St. Elmo Steakhouse and Restaurants and Real Estate & Retail

St. Elmo top-selling restaurant; others sizzle, too

July 17, 2006

Two years ago, St. Elmo Steak House appeared poised to lose its crown as king of the Indianapolis restaurant scene, when California-based Cheesecake Factory raked in more than $10 million in sales at its sole Indianapolis location.

But the king has not left the building. The meat and potatoes mecca isn't giving up its championship belt just yet.

According to publicly available sales information, St. Elmo punched up more than $11.3 million in sales in 2005, up from the $9.8 million it reported in 2003. Just the $1.5 million increase would represent hefty total sales for many of Indianapolis' eateries.

Cheesecake Factory hasn't filed its 2005 or 2004 numbers with the Indiana Alcohol and Tobacco Commission, even though it's required to do so, and company officials did not return calls. But a typical outlet in the chain posts $11 million in annual sales. So if St. Elmo isn't tops in town, it's darn close.

Those two aren't the only two local restaurants with heavy cash drawers after the Saturday night rush.

Oceanaire, Maggiano's Little Italy, Sullivan's Steakhouse and P.F. Chang's, among others, topped $5 million in sales in 2005. And The Rathskeller has become a formidable player, too, with 2005 sales of Sauerbraten, doppelbock and other German fare of $4.2 million--up 76 percent in just two years.

The list of standouts is in step with top restaurants nationally. Many of the top-grossing U.S. eateries are steakhouses or seafood restaurants, because they have the priciest checks, said Carolyn Walkup, senior editor for Nation's Restaurant News.

The strong economy has given restaurants locally and across the nation a lift. It also helps if someone else picks up the tab--which helps explain the thriving restaurants downtown that benefit from the city's booming convention business. Many conventioneers are less price-sensitive than they would be at home because they have expense accounts.

"We love Indianapolis; there's no other way to put it," said Richard Edwards, general manager and operating partner at downtown's Oceanaire.

Last year, the restaurant rang up more than $7 million in food and beverages.

Investors in Oceanaire had worried about the city's meat-and-potatoes reputation when they opened the restaurant in September 2003.

"We weren't quite sure what Indianapolis would have in store for us," Edwards said. "But our fears turned out to be unfounded. We learned that diners in Indianapolis are extremely savvy. They're well-educated about wine and food."

Firing up more grills

The hum of the cash register at places like Oceanaire will only get louder, experts say.

Even high gas prices aren't dissuading consumers from dining out, said Walkup, the Nation's Restaurant News editor.

"Eating out has become such a part of everyone's lifestyle that they will make adjustments to their disposable income budgets so they can still dine out," she said.

The National Restaurant Association predicts employment in the restaurant industry statewide will increase more than 14 percent in the next decade.

And Indianapolis will be the beneficiary of much of the growth. The city's hopping culinary scene has made it a favorite among restaurateurs.

"[Indianapolis] is one of the best downtown restaurant markets for a market this size," said Steve Delaney, a partner and restaurant specialist at The Linder Co., a Carmel-based real estate firm. "A lot of the chains have among their best or their best restaurant in downtown Indianapolis."

That likely includes the local booming outlets of Palomino, Champps Americana and P.F. Chang's.

The problem is not selling restaurant owners on Indianapolis; it's finding room for them.

"It's still the issue that there's not enough good spaces for the restaurants that want to be here," said Brian Epstein, president of Indianapolis-based Urban Space Properties, who's been putting together restaurant deals for six years. "I had two national chains in town this week that would love to be here, but there's not an 'A' site sitting there for me to jump on right now. I'm trying to manufacture sites."

One restaurant Epstein represents rings up $20 million a year in sales in Chicago. And while he wouldn't say who it is, he conceded it's itching to get into Indianapolis.

Most of the grill-masters eyeing the city are looking in only one area--downtown.

"Downtown has been the hot spot in this area because of the convention center and convention business," said John Livengood, president of the Restaurant and Hospitality Association of Indiana.

The restaurants on Illinois Street, what's becoming known as "Restaurant Row," concede they're in a dream location.

"There's always something going on downtown," said Chris Clifford, general manager of St. Elmo. "There were days in the past where you'd have lulls."

And it's getting rosier.

"In 2010, we're going to have a new Colts stadium and a new convention center that's double the size it is now," Clifford said.

Business has been so good for St. Elmo that it announced plans three months ago to open a new restaurant--Harry and Izzy's--this winter two doors to the south in Circle Centre mall.

Strong suburban sales

It isn't just downtown where business is booming. Champps and Claddagh Irish Pub had higher sales at their north-side locations than their downtown ones.

"Business has been great," said John Stanley, general manager of Sullivan's Steakhouse on the north side.

The restaurant's sales have climbed 13 percent over the past two years, reaching $6.1 million in 2005.

But experts say the downtown restaurant market will continue to gain momentum.

On the east side of downtown, The Rathskeller, the city's oldest restaurant (1894), has been another beneficiary of the city's broadening interest in ethnic food.

It might crack the top 10 in sales citywide this year if sales stay on pace. It's not unusual for the Rathskeller to serve 500 dinners in less than two hours when there's a show at the nearby American Cabaret Theatre.

Eleven years ago, when Dan McMichael bought the restaurant, sales were around $400,000 annually.

While he admitted competition is "fierce" for the dining dollar, he expects sales to continue to climb, thanks to the growing number of people buying condos and houses downtown.

"I'm so excited to see the amount of new residential growth downtown," he said. "These are people that are going to walk all over and patronize all the restaurants in the area."

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