‘They went to war with each other’: The rise and fall of a Sydney restaurant revolutionary

The first thing colleagues tell you about Barry McDonald is he knows how to transform a restaurant. The second is he should be nowhere near managing one.

McDonald revolutionised Sydney’s food scene in the early 2000s with his iconic chain Fratelli Fresh. The flamboyant restaurateur developed a taste for watches, cars and fine Australian art in the process. By 2010 he was boasting of his red Porsche Carrera and a 50th birthday dinner at Heston Blumenthal’s restaurant The Fat Duck.

Now it has all come crashing down after the closure of his second restaurant in as many years, with the two failures leaving a string of suppliers owed tens of thousands of dollars, more than a million dollars in unpaid superannuation and allegations of theft from his former business partners.

McDonald’s latest venture Bar Grazie opened to strong reviews in Potts Point in October 2022. The Good Food Guide’s chief restaurant critic Terry Durack praised head chef Jarrard Martin for his lobster with champagne sauce and veal Vitello tonnato.

But beneath the wood-panelled surface trouble was brewing.

Exorbitant fit-outs, a spiralling wage bill and mounting debts to suppliers had taken their toll.

McDonald’s lavish spending on alcohol raised eyebrows among investors and staff. So had his use of sugardaddy.com.

By January last year, Bar Grazie had only 68 cents in its account, according to a liquidator’s report by Cathro and Partners.

Martin estimates he is owed $20,000. Suppliers say they are down up to $12,000. Two former business partners put the figure at more than $200,000.

“He needs to be held to account,” said Martin. “He doesn’t care who he burns. To him, it’s just business.”

In response to questions, McDonald said he was receiving treatment for cancer and denied he owed investors any money, describing the allegations as “incorrect and untrue”.

“You can write whatever you like, but I just suggest that you make sure it’s right,” he said.

After The Sydney Morning Herald and The Age sent detailed questions to McDonald last week, McDonald told The Daily Telegraph on Saturday that he would pay $50,000 back to staff and suppliers once he was healthy.

But he did not address a series of other allegations made by Martin and a dozen other employees, business partners, colleagues and suppliers that this masthead spoke to for this story. Some requested anonymity to protect their employment or investments. Others asked not to be identified because they are pursuing legal action.

The latest chapter of McDonald’s colourful career began less than 200 metres down the road from Bar Grazie at Cafe Giorgio in 2018.

Nestled by the El Alamein fountain in Kings Cross, Cafe Giorgio won investments from high-flying executives including former Myer chair Bill Wavish to serve up al-fresco pizzas and Aperol spritzes on the piazza.

But it floundered during the coronavirus pandemic and racked up superannuation debts of more than $1 million to employees, according to an insolvency report by PCI Partners. When it closed in mid-2022, it owed another $59,000 in insurance payments and $12,328 to wine wholesaler Single Vineyard Sellers.

“It’s literally as if you went to the restaurant and ordered $12,000 and just walked out,” said Single Vineyard Sellers director Stuart Leece. “It’s just being stolen from.”

Wavish, who was also the former chief financial officer of Woolworths, said he had no concerns with how McDonald operated. “Barry’s got some people who don’t like him,” he said. “I don’t have any negative points of view.”

When liquidators arrived at Cafe Giorgio to assess what equipment could be sold, there was little left to recover. McDonald, who was the manager but not a director, had moved, packed and stored most of the equipment, wine stock and furnishings to take to Bar Grazie, according to a statutory declaration signed by Martin.

Martin arrived at Cafe Giorgio’s through a recommendation by Neil Perry. McDonald was Perry’s best man. The pair had grown close as they moved up the ranks of Sydney’s cut-throat restaurant scene during the 1990s and 2000s.

In an email to McDonald in April 2022, Perry backed the Bar Grazie menu, topped with Affettato Misto, rounded out by Caccio e Pepe and finished with Mascarpone semifreddo.

“Mate looks good, if the kitchen pull it off people will come for that,” Perry wrote.

Investors say the endorsement from one of Sydney’s highest-profile chefs convinced them to stump up the cash to turn McDonald’s vision into a reality.

“I didn’t even know he had any investors,” Perry told this masthead.

But unlike Perry, McDonald was not on the directors’ lists of two of his recent venues. The 64-year-old never revealed to investors that until March last year, he was an undischarged bankrupt, according to documents filed with the Australian Financial Security Authority. Instead, he signed a consultancy agreement that handed him the day-to-day operations, without taking on the investment risk.

Bar Grazie business partner Oliver Blades-Moore, a former executive director with JP Morgan, said McDonald was like “dealing with a rock star”.

“He had a bit of a talent but needed careful management,” he said.

Blades-Moore said McDonald’s flair and an impressive contact list made the restaurant an attractive investment opportunity. Bar Grazie was full when it opened in October 2022.

“The first week’s trading was absolutely phenomenal,” he said. “Barry has a knack for opening these places up and swooning well-paying guests. But the problem was money was falling out the bottom. His spending was out of control.”

Within months superannuation stopped being paid to staff. Then the tips started disappearing from the safe.

“He used to take away tips and hold them for a month or two,” said kitchen hand Diperashan Adhikari.

One former employee said in mid-2023 McDonald owed $24,000 in tips to staff.

‘He always had those silver fox good looks. The hair did the heavy lifting.’

Mark Best, owner and chef of Marque

The employee confronted McDonald, who agreed to send screenshots of superannuation payments and bank statements of money leaving his account.

Then wages started being withheld. “In hospitality by law, you have to be paid on a Thursday. But sometimes these guys did not get paid until the following Monday,” the former employee said.

“He would just literally dump the money into his private account and then just pay what he saw fit,” he said. “It was insane.”

McDonald went through three head chefs in one year. The chaos surprised the staff and investors lured in by McDonald’s reputation. The Kiwi-born McDonald brought Tasmania’s King Island Dairy products to the mainland in the 1980s.

‘He makes you feel important. He is charismatic. But he has an ego the size of Australia.’

A former business partner of Barry McDonald

Then with his brother Jamie, he transformed neighbourhood fruit and vegetable shops into foodie destinations: filled with porcini mushrooms, quinces and Cape Wickham Double Brie.

Mark Best, the owner and chef of former three-hatted Sydney’s institution Marque, said McDonald was a visionary who combined great food with Ralph Lauren-style charm.

“He always had those silver fox good looks,” he said. “The hair did the heavy lifting.”

By the 1990s he had teamed up with Perry to launch Sails (now Catalina) in Rose Bay. In 2004, his fusion of a gourmet grocery with a restaurant reached its zenith at Fratelli Fresh.

“He throws around Fratelli Fresh a lot. It was his claim to fame,” said one former business partner. “He makes you feel important. He is charismatic. But he has an ego the size of Australia. He can’t run a business. He just uses other people’s money like water.”

Two of the original investors in Fratelli Fresh: Les Schirato, the founder of the $250 million Vittoria Coffee empire, and his brother Jamie have watched on in shock as McDonald added another half-a-dozen restaurants to his portfolio after Fratelli Fresh was sold in 2016. Fratelli Fresh is now owned by Quadrant Private Equity and has no relationship with its former owners.

At its peak in 2010, the grocery-restaurant chain reached a turnover of $20 million a year.

But McDonald’s use of the company coin, $50,000 in parking fines in one year, a $53,000 credit card bill, $14,000 in personal security and regular weekday lunches with $300 bottles of Barolo wine, alarmed some investors.

McDonald’s brother Jamie says he has not seen him in 15 years. “It surprises me he has been able to attract continued investment with all these failed establishments,” he said.

“I and the other shareholders lost complete trust in Barry,” said Schirato.

Former Fratelli Fresh Cafe Sopra executive chef Andy Bunn said he did not get superannuation for more than four years. Bunn says some of that was repaid after he confronted McDonald but estimates he is still owed more than $200,000 in lost wages.

“He is what he is, and he always will be,” said Bunn. “He just tries to get away with as much as possible.”

So where does the money go?

“Where do you reckon a narcissistic wanker puts any available cash?” said one former business partner.

One Bar Grazie partner said he was putting in $7000-a-week to keep the business afloat while McDonald drank the profits.

“He just sat there brazenly on the piss on a Tuesday afternoon,” said Blades-Moore. “Barry’s appetite for booze and young women was absolutely off the charts.”

One bartender said Bar Grazie looked amazing. “But he ran it like a Roman bathhouse,” they said. “He used to drink all the profit himself. Then he blamed me for having to buy more gin to make Negroni mix.″

By January 2023, Blades-Moore and two other investors had become so suspicious that they enlisted a “secret shopper,” the former general manager of Riley St Garage, Julian Damjano, to find out what was happening.

When they saw the receipt for Damjano’s $475 meal they were shocked to discover the bill had not been put through the Bar Grazie EFTPOS machine but through another payment terminal linked to McDonald’s personal account.

“I thought right, we have got the bastard,” said Blades-Moore.

The incident broke all remaining trust between McDonald and the investors. Two of the partners pulled the plug. Liquidators were called in to shut it down and recover the assets to meet the company’s debts.

But McDonald was not done with Bar Grazie.

“Whilst the valuer was undertaking the valuation of the property at the Elizabeth Bay Road address, Mr McDonald attempted to break into the property via climbing through the outside awning of the premises,” the liquidator’s report said.

McDonald got a locksmith to change the locks, re-opened the restaurant and put in a new sales terminal. Blades-Moore drove past the venue the next day on his way home.

“The tables are out in the street, the place’s front doors are open and Barry’s walking around like a dog with two dicks,” said Blades-Moore. “I was flabbergasted.”

Blades-Moore claims McDonald effectively stole the entire restaurant. “There was about $30,000 a week that went straight to his machine, whilst racking up debts in our business,” he said.

McDonald denies he owes the investors any money but did not respond to detailed questions about his spending or his relationships.

A photo of a sales terminal shows that McDonald’s account was not the only one on the receiving end of payments. Another EFTPOS machine was sending payments to Greg Magree, the owner of the property and an associate of Kings Cross figure John Ibrahim.

Magree was frequently seen at the bar with McDonald. “He would sit next to Barry and chat with him while eating and drinking free booze,” said one bartender.

Unknown to the other investors, the pair had signed a separate lease agreement to take over the property, despite $75,000 in assets including wine and other equipment belonging to the original three Bar Grazie founders, according to the liquidator’s report.

Magree said McDonald approached him to take over the lease from the investors and that the restaurant paid rent to him through the EFTPOS machine.

“Those guys went to war with each other, it was nothing to do with me,” Magree told this masthead.

NSW police were called to the premises, but the investors were told there was nothing they could do as it was now a civil dispute. NSW police did not respond to requests for comment.

When Bar Grazie first leased the Potts Point storefront in July 2022, the rent was $130,000 a year. Magree purchased it that month for $2.5 million. By the end of the year, the rent had increased by almost 75 per cent.

”It was run so poorly, that restaurant could never have afforded $130,000 a year in rent,” said one former employee.

In August, the property was advertised for sale with a 10-year lease for Bar Grazie run by “renowned hospitality veteran Barry McDonald” with an annual rent of $225,000-a-year.

“If your rent is more than 10 per cent of your takings, you can’t afford to survive,” said Martin.

The new owners, who asked not to be identified, settled on the property in December for $3.39 million.

“The new owners of the building must be spewing if Barry’s now closed down because Greg sold it on the [basis] that Barry would keep paying rent,” said one former partner.

Magree said McDonald paid his rent and the property was advertised at market rate. He said he had invested more than $350,000 in renovations.

“I’m just the landlord. I’ve had hundreds of these properties. I fit out properties. I add value and I sell them,” he said.

In April, Bar Grazie closed its doors. McDonald said it was because “it wasn’t really as busy as last year”. “The other reason is because I’ve not been very well,” he said.

It was McDonald’s 19th restaurant.

“This is a pattern that really needs to be stopped,” Martin said. “Number 20 will come soon.”

With Perry Duffin

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