restaurant openings and Scotty's Brewhouse and Growth and Restaurants and Real Estate & Retail

Local restaurants add sites, consider taking on chains

March 10, 2008

If you can't beat 'em, join 'em.

Several local eateries are going through a growth spurt, adding locations despite central Indiana diners' reputation for being addicted to national chains. Ironically enough, the expansions could be the first step in transforming the local restaurants into chains themselves.

Home-grown Cajun king Yats recently opened a fifth area restaurant, and Scotty's Brewhouse isn't far behind, with plans for its fifth location in the works. Greenfield's The Bread Ladies opened a cafe and bakery in Indianapolis last summer, and Broad Ripple's Naked Tchopstix is set to open a 96th Street outlet next month.

Whether the local restaurants evolve into full-blown chains remains to be seen, but one expert said they have all the necessary components--unusual concepts, affordable food and simple menus that are easy enough to replicate.

"You could easily say some of these are budding chains," said Carl Behnke, a chef instructor at Purdue University's Hospitality and Tourism Management Department.

The main risk of expanding is that quality won't live up to the original and can dilute the brand, he said. "If you're really proud of what you're putting out, that's more a passion than a business." Generally, Indianapolis-based independents thrive either by catering to very-high-end clientele in a single location--such as St. Elmo Steak House or L'explorateur--or by finding an economical niche where national chains haven't yet ventured.

Take Naked Tchopstix, for example. Its College Avenue location offers Asian cuisine ranging from creative sushi to more traditional meat-and-vegetable fare--something major chains haven't done much with yet.

Local restaurant specialist Steve Delaney said the national Ra Sushi chain has looked at the Indianapolis market, but hasn't made a commitment here.

Naked Tchopstix owners Maggie and David Lee actually launched their concept downtown in spring 2004, when they opened Bistro Tchopstix. The Broad Ripple location opened that fall, and the couple also ran a shop in City Market.

"We expanded too quickly then," Maggie Lee admitted.

Lesson learned. The couple sold the downtown location about three years ago to focus on Naked Tchopstix.

It has done so well--with annual revenue of more than $1 million--that the Lees added a bar and more seating in Broad Ripple and are planning to open another Tchopstix at East 96th Street and Keystone Avenue in mid-April. They used earnings to fund the projects, which totaled about $400,000.

Naked Tchopstix and the other local eateries are growing at a time many higher-end restaurants are struggling with rising costs and tighter budgets as consumers buckle down on discretionary spending. Any restaurants that are expanding now must really be onto something, said John Livengood, president of the Restaurant & Hospitality Association of Indiana.

It's even more remarkable given the stronghold chains seem to have on Indianapolis.

"Lots of national chains have their best-performing stores in Indianapolis," said Delaney, a partner at Indianapolis-based Sitehawk Retail Real Estate.

In fact, central Indiana doesn't offer as many locally owned eateries as comparable markets, he and others said. Although there's no hard data on the percentage of local offerings, Livengood estimates they make up only about a third of the total--and that's counting taverns.

"We're a big chain state," he said.

Anecdotal evidence suggests a shift in the making. Local shopping center owners are becoming a bit more welcoming, searching out locally owned eateries they think will drive traffic to their properties.

"Landlords are looking for a different type of tenant apart from the national chain," said Bill French, a senior vice president and retail expert with the local office of St. Louis-based Colliers Turley Martin Tucker. "If they want a signature shopping center, it's nice to have [a restaurant] that's not on every street corner."

That uniqueness and a softening economy often mean local restaurant owners have a bit more leverage when negotiating rental rates, he said.

Timing can be important, to be sure.

The Bread Ladies cafeand bakery, which offers made-from-scratch bread, baked goods and sandwiches, branched out from its Greenfield roots last June, setting up shop in space it subleases from Lazy Daze Coffee House in Irvington. At the same time, it opened an employees-only store at eTapestery.comInc., a Greenfield firm that sells fund-raising software to not-for-profits.

Co-owner Donna Johnson said she and partner Donna Eckler have been approached about opening additional locations since launching the business in 2001, but didn't make the jump until the right situations came along.

"We have been watching and watching," Johnson said.

At eTapestry, the company built a kitchen for The Bread Ladies. In Irvington, startup costs were only about $10,000.

What happens next is anyone's guess. The restaurant owners expect they'll eventually hit a fork in the road where they must decide whether to keep growing on their own, become a franchisor or be content with the status quo.

The Lees plan to be hands-on at both Naked Tchopstix locations in hopes of continuing their success.

"From there, we can either stay small and keep our sanity or become a brand," Lee said. "Those are the two options we're weighing."

It's a debate Scotty Wise is familiar with as majority owner of Scotty's Brewhouse, a sports-themed eatery featuring micro brews, an extensive menu and occasional karaoke.

He started the restaurant in Muncie in 1996 and now has four restaurants that bring in more than $12 million a year. The Indianapolis location--on 96th Street just east of Keystone Avenue, not far from the Lees' new place--generates nearly $5 million alone.

Wise has plans to open his fifth location in downtown Indianapolis this August on the ground floor of the Allen Plaza at 1 Virginia Ave. He wants that restaurant to help fund a new location in Chicago's Lincoln Park neighborhood and eventually new stores in the Southeast and the Southwest.

He's choosing new locations based on market conditions but also on where he'd like to spend his time. Opening too many stores and tackling towns he doesn't want to visit would turn his passion into a job, Wise said.

"I'm trying to be selective in where we go because I'm having fun with it," he said.

Investors have looked at buying out his concept before, but Wise said he'd likely have to get to 15 to 20 locations before the offers would be tempting enough.

It'd be tough to sell the brand he's spent 12 years building, Wise said, but "if the check has enough zeroes, it could be worth it."

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