deal.

The only problem, however, is the fact that Tu owns and operates one of the country's finest vegetarian dining spots: New York City's Zen Palate restaurant.

What's more, he's planning to take Zen Palate national and introduce a line of vegetarian fast-food outlets, known as Zen Burger, as well as start a line of prepared convenience foods under the name Fro-Zen, which will be distributed through natural-food markets like Whole Foods (WFMI) and Trader Joe's.

Not bad for a former Wall Street money manager -- a profession most usually associated with more carnivorous types.

A Change of Plate

Tu, a native of Taiwan who came to the U.S. in 1993, originally became vegetarian only nine years ago, but then was quickly faced with a dearth of quality vegetarian dining alternatives.

"I looked around and I saw nothing except the Zen Palate restaurant," says Tu, which is notable to many New Yorkers (and even nonvegetarians) for its Asian fusion-style vegetarian food.

Want more? Check out TheStreet.com TV video.Simon Constable has a juicy bite with Zen Palate owner James Tu.

So three years ago, Tu quit his job managing $350 million in assets for investment adviser Gerstein Fisher, formed his own company and purchased Zen Palate.

His vision? Taking the restaurant and its tasty food concepts mainstream, and thus revolutionizing the sector.

It's a noble goal, but at first blush it looks like the demographics are against him.

Although the number of true vegetarians in the U.S. -- those who never consume fish, fowl or meat -- has grown dramatically over the past decade or so, they still only represent about 2.3% of the population, according to 2006 data from Baltimore-based Vegetarian Resource Group (VRG). That's up from between 0.1% and 1% in 1994.

But Tu says that's looking too simplistically at the numbers. He's instead targeting "flexitarians," or those who eat meat rarely. Fortunately for him, VRG says that's a much bigger group -- around 20%-25% of the U.S. population "usually or sometimes maintain a vegetarian diet" -- making the business terrain a lot more appetizing.

"The key is the taste," Tu says. "Ideally, I don't want people to know what they are eating is vegetarian," preferring to bag converts on the basis of flavor rather than morals or health reasons.

With that in mind, he's planning to expand Zen Palate's reach, opening one in Princeton, N.J., and another in Pasadena, Calif.

At full steam, Tu says, Zen Palate grosses about $15 per head per meal -- not bad considering there's no alcohol on the menu. Booze apparently doesn't fit with the healthy values to which the company aspires, although some spirits and wines may occasionally be used in food preparation, Tu notes.

Beyond the Veggie Burger

The plan for Zen Burger, the all-vegetarian quick-service line which is to open its first outlet in late October in midtown Manhattan and others elsewhere thereafter, is similar.

Tu expects revenue of $7 to $8 dollars per diner per trip, with a menu driven by typical offerings found at

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. Again, he says, tasty food is the key.

Tu has spent the past two and half years developing the extensive Zen Burger offerings.

From what my colleagues and I sampled at a recent private tasting, he seems not only to have hit the right spot on flavor, but also on texture, a much trickier feat for faux meat.

It was particularly notable in the tenderness of the imitation seafood items -- popcorn shrimp, tuna salad and fish patties -- as well as in the soft, chewy chicken strips.

Still, offering tasty food is only one hurdle in the steeplechase of setting up a successful restaurant chain, especially up against such industry giants.

Tom Cross, a 14-year veteran of the fast-food industry and now a faculty member at the Darden Graduate School of Business Administration in Charlottesville, Va., says that the sector of quick-service food outlets is now pretty much saturated, and the costs of finding suitable retail property has skyrocketed, with sites that once cost $50,000 now commanding $1 million or more.

But mostly, Cross is skeptical about the concept of a vegetarian-food-only restaurant.

Tu contends, "It's not that there is no demand, it's that there is no access to quality food."

However, even Tu acknowledges there are some regions more likely to give his restaurants a fair shake. That's why new openings of Zen Palate will be initially restricted to major metropolitan areas, with Zen Burger to be more widely dispersed after the concept gets honed in that most cutthroat of all restaurant markets, New York City.

It will give Tu something to chew on, at least for a while.

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