Finding room to grow
By Mike Mitchelson

Times are tough, blah, blah, blah. We know that. Most just deal with it. And there are many foodservice operators and restaurant owners who react to the recession how any responsible business owner would: they make adjustments—some difficult—and survive.

Some that make the adjustments also find opportunity. We’ve heard names in recent months of a few Twin Cities restaurateurs adding a third or fourth property to their portfolio: Kieran Folliard and company developing a fourth Irish pub, Cooper, in St. Louis Park; Josh Thoma and Tim McKee adding a second Barrio in St. Paul (their fifth restaurant) and taking on Cue at The Guthrie; and Matt Lokowich building a third Bulldog pub, also in St. Paul.

There are other names growing their multi-unit restaurant companies—independent and franchised—during these times, finding financing and filling seats. Foodservice profiles four of these dynamic area businesses and personalities that often don’t grab the Dining section headlines: Alexander Roberts, Nova Restaurant Group, Buffalo Wild Wings and MRG Management.


Mr. Roberts’ neighborhood (restaurants)

Alexander Roberts earned his reputation as a chef at his Restaurant Alma—this year he earned his second consecutive James Beard Award nomination for Best Chef Midwest (He was listed as an FSN Top Chef in 2005 and 2008).

One might also recognize his business savvy. He and then-partner Jim Reininger opened Alma in 1999 at the cusp of a Twin Cities fine-dining explosion and when eating locally- and sustainably-produced foods was a barely audible trend in restaurants. Alma opened as a top restaurant, and today it remains.

Roberts opened Brasa Rotisserie in 2007 in Northeast Minneapolis—the seats remain filled. A second will soon open in St. Paul. Brasa appears perfect for the times: Moderately-priced fare from those same local and sustainable producers, a “to-go” or “eat-in” concept with the menu a patchwork of global and American influences that appeal to an increasingly educated and demanding palate.

Expanding operations in this economy:

I had the goal of doing a lower-priced concept before I opened Alma, but it took a while before my idea was clear. I knew that price point, $15 to $16 dollars—less for lunch—is comfortable for many people, even in this economy. I don’t get a sense that Americans are really cooking that much more, they’re finding different ways to eat conveniently—McDonald’s and Chipotle are doing well. I imagine those of us who are convenient and priced comfortably enough are not seeing any drop.

The appeal of Brasa:

There aren’t a lot of places (at that price point) where you can get hand-made, fresh made food—like the old diner where people actually baked, as we do. It’s kind of fallen off the landscape. To me, Brasa is a very American concept, the food is as American as jazz. The dishes represent who Americans are—it’s German as much as it is West African and so on and so forth. That’s part of the concept of the restaurant, the personality, the accessibility.

Was thought given to have a lower-price concept with your fine-dining Alma to adapt with economic fluctuations?

I didn’t really think of it that way, but certainly in a worst-case scenario for some businesses, that could provide buoyancy. We’ve been fortunate at Alma. 2008 was even with 2007, and 2009 so far, we’re about 5 percent down. We’re not immune, but some people are 25 percent down, or other horrible numbers. We benefit at Alma from being established almost 10 years and not being too special-occasion. It’s still accessible for many people.

How did the you a prime Grand Avenue location in St. Paul for Brasa 2?

Through a third party who knew the landlord. Grand Avenue is kind of that way, there’s not often a sign in the window very long. The building was a bit of an ugly duckling; I don’t think people saw much potential in it, but it has great bones for Brasa. Grand Avenue is an exceptional commercial and retail area with amazing pedestrian traffic. People use it for their lifestyle—they shop, celebrate, watch sports, have an ice-cream cone, they take grandma to have coffee or walleye at the Tavern. It’s both a neighborhood and a destination thing.

Financing in a difficult climate:

We went to three different banks before we got the deal done—two said no, one said yes—and I brought in some cash. It’s a very difficult time for financing right now.

Cost to open a Brasa:

About a half-million dollars, and my build-outs are on the low side—I don’t do a lot of floor finish or expensive wall finish. I do some mill work, custom benches that give a certain integrity and personality that’s not cookie cutter stuff. For design and construction, we work with design-build contractor Site Assembly out of St. Paul and Shea Design in Minneapolis.

Are you tweaking the concept to the Grand Avenue crowd?

It’s very much the same (as Minneapolis), but we’re going to have a 12-seat table for which we’ll eventually take reservations. Brasa hasn’t been a reservations concept; we do more volume with walk-in. In Minneapolis, we seat 45 indoors, and (a recent) Saturday we had over 450 customers. If I had reservations, I’d probably do about half that.

So, I’m apprehensive about reservations, but I’d like to do some cool stuff—give people a chance to plan a special arrangement, reserve the table and a menu. It’ll gives us the chance to upsell a little bit, and do some things like a roasted baby pig, a goat or a smoked rack of lamb. Otherwise we’ll use it for large parties or communal dining, too.

Because we’ve got a bigger space, we’ll expand the menu a bit. We’ll offer a special protein on the menu besides the chicken, pork and beef; we’ll try rotating specials and then do like a soup or a stew of the day, like étouffée, or tortilla soup.

What critical partnerships are required to add restaurants?

With Alma and (the first) Brasa, I work with individual suppliers, and it’s great they grow with you and root for you, because it’s good for them. With Alma, I change the menu often, so I’m not doing a huge volume for suppliers—you’re going with the market, you don’t have a lot of pull. With both Brasas, my estimate is that we’ll go through about 2,000 pounds of pork shoulder a week. Working with Classic Provisions, we’re using Heritage Berkshire pork (from Minnesota and Iowa farms).

When you’re buying that much, you have a decent bargaining chip (with a supplier). We can talk about price and find something that works for both of us. I can keep my prices stable and get a little bit better margin, and the volume I order benefits them.

How has your role changed with multiple restaurants?

My business partner at Alma (Jim Reinenger) retired at the end of 2007. That was the marker for me. I was the 100 percent owner of Brasa, but when I took over Alma, that was crossing a threshold. Now, I really have to manage each business well to be responsible to them.

I see myself as the first employee. It’s not about me; it’s about the restaurants. I’ve put aside some of my personal desires to instead learn to manage these businesses, be strategic, teach, hire and plan so I can take off some of those hats and hand them to others—but only when I’m able to verify work is done well and honestly. I’ve accepted that role and do much less day-to-day line cooking. I’m in both restaurants every day—but I try to take Sundays off. I do the menu and recipe planning for Alma and Brasa, but I have people help me with execution and day-to-day kitchen management.

If things go well, I’ll employ a catering person, an office helper, which will take some weight off my shoulders and allow me to be in my businesses more. If business is bad, I’ll be stretched thinner than ever. But business has been good, and I feel optimistic. I love being in my restaurants. I prefer being there, cooking, being with my customers, developing the wine list. I enjoy operations more than anything else about the restaurant business.


Nova super with Rochester expansion

Scott Foster and Pat Woodring, the founders and owners of Nova Restaurant Group, have opened two casual dining restaurants within the last year. While the overall segment has taken a pounding recently, the dining rooms at the Hazellewood Grill & Tap Room, two Joey Nova’s Pizzeria & Grilled Subs, Chester’s Kitchen & Bar and Pescara remain filled, offering a menu of American fare prepared with culinary flair. (Foster also co-owns with Andy Kron the Pier 500 restaurant in Hudson, Wis., which is not part of Nova.)

Two restaurants in Rochester within the last year. Why?

Rochester is a great market with a captive audience. There are great people that live and work there centered around IBM and Mayo (Clinic), but also a transient population that come in for the great health care. You’ve got some world travelers.

Pescara is a step away from the menus at Hazellewood, Chester’s and Pier 500.

As the chef of the company—but increasingly in the ownership role and developing the chefs—Pescara is an anomaly with me. I really went back to “chef-ing” it, if you will. It’s only 100 seats, so I really got to do some pretty upscale food. The term I use is “polished casual.” Upscale can turn people off. It’s heavily fresh fish and seafood based, but we’ve got prime New York and filet and some great pastas.

The Pescara opportunity:

(Rochester developer) Gus Chafoulias owns the University Square shopping center where Chester’s Kitchen & Bar is. After we opened Chester’s and he saw the way we operate, he invited us to participate in his (DoubleTree) hotel property across the street. When I went to the drawing board to develop the concept, I went with what I thought was a huge void in that town, which was great, fresh seafood. The only thing they had down there was Red Lobster.
Financing growth in these times:

Hazellewood’s been open four years, the two Joey Nova’s open for three and two years, respectively. My separate partnership with Pier 500 (open for about three years), we struck a great deal with a local bank.

In Rochester, Gus’ vision is to enhance the downtown Rochester experience. The city’s downtown has gone through some trouble, becoming dead and old. Chain restaurants like Chili’s approached him and he said, “No, I want an independent operator.”

He made us a very fair lease for Chester’s. You might have a perfect location and sales visions, but you have to go in with something very palatable. Our plan required money that, frankly, we couldn’t afford and have it make sense, and he stepped up with tenant improvements. It makes it easier on us with initial cash output, and makes it more palatable for our overhead. And he’ll share in the future with a percentage rent package we put together to recoup some of his costs.

Two concepts you have with Pat Woodring and also Pier 500 with Andy Kron have similar menus with different twists.

Those restaurants, you have to develop menus to attract regulars, and that centered on American classics. You can splash in some hip and fun, but the core menus you develop to attract repeat guests and make them feel comfortable.

The consistency between a Joey Nova’s, Hazellewood, Pier 500 or Chester’s is our commitment to food and flavor. That’s always been our thing. I’m behind those recipes; the menu may be very recognizable, but when we deliver it, people taste it and go, “Wow, this is different, something is going on here.” There is some passion and effort behind these recipes.

Do you try to differentiate certain similar dishes, like the walleye at Hazellewood versus Pier 500, the side is wild rice at one and garlic mashed potatoes at the other.

No, (laughs), when I originally created the walleye dish with wild rice at Hazellewood, it was like, “Hey, it’s Minnesota.” It became a popular item; now I can’t change it. I tried one menu ago, with wild rice cakes, a cross between a blini and a wild rice pancake. People said they were fun and tasted good, “But where’s the regular wild rice?”

At Pier 500, frankly, when I started the menu over there, it was in incremental phases while training the staff. I served the walleye with garlic-mashed potatoes, and it stuck. But I did write the menu to appeal and give respect to how those people eat— straightforward stuff—and I do try to do it with a little pop.

Chester’s is slightly higher priced, more “chophouse.”

Yes, and there are splashes of healthfulness to the menu—but I’m not in the business of opening a health store. People applied pressure, being near the Mayo Clinic, saying I should offer celiac (options) and all that. I said, “You know what, I’m gonna do what I do and do it the best I can.”

There’s a whole-wheat linguine and a vegetarian chili that’s very popular that are virtually nonfat, and great salads, so I made it healthful. But I’m not getting drawn in on something that never really worked on menus for most restaurants anyway.

Chester’s is a bit of a mini “greatest hits” for me as a chef. It’s my first restaurant as an owner out of town, there’s some nervousness. I can’t be there daily, but I hired a great staff and a good chef. I put together recipes that I know work very well to hedge my bet.

How has Nova’s infrastructure grown to handle multiple restaurants?

I have a solid partner in Pat. He and I are working partners; we’re in our restaurants constantly. We still interview every manager that gets hired, usually five to six candidates for each position. Some people try to fill that hole quickly, and don’t take time to interview candidates from a two-fold aspect. Pat and I might like the candidate, but it’s not about us.

We often invite candidates in for an appetizer or a drink and to talk to our people. Then I’ll get staff feedback. If the candidate isn’t engaging with our staff, they’re not going to engage our guests. We try to find people who match our culture. We’re very passionate about food and service. But, can you be a nice person?

From an HR standpoint, we have evolved handbooks and training manuals—lawyer approved—that cover all our legal obligations. The whole HR process is pretty simple if you have the basics, and you do a good job of orientation and training.

The GMs, how do you infuse in them a sense of ownership at the restaurants?

That comes directly from me. I’m the operations partner of the company. I give them a fairly large amount of autonomy with the hourly staff. The hiring, firing, review and coaching lies squarely on the GMs shoulders—with the exception of the management team, then I’m directly involved in any sort of review process or reprimand.

Pat and I both read Danny Meyer’s “Setting the Table,” and we’ve really changed our philosophy in recent years, that, our No. 1 priority is our staff, as opposed to the industry saying, “the guest.”


Buffalo Wild Wings soars

Minneapolis-based Buffalo Wild Wings is in an enviable position these days. It’s one of a very few casual dining chain restaurant (or independent) where sales remain on the upswing while the national economy swoons. The word one might use to define the restaurant company’s success: focus.

That applies to menu, which is built upon its award-winning Buffalo wings; theme, which is sports bar-plus (flatscreens absorb the attention of sports fans, but trivia games are there for those who are not); and demographic, which is largely the 18- to 34-year- old male.

Its success has been nice for shareholders: BWW stock price has crept upwards from $16 in November 2008 and hovers at about $36 as of press time late last month (although that’s still down from its $43 mark in September 2008). While Bennigan’s, Applebee’s and other casual dining chains fumble with reinvention, BWW is chased by developers and property owners to fill vacant space. “Today, we are on the top of the list for developers,” said Mo Sawda, a BWW executive. Sawda, the company’s senior VP of franchising and development, spoke with FSN’s sister publication, Franchise Times, in January. The company maintained its planned growth of 15 percent during 2008 and expects the same for 2009. The company has about 570 units in most states across the country.

Alan Hickok, a restaurant analyst for Restaurant & Retail Strategies, an international investment bank, said at FSN’s February Restaurant Executives Forum that BWW reminded him of “Champps 20 years ago. It’s a multi-purpose concept. At Applebee’s, you went to eat. That’s it. …Also, for (that) certain demographic, it’s their clubhouse.”

Mark Smith, a restaurant analyst for brokerage and investment firm Feltl and Company, said the reason for BWW’s 24 percent sales growth in the fourth quarter of 2008 is that “It’s entertainment beyond the meal. …The localized entertainment has helped drive and sustain business. …They have also maintained a stellar balance sheet.”

CEO Sally Smith wrote in the company’s 2008 fourth quarter earnings report that with the company’s numbers (which included a total revenue increase of 32.6 percent to $121.2 million in the fourth quarter compared to $91.4 million in the fourth quarter of 2007), “We believe our 2009 annual goals of 15 percent unit growth, 25 percent revenue growth, and 20 to 25 percent net earnings growth are achievable. Our brand offers a unique and appealing experience that is more than just going out to eat. Buffalo Wild Wings is a haven where people go to relax and connect with friends and family, and we are thankful that, in this economy, they are choosing Buffalo Wild Wings as the place they want to be for hot wings and a cold beer.”

So, what could bring down BWW from those lofty goals? Any number of things in this volatile economy. Analysts point to increasing chicken prices as something to watch. FSN commodities columnist and American Restaurant Association founder and analyst David Maloni noted in February that the USDA forecast that chicken production would decline in 2009. In the March and April issues, Maloni wrote that all protein production throughout the winter has been “trending well below the previous year.” That means higher prices, which cut into profits. Fortunately, he writes this month (page 17), low demand for chicken has kept prices down. But the curtailed production will put “upward pressure” on prices.

The Star Tribune reported recently that the company’s heavy presence (more than 80 units) in Ohio, which has been hit particularly hard by the recession, might also place a drag on the company.

But with a loyal clientele, a slightly broadened menu to appeal to families and developers knocking at the door, the chances look good for BWW to avoid the pounding other large, casual dining restaurant chains are taking.

Local Hardee’s burger business booms

Owning a franchised restaurant has its advantages: an established brand, supply chains and protocols. But when the franchisor starts having trouble, then the franchisee is often undeservedly linked. Such was the case with Hardee’s, which, beginning in the late 1990s, looked like a chain on the way down.

But local Hardee’s franchisees Dave Glodowski and Mike Hoff combined their restaurants, resources and know-how in 2001 to form MRG Management. They kept their attention on what they could control: their restaurants. Today, with Hardee’s very much on the upswing, MRG is growing—now up to 18 restaurants in Minnesota, Iowa and Wisconsin—fueled by steady sales growth for three straight years. Dave Glodowski offers his opinions on the company’s success.

What’s fueling the success?

Hardee’s was one of the first (quick-serve chains) with a quality hamburger—Angus beef. Give people quality food, charge them a reasonable price, along with good service, clean restaurants, and the people will come. Also, Hardee’s grew up in small-town U.S.A., and we still have a lot of our restaurants in smaller towns like Milaca, Faribault and Albert Lea. And they do very well. I think in small to medium-sized towns again, your reputation precedes you, and if you take care of the customers they’ll continue to come, even in the tougher economic times.

You’ve added a restaurant in each of the past two years. Can you do it again?

We bought a restaurant in April 2008; we didn’t see the economic downturn at that time. We felt our business was strong, our bank partner agreed with us. It’s been a positive addition. We would like to build a new restaurant this year, and mirror the result we had building a restaurant in Faribault in 2007. With financing much tighter than two years ago, that’s slowing us down. But it’s still our goal that we could hopefully have another restaurant open by the end of the year.

How are you financing growth?

We have a very strong relationship with our senior lender, a regional bank. We’re very transparent with our numbers, our cash flow, the P&Ls. However, when we spoke in December about 2009 and our plans, they told us to roll back and get through the first quarter to see how far the economy drops and its affect on winter sales. They were much more cautious than we were, and maybe that’s a good thing. Sometimes you need your banker to rein you in a little bit, they might see a bigger picture. CKE also has been very good about setting up successful franchisees with lenders for expansion or remodeling efforts.

Are your sales benefiting from the downturn in the casual dining segment?

We just saw positive sales each month last year, averaging close to 5 percent, and I would say that continues into 2009. I’m sure some of that came from the casual segment customer who moved over our way, and maybe some of our (regulars) didn’t come quite as often, so in the end it balanced out.

How do you modify sales expectations with economic fluctuations?

Planning for 2009 in October/November, as we do each year, we knew what was going on, but we weren’t sure how deep the economic drop would be.

We talk to our GMs out in the field, and they have a good pulse of that community. We have a restaurant in Forest City, Iowa, the home of Winnebago Industries. And in a town like that, where the largest employer sees their economies change dramatically in 12 months, you have to adjust the goals and strategies for that restaurant. If a restaurant is struggling a little bit, you want to do a little more advertising locally, or a little more couponing, but we don’t do it as a blanket in all 18 restaurants.

Relying on GMs, how do you instill a sense of ownership?

The GM has to think about that restaurant as if that is their restaurant. That’s their community, restaurant, and crew. Most of our GMs have been with either us or the Hardee’s brand for five to 15 years. We’ve been very blessed with longevity. Some people think fast food is a dead end job—I don’t think that’s the case. We’re getting more applications than we ever had, and now we can pick and choose and find a couple jewels in there who say, “Yeah, this is a career move, I can do something, I can get into a management position.”

And adding restaurants in part provides opportunity for those people.

Anytime you can add a new restaurant in an organization our size, it energizes everybody. People see that, No. 1, our organization is financially strong, and we’re not going anywhere. No. 2, there’s opportunity—if they’re an assistant manager, maybe they can be a GM at the new restaurant. And, we’re still a fairly small company, there’s always career opportunities with people like us. I think the people who work for us feel very comfortable, that they know we’re in a good financial situation and when they read the papers about layoffs, they know that’s not a concern for them.

We’re very low in manpower running the office; we put all our money and our people in the field, and we try to be as competitive as we can afford to be with salaries, bonuses and benefits to keep good people so they’re not looking over their shoulder for something else. We want to grab somebody that’s good and show them loyalty.

Is owning a franchise about developing a management system, then finding concepts to fit it, or is it more brand oriented.

I’d say we’re closer to the latter. However, I’ve been in the business for 30 years working for different restaurant concepts, starting with Wendy’s back in the 1970s, and my philosophy is, a restaurant is a restaurant, is a restaurant. You have good food, you want to serve it to customers and take care of them. You have employees and vendors. It doesn’t matter what the concept or chain is, you want good people. You want to train and develop them, give them all the tools they need to succeed at the restaurant level, because that’s where the money is made.

The whole hospitality industry is truly a people business. You have to enjoy working with people and being around people all the time. If you do that, you can have a lot of fun, be very successful, and make a nice living at it.

We have looked occasionally at different concepts, but we’ve never found something we’re all that excited about, plus the economy now, it’s hard to go to the bank and say we want to start from scratch on something else.

As an owner, how often are you in the restaurants?

I was in three restaurants today, had lunch in one of them. I trust my district managers are in the restaurants all the time. I’m the operations guy, so it’s my job to keep a feel for what is going on. Maybe three days a week I’m driving to restaurants, planning a route to hit two or three. It’s important to get out and kick the tires. You can only read so much on a computer printout. There are personnel situations, or the parking lot has a big crack in it. I want to talk to the GM, but also the front cashier, the drive-thru person, or the guy sweeping the parking lot.

A few years ago, it was tumultuous at Hardee’s corporate. How do you insulate your restaurants?

Nine times out of ten, a diner’s opinion of Hardee’s has to do with just their local Hardee’s. They might read in the paper that Hardee’s was sold from one entity to another, and they might ask the manager a question. But that manager says, “We’re a franchise, we’re owned by a couple guys in Minneapolis, don’t worry about it.”

It goes back to the stability of our organization. Even if the franchisor is going through rough waters—and Hardee’s was about five years ago—we continue to push what we’re doing. Now, when the franchisor (CKE) is very strong, and has done good things financially, in advertising, and development-wise, it’s even better. We know they’re not going anywhere, and we can be little bit more aggressive locally.