Executive Q&A: How a Burger Chain Picks a Site
Real-estate veteran Tom Jednorowicz, co-founder of better-burger concept Meatheads, explains the site-selection method for the restaurant chain.
By David Farkas, Senior Editor -- Chain Leader, 9/18/2009 12:00:00 AM
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| A hand-pressed double cheeseburger ($6.04) with fries ($1.64) at emerging Chicago-based restaurant chain Meatheads Burgers & Fries. |
Meet Meatheads Burgers & Fries, a two-year-old "better burger" concept founded by Tom Jednorowicz, former chief development officer for Potbelly Sandwich Works, and real-estate developer Doug Reichl. The partners open their first unit in Bloomington, Ill., "before facing the bright lights of Chicagoland," says Jednorowicz. The restaurant was profitable, and shortly thereafter units opened in Chicago suburbs Naperville and Northbrook. Next up: the city itself.
Chain Leader grilled Jednorowicz, 42, about the chain's site-selection process.
What are Meatheads' current expansion plans?
Our focus now is the metro Chicago area. We are looking at opening three to five units in the next year. We have an infrastructure in place that can handle that. I don't feel it would be judicious to press the accelerator any harder. You talk about where the wheels fall off the bus on these things. It is going too fast and not executing well within the restaurant.
Until recently growing fast was a big temptation.
I would tell you that, especially in this burger segment, because there are so many players, it is still there. You hear someone is doing a deal here or there, and you say, "I don't want to miss out on that." It's still very easy to fall into it.
So you do or don't know where competitors are going?
I pay attention to the competition, but it is just 2 percent of my time. I try to keep my group focused only on what we need to do to be successful.
What is your site-selection philosophy?
I believe that we are a use looking for a site. Most concepts gravitate to sites looking for uses. We have a market plan in Chicago, and I know precisely where I want to be, what trade areas and where within those trade areas.
So how does that approach make you different?
We are out there knocking on doors and trying to create availability as opposed to, "Hey, this space is vacant. What do you think about that?" Then you wind up in trade areas you don't belong in.
| Snapshot Concept Meatheads Burgers & Fries Headquarters Chicago Founded November 2007 Units 3 Average Unit Volume $1.1 million 2009 Revenues $4 million (company estimate) Check Average $10 Expansion Plans 3 to 5 in Greater Chicago in 12 months |
Have you made that mistake?
Not at Meatheads. I don't how many deals I have been in involved in in my career, but it's in the thousands, and, sure, my fingerprints are on a few murder weapons out there.
Be specific.
One of the most common mistakes I have made in the past when dealing with aggressive growth programs is going into trade areas that were not mature enough to support a store.
In other words, new construction projects?
When you're green-fielding, there's lots of new construction. The thing about the restaurant business, however, is you need to build for today. Most restaurants will say, "We understand we will be losing money for a few years." But you can't do that in this business because of tight margins. I always tell my crews that we are looking for couch change in the P&L.
Does an example pop to mind?
A Potbelly I did in Columbus, I think. It was a good soldier and made a little money and was never a drag on the system. But when you look at the spectrum of locations we opened, it was a mistake. There were so many other better opportunities.
What went wrong?
You can easily get infatuated with wealthy areas. But you have to keep in mind that with big houses and big lots your density gets reduced.
Does that mean Meatheads will never be a first-in concept?
I never say never, but I like to play a calculated game. To just jump into a space, I'd want to see underlying dynamics that made me confident that our core customers are attracted there and in the numbers that would make the unit economics work.
Wealthy people are your core customers in Northbrook. What brings them in?
We've really tried to create a dining room there that offers a dining experience for the family business, though it's not the same place mom and dad are going to stop at when they are alone. But when they are with their kids, [Meatheads] is not a hard sell.
Which retailers are kissing cousins?
We love Whole Foods. Two of our units are in the same shopping centers. Grocery shopping is not the same occasion, of course. But it is getting us exposure to people who have an appreciation to high quality food. That's all I want.
Let's go back to Chicago. What are the challenges finding your first city site?
You have urban residential, which is a tough lunch business because the residents are working. You have the central business district but only five dayparts there. Break it down further and you have 10 hours a week to make hay. If you are trying to ring up $20,000 a week, that means you have to do $ 4,000 a day and have systems in place to do $2,000 an hour. That is an enormous barrier to entry.
Is there happy medium?
I call it an urban-hybrid site. It's South Michigan Ave. across from Millennium Park or a shopping district on Michigan or River North. Somewhere where you have more dynamics driving the business than office workers or urban residents.
What are rents in these hybrid areas?
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For the types of space we want to go into, the availability hasn't loosened up and rents have not dropped. Anyway, you can't talk about rent without what it is in relation to. This is where you have to go back and look at dayparts. We have 14 dayparts, for example. If we can do $30,000 a week, in rough numbers that's $1.5 million a year. If your P&L is to work, you can only afford a certain percentage of dollars for rent given revenue.
When will the first Chicago site open?
That's tough one. I have yet to find a site I feel good about. I am committed to opening one of the five units in the city of Chicago.
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