Small restaurant operators expanding despite the odds

Any small business owner will tell you that it isn’t easy being small. You wear many hats, you work crazy hours and you may need to look really hard to find the resources to expand, especially in today’s economy.

Still, a small, flat organizational structure does have its pluses: the power to move quickly, the freedom to take chances, the lack of quarterly earnings pressure and more.
That’s why, despite the beating many restaurants have taken since the global economic crisis, many small operators have mustered the courage and the resources to forge ahead with often ambitious expansion plans. Here’s how they have managed to flourish.

They find great partners.

Jeremy Fitzgerald had a family background in hospitality when he decided to buy a Subway franchise. Still, he never lost sight of his  ultimate goal, which was to create a concept of his own and start franchising it. He teamed up with a trusted friend, George Simon, to open Bar 145, a Toledo gastropub promising “burgers, bands and bourbon.” Twenty bourbons, better burgers and live entertainment six nights a week are the signatures. The first location opened in May 2011, a second is due to open late in 2012 in Kent, OH, and three more  next year. Fitzgerald envisions a mix of corporate and franchise locations.

The duo’s strengths complement each other: Simon looks after the numbers, and Fitzgerald works on the details of the product. “George did not have any experience in the restaurant business, but as a successful business owner himself, he provided me with financial backing in addition to a profound understanding of the business end of running your own company,” Fitzgerald says.  

Neophytes aren’t the only ones who can benefit from strategic partnerships. Lark Creek Restaurant Group’s veterans (including Michael Dellar and Bradley Ogden) have expanded to a portfolio of 12 restaurants centered around the heavily competitive San Francisco Bay area with a little help from their landlords.

Lark Creek has worked out revenue-sharing agreements with property owners that turn out to be a win-win. “They’ve been more than willing to be very generous with tenant improvements that are far above the industry norm,” Dellar says. “That has allowed us to build high-end restaurants with limited capital from us.” Those partnerships sometimes extend beyond tenant improvements, too. Some landlords have agreed to split development costs, then pay Lark Creek to manage the restaurant.

They are nimble.

Tim Spinner and Brian Sirhal, protégés of Jose Garces, opened Cantina Feliz and La Calaca Feliz in and outside of Philadelphia a year apart, and a year later they’re embarking on their third project, a fast casual concept. It’s a pace the two would like to continue.

The lack of a defined infrastructure has helped Spinner and Sirhal shape their concepts and fuel that growth, Sirhal says. “It’s nice to be able to just tweak things at a moment’s notice,” he observes. “We are able to get direct feedback from our managers, servers, bartenders and cooks. And they’re not shy about sharing their opinions if they think something isn’t working.”

James Brennan, who has partnered with Brian Malarkey to open a collection of five hot restaurants (Searsucker, Burlap, Gingham, Gabardine and Herringbone) in San Diego, says the lean structure of Enlightened Hospitality Group allows it to jump on opportunities quickly. Looking to expand into Phoenix, they found a prime location where a restaurant had failed on a Saturday night. “By Tuesday the landlord had 30 offers. One of the advantages we had—beside the fact that the guy had eaten at Searsucker and loved it—is that there was no chain of command to make the decision,” Brennan says.

Acting swiftly and developing more than one project at a time have allowed Enlightened Hospitality to grow from a single location two years ago to five. Brennan expects to add 15 more units—additional locations of the existing brands—over the next five years.