Road Trip: Blowing Through the Windy City

Dennis Lombardi offers brand insights in the highly competitive Chicago market.

By David Farkas, Senior Editor -- Chain Leader, 7/1/2004

Brand strategy expert Dennis Lombardi expects the battle for prime real estate in Chicago to continue.

Dennis Lombardi cracks up the moment the dark blue BMW 740i pulls in front of us. “Only in the North Shore are you going to see a Beamer with a Domino’s Pizza delivery sign on the roof. It’s got to be daddy’s car,” he says, laughing and shaking his head in amazement. Give the kid credit for working a restaurant job. In these wealthy suburbs along Lake Michigan, some 20 miles north of downtown Chicago, spotting Wolfgang Puck delivering duck-sausage pizza wouldn’t be all that surprising.

Lombardi, executive vice president of Chicago-based Technomic Inc., is taking me on a tour of Chicagoland chain outlets. We want to determine which full-service and fast-casual companies have helped their brands by strategically picking good sites in a market saturated with regional and national chains. Lombardi qualifies as an expert in this area, as he often advises companies on how to strengthen their brands.

That, in any event, is the idea when we set off one warm and sunny spring morning.

Booming Business
At 10 a.m., we’re far from the North Shore, cruising Chicago’s South Side, a few miles south of the Loop. Here, new row houses, condos and lofts are springing up in an industrial area. It’s an easy walk or bus ride to the city’s thriving downtown.

Trendy eateries are not far away either. South City Tavern, which serves “new Southern” cuisine, arrived this spring in the bustling South Loop, a historic district that includes Chicago’s famous Printers Row. With a check average of $25, the upscale restaurant is RDG Chicago’s second in the South Loop.

Another testament to the area’s attraction to restaurant operators is the presence of Hackney’s, a decades-old burger chain with six popular suburban units. “They’ve broken with tradition coming down here,” Lombardi says.

He thinks the area’s relatively high incomes will eventually draw more limited-service operators. Subway, Baskin-Robbins and Domino’s already do business here. “The quick-casual guys will start looking down here,” Lombardi predicts. “But they’re worried about not getting enough lunch business. You certainly have a chance at evening traffic. That’s why South City Tavern is down here.”

Urban Suburban
Lombardi wants to show me a part of Chicago he dubs “urban suburban” due to stores like Restoration Hardware, Crate & Barrel and Old Navy. Called Old Town, this vibrant neighborhood is home to many apartment-dwelling yuppies who dine at its many restaurants.

A year-and-a-half ago a California Pizza Kitchen opened in the area on the second floor of a building. Lombardi says the spot lowers volumes because the restaurant isn’t easily visible from the street. And the numerous competitors don’t help, he adds. “Wonder what their volumes would be if the restaurant was on the first floor?” he muses.

The unit’s young manager is eager to talk about business, which he claims is good despite the awkward location. “We’re doing well, especially with young families,” he says. “But there is lots of competition.”

Consider Uncle Julio’s, an outpost of a Dallas-based chain known for $6 margaritas and a party atmosphere. “Young people come here to mix and mingle,” declares Emily, the manager, who says most customers are under 35. “No one goes to CPK to drink.”

The Starbucks across the street even poses something of a threat. It offers free Wi-Fi to T-Mobile customers and has electrical outlets for laptops throughout the store. Several people hunch over computers on spacious tables. “This is the perfect example of a ‘third place,’” marvels Lombardi, referring to the theory that besides home and work, people tend to linger in places that offer home-like settings to work, read or talk without pressure to order something.

Location Dos and Don’ts
After coffee, we drive through downtown Chicago, heading toward the expressway that leads to the vast western suburbs. Restaurants are on every corner: Spago, Rock Bottom Brewery, Roy’s and Fogo de Chao among them. Lombardi spots a Red Lobster. “If you’re a conventioneer and you see a Spago, you’ll go there because you don’t have one in your town, even though Wolf[gang Puck] won’t be there,” he reasons. “But Red Lobster? They’re going to say, ‘I got a lot of them in my hometown.’”

So why is it here? Lombardi surmises parent company Darden Restaurants must be in awe of the area’s demographics. “What they see is a gazillion people on the street,” he says. “Traffic beyond description. ‘What a wonderful billboard for our brand.’ But the real question is, what are the occasions that create visitation? I don’t have an answer for that.”

Many people also have Weber grills in their backyards. Why does the world need a Weber Grill Restaurant, an oversized version of its kettle cooker hanging over the door? Lombardi looks surprised. “It’s incredibly smart marketing,” he exclaims. “People know Weber grills are the best ones out there. Consumer Reports says so. They think, ‘If I can cook a pretty good steak, think what these guys will do!’”

Which brings up another important point about a brand’s importance to its location. “Operators need to think about the trade area and not the city,” Lombardi says, “because trade areas have their own cultures. They’re microcosms in a way.”

Half-Staff
The first suburb we visit is Oak Brook. Sadly, the McDonald’s flag at company headquarters is at half-staff. CEO Jim Cantalupo died of a heart attack a few days earlier while in Orlando, Fla., for a company meeting. “He worked magic, and it’s nice that he saw the fruits of his labor—big comps in sales and appreciating stock price,” Lombardi says as we drive past.

Chain restaurants have long been a feature in affluent Oak Brook, which erected an outdoor mall more than 20 years ago. Mon Ami Gabi, Wildfire, Papagus and Maggiano’s Little Italy dominate one end of the mall. “Here’s a power row of heavy hitters,” he says, passing the Lettuce Entertain You Enterprises chains. “It’s great to have them here because they create that gravitational pull that everyone talks about. But the trade-off is you get concentrated demand for parking on Friday and Saturday nights.”

But Lombardi doesn’t want to stop here for lunch. The more interesting eatery is J. Alexander’s, part of a 27-unit chain based in Nashville, Tenn. Stuck in the back of a small strip mall, the restaurant’s brick façade is nearly invisible from the street. It is packed nonetheless with neatly dressed customers, many from the nearby office buildings, says Don Lullo, J. Alexander’s amiable GM.

A big attraction inside is the display kitchen, where prep and cooking areas are completely visible. A cook 2 feet in front of us greases a grill and tosses on two pieces of bright orange salmon. An assistant manager expedites orders. It’s quite a show for anyone waiting for a table.

“You know, we don’t spend a penny on advertising,” boasts Lullo, who landed in the 270-seat restaurant a year ago after managing the upscale chain’s Fort Lauderdale, Fla., unit. He admits keeping the kitchen clean is a challenge but worth it because customers love watching the cooks. “They can see we do everything from scratch,” he adds. The all-day check average is $18, Lullo says.

“If the company would grant you one wish, what would it be?” Lombardi asks.

“Make the place larger,” the manager answers. “This is the chain’s flagship location in Chicago.”

An outpost of the home-grown Portillo’s chain is just down the road. The 27-unit concept, part of the Portillo Restaurant Group, is famous for hot dogs but serves a variety of sandwiches and salads. The chain features several decor packages, including Chicago Prohibition. In this unit, props like wooden barrels and old-fashioned cars hang above the tables.

The food is delicious—hot, greasy and inexpensive. Jumbo chili dogs cost $2.69; large fries, $1.59. But Lombardi is miffed about something that I didn’t notice when we placed our order. The manager training a counter worker failed to interrupt the lesson to take his order. Not a big deal, he admits, but annoying anyway. “It’s an issue with our whole industry,” Lombardi charges. “There is not enough training on acknowledging and selling the customer.”

Best in Burger
It’s hard to fault the service at Hackney’s in Glenview, where we wind up for dinner after driving through the North Shore and spotting the wealthy pizza-delivery driver. The restaurant’s large Georgian structure could pass for insurance offices at first glance. But the six-unit chain, around since the 1940s, is wildly popular with suburbanites, mainly for its thick burgers and all-American menu.

This particular unit, Lombardi recalls, easily withstood the arrival of Hamburger Hamlet in the late ’90s. “Hackney’s has been around for years; everyone knows it,” he explains. “So why would you open a restaurant that few people have heard of with a similar menu less than a mile away?”

He walks from Hackney’s parking lot to the strip mall where Hamburger Hamlet opened in 1999. “It closed after a while,” he says. The Los Angeles-based chain also opened a unit in nearby Vernon Hills, another suburb. It, too, is closed.

Lombardi, standing next to a wall in Hackney’s that is decorated with glowing reviews and award plaques, says that perhaps the Hamburger Hamlet folks forgot to look here. Hackney’s won a local magazine’s “Best Place for Burgers” in ’94, ’95, ’96 and ’99.