An owner doesn't always have to be in a restaurant—but it helps.
A few years ago, a new French restaurant named Savarin opened in Chicago. It boasted chef John Hogan, who commanded a strong local following. And before long, it also boasted a full reservation book. Local press praised the place, and pretty soon, so did national publications. Savarin's first year was a smash.
And its second year would be its last.
"I was shattered," says Hogan, a partner in the venture. "It ruined my lifelong dream. I think we created one of the great restaurants in Chicago."
As with many restaurant failures, the causes behind Savarin's disappearance were many. The long wait for reservations was a turnoff to a lot of people, Hogan says, and climbing the stairs to the dining room discouraged older would-be patrons.
But above these things, Hogan says the grave error happened when he chose to go in with partners who owned a number of other restaurants. Why? "They weren't here enough," he says. If a guest had a complaint, he says, there was seldom an owner to speak with. "And that guest would go home and never come back," Hogan says. (Incidentally, he puts the blame on himself, too, for being involved in other ventures that also took him away from Savarin.)
These days, Hogan clearly knows the importance of a visible owner on the premises. At Keefer's, Hogan's upscale American dinnerhouse, "my partners here are very involved," he says. "And I've made minimal commitment to outside events." Yet the lesson he learned years ago still stings every so often. "People still tell me how much they miss Savarin," he says. "I'm just glad I didn't lose my reputation."
This entrepreneur says, Go where you know.
To Jeff Hamlin, it sounded like a good idea at the time.
It was three years ago, and Hamlin was running Pizza Express, a small chain he'd managed to make very popular with the college kids in Bloomington, IN. Express had solid brand loyalty, Hamlin says, and nearby national pizza chains were beginning to sweat.
And that's about when the idea hit to build another Pizza Express—in South Florida. "We were landlocked," Hamlin explains. "That idea presented a strategy for growth." And after all, he reasoned, if Pizza Express was such a hit with young people in the Midwest, wouldn't the same be true in the Sunshine State?
Well, not exactly. Hamlin built a unit in south Florida, but soon realized it wasn't appealing to the predominantly Hispanic population. So Pizza Express became Pizza Mambo. Hamlin printed menus in Spanish. Then he spent big on advertising. Nothing happened. "Our brand strength was just dismal," he says. "Our success in Bloomington was meaningless in Florida." Pizza Mambo barely broke even, and Hamlin's still not sure what to do with it.
But it's all taught him some valuable lessons. "Our experience in Florida made us realize we needed to build the brand closer to home," he says. Today, Hamlin's expansion plans are all for southern Indiana, and his yen for expansion has driven him to start selling franchises. He's also plowed money into local marketing (which has included the purchase of a promotional van equipped with a fog machine and a live mascot, Express Man) to make sure the college kids remember which pizza place to call when they get hungry. And that, he's certain, is a good idea.By Robert Klara
Exotic can be very tempting —and very temporary.
Before selling off its empire of Applebee's units, Avado Brands—formerly Apple South—had built a reputation as a crack franchisee. In 1997, flush with cash from the sale, the company went shopping for new concepts. Industry watchers may have expected Avado Brands' new brands to be a departure from Applebee's—but perhaps not as much of a departure as one of them became.
Because in 1998 the company inked a 50/50 joint-venture partnership with Belgo Group, a European operator of eccentric pubs. And then Avado proceeded to open a Belgo right in the middle of a trendy neighborhood in Manhattan. New York was unfamiliar turf for the company—and its concept was unfamiliar to New Yorkers, to say the least. Inside Belgo, the waiters dressed in the robes of Trappist monks, even though the whole place looked like a spaceship. As things turned out, both were fitting touches: Belgo needed prayers, all right, and it was in for a crash landing, too.
Why? One Belgo insider who declined to be named says it was that design—cramped, ugly, and costly (an estimated $3.5 million)—that doomed Belgo. "No matter how good the food, service, and price were, you couldn't overcome it," he says. "I didn't like eating there."
To make matters worse, neither Madison, GA-based Avado nor its Brit partners thought to have a New Yorker involved in the planning. "We had a tiny bar, nowhere to stand, no reservations, and it was noisy," he says. "That works in Europe—but not Manhattan."
Finally, Belgo might have been serving its pricey buckets of mussels in a trendy neighborhood, but its block was trafficked mainly by cash-poor college students. Before long, Belgo went bye bye.
Avado CEO Tom DuPree wouldn't comment on what Avado learned from the experience, but its recent actions show a renewed concentration on core brands with a track record—a strong suggestion that it can be wise to stay with the stuff you know and resist the temptation to be exotic. Avado is now focusing on its Don Pablo's and Hops restaurants, while plans to develop another European concept have disappeared. By Michael Malone
Sometimes, fancy can go too far.
For 12 years, restaurateur Thalia Loffredo has had a winner with Zoë, an upscale yet casual New York eatery that won consistently good reviews and still churns out $4.5 million a year.
Then Loffredo aimed higher. Envisioning a "temple to gastronomy," she opened Cena, a minimalist-chic restaurant with an all-white dining room and the whites of celebrated chef Normand Laprise in the kitchen. Cena won a coveted three stars from the New York Times.
Within 18 months, the front doors were padlocked.
Today, Loffredo is philosophical about the washout, and pretty clear about why it took place. Simply put, she wanted Cena to be high-end, but got a bit more than she'd bargained for. The restaurant's clinical atmosphere was a turnoff to many ("If the space were any less romantic, you might as well be eating as your desk," sniffed one critic). Entrees hovered at $30—a bit lofty even by Manhattan standards. Combine these with a location that had little street life, and Cena just seemed too high-and-mighty for almost everyone. Everyday upscale diners stayed away, and that was the kiss of death.
"Cena needed lines out the door to offset the costs of doing a three-star operation," Loffredo says. It didn't happen.
But Loffredo did take one valuable thing away from Cena—a business lesson. Future projects, she says, will follow Zoë's model: A warm atmosphere, accessible food, and friendlier prices. "We enjoyed Cena in our hearts," she says. "But it just wasn't restaurant reality." —M.M.
Regional favorites aren't always favored in other regions.
Back in 1995, things were good for Pollo Tropical. The quickservice chain where the chicken was marinated in various tropical juices before being flame-grilled had solid brand awareness in its home turf South-Central Florida. With 33 units, Pollo drew heavily from a largely Hispanic population, which never scratched its heads over what Pollo meant.
But then management had a plan: Why not build the brand up north? So the contracts and bulldozers came out, and soon there were Pollo Tropical units in Chicago, Atlanta, and New York's suburban community of Long Island.
What happened next has become a well-worn tale: Local chain expands beyond its customer base, and pays the price. Says Roger Lipton, a former restaurant analyst who tracked the chain at the time: "They had a regional menu, took it north, and it didn't work."
When non-Hispanic northerners ordered chicken that came bathed in juice, spiked by island spices, and graced by sides of black beans and yuca, many of them simply didn't get it—and they didn't come back, either. Sales at the northern units rang in as much as 20% below company averages. When Wall Street found out, the stock price fell into the deep fryer.
In a desperate bid to change its fortunes, the company changed names on the far-flung units from Pollo Tropical to TropiGrill. Management added non-ethnic items to the menu. The company even modified its architecture so units would look like more traditional quickservice restaurants. None of it worked. Before long, the units were shuttered.
Pollo Tropical executives did not return calls seeking comment, but their current strategy clearly shows what they've learned. In the years since the debacle, company expansion has been strictly limited to South Florida market, while franchising efforts have been directed toward Latin-American countries, where 20 units have been built so far. Meanwhile, if Chicagoans suddenly develop a taste for tropical chicken, they'll have to get on a plane.
Specializing in one dish isn't always a good idea.
The late restaurateur Dave Wachtel achieved fame and fortune by developing concepts like O'Charley's, Western Sizzlin', and Shoney's.
A few heads turned, then, when he latched onto his next venture: A shack-like dinnerhouse with a menu built almost solely around deep-fried food—much of it catfish, frog legs, and alligator tails. Its name was Uncle Bud's. The down-home concept played well in its home market of the southeast: Average unit volumes were $2 million.
But then Wachtel vowed to branch out to points north, even Manhattan. "Bud's has as much menu potential as any of the concepts I've been involved with," he told RB in 1997. "Nobody's done a catfish chain on the scale we're talking about."
Still, no one has.
The problem was the catfish. It had fans down South, but far fewer in other places. Yet even in bayou country, the food had its limits. "Even if you love catfish, you may still only want it once a month," says Bud's operations director Jesse Meade.
That spelled trouble for a concept largely built around one food, and its devotion to deep frying meant even more problems. Observers speculated that Bud's suffered heavily from the "veto vote," cast by growing numbers of people watching their waistlines.
Wachtel died in 2001, and Uncle Bud's president Gary Sharp bought the nine remaining units. These days, that number has dwindled to five.
Yet those left in charge have clearly learned from the experience. For one thing, Uncle Bud's menu has been broadened to include chicken and pasta, and deep-frying has been curtailed. And Meade promises that the concept will grow again—but only in home markets of 100,000 and up, capturing a larger pool of catfish lovers. And New York? Fuggedaboutit.
Good food is important, but timing is everything.
If Dan Dannaldson were an economist, perhaps he would have seen trouble coming. But as a 26-year-old kid, he saw only stars.
It was 1975, and Dannaldson decided he wanted to be a restaurateur in his home town of Blue Springs, MO. Leaving his job with the electric company, Dannaldson took over the struggling Haymarket Inn. Haymarket was a restaurant/bar with an Alpine roof and a country-style menu. It was also, as Dannaldson puts it, "one of the original greasy spoons."
Dannaldson reopened the place on a shoestring budget and hoped for the best. "Then the whole town collapsed," he remembers. The recession that would define the late 1970s had arrived.
All over Blue Springs, mortgage lenders failed, many people lost their jobs, and some lost their homes. Needless to say, discretionary spending on things like restaurant meals went into the tank. Before long, the Haymarket did, too.
Dannaldson can perhaps hold his head a little higher than other restaurateurs with early failures in their pasts. After all, the recession wasn't his fault, and few could have predicted it. Yet the restaurateur is grateful for the wisdom that grew out of the mess. His desperate attempt to save his place made him into "a real hands-on guy," he says. "I was the head guy and the busboy—but that's how you learn to run restaurants."
Dannaldson went on to a 20-year career as a manager for various chains, and these days has struck out on his own once again as the owner/operator of two casual/comfort food places in nearby Lee's Summit, Chicken-N- Blues and Strother's—which nobody considers greasy spoons.
Today's lesson: Know thy market.
Back in the mid '90s, when home-meal replacement was the next big thing, Eatzi's was going to be even bigger.
And indeed, these market/restaurant hybrids, the offspring of concept whiz Phil Romano (Macaroni Grill, Fuddruckers) and casual-dining giant Brinker, were big. At each unit, a team of 100 chefs prepared 1,800 items for 2,500 customers every day. Eatzi's boasted an open kitchen, mountains of prepared meals, and pyramids of produce. From stellar beginnings in Texas, Eatzi's rolled northward in a planned conquest of America. Then it all fell apart.
Of a promised empire that was supposed to revolutionize the way a nation had its dinner, today a mere four units remain. Eatzi's foray into the New York market—where commuters were supposed to drop big bucks on its take-home gourmet meals—was an utter flop. After hemorrhaging millions, Brinker sold its stake back to Romano last year for $15 million.
Why didn't it fly? Eatzi's didn't just overestimate a trend, it fell prey to simple economics. With literally tons of gourmet food and an army of staff preparing it, Eatzi's had the sort of costs that demanded mega volume, and in some cases, never attained it.
The unit in the basement of New York's Macy's was Eatzi's undoing, insiders agree. "We underestimated the complexity of that market," says former Eatzi's president Lane Cardwell, who some say lost his job over the failure. "With such a high break-even point, we had to be busy on Day One."
They weren't. Romano says they learned too late that New Yorkers, few of whom own cars, were unwilling to haul their dinners home on the bus, subway, or taxi. "Instead of trying to fight that culture, we decided, let's get out of there," says Romano.
Of course, Eatzi's is still very much alive—and its execs apparently wiser for the experience. Based on lessons learned up north, future Eatzi's will open only in proven markets, Romano says, and the units will be smaller.