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Self-serve chili could help Charlie & Barney's grow nationally

November 24, 2008
Visiting the venerable downtown Charlie & Barney's locations at 150 E. Ohio St. and inside the atrium of the National City Center is like stepping into a culinary time machine.

The restaurants, still ladling up the same signature chili they've offered since the privately held chain debuted in 1977, haven't changed much (or at all) since the days of stagflation and Billy Beer.

That stuck-in-time ambiance belies the fact that while the stores haven't moved with the times, the company that runs them has. Charlie & Barney's is quietly expanding into unorthodox niches, placing its product in unusual places — like convenience stores.

Charlie & Barney's operates only three full-service, stand-alone eateries. The one inside National City Center and a food court spot at The Fashion Mall at Keystone are franchises, while the original Ohio Street location is owned by the company.

Yet its chili is showing up everywhere, from the Good To Go BP in Warsaw to the Village Pantry in Cambridge City.

"It's worked out better than any of the other self-serve programs that we've had," said Shane Neal, director of operations for C&G Oil Co., which offers self-serve Charlie & Barney's chili at its three Indiana-based Petro Stopping Centers. "There seems to be good name recognition with it. ... And I know that I'm seeing it in more of the convenience store/truck-stop-type locations."

Expect to see the product in even more such places in the next few years as the company expands both in Indiana and — if all goes as planned — throughout the Midwest and perhaps the East Coast.

"The way we prepare our chili and serve it fits the model of a self-service convenience store," said Richard Hogshire, founder and chairman of Charlie & Barney's. "Our expansion is basically selling the chili. Rather than ... doing more of those sorts of stores in other towns, we decided to go to the convenience store market."

Good thing, since the idea of franchising restaurants nationwide didn't exactly take off. In 2004, C&B management boldly predicted that the company would open some 200 such locations within four or five years. But the concept never gained steam and some of the early franchises closed.

Chili and a dog

The more modest expansion idea was the brainchild of both Hogshire and Bill Church, 41, the company's president and chief operating officer. Formerly a vice president at Roly Poly Rolled Sandwiches, Church met Hogshire when Roly Poly started offering Charlie & Barney's chili.

"We came up with this concept of going into truck stops and convenience stores," Church said. "I decided to become a partner with Dick, and we're rolling them out across the state right now."

The partners declined to disclose the company's annual revenue, but industry publication Nation's Restaurant News pegged it at $2.5 million four years ago, when it had five restaurants operating.

About 40 establishments now offer its chili in some form. Some clients offer a scaled-down version of the restaurant with a truncated Charlie & Barney's menu. But the more popular option is the basic "crock program," in which customers simply set out a crock of C&B chili along with a rack of 12-ounce, self-service bowls. Almost 30 locations have signed up.

"We display our cups on a rack next to the crock," Church said. "And the retailer will simply buy the chili from one of our distributors. The staff heats it up in the microwave and it will hold in the crock. The consumers self-serve. It has a very small footprint on the counter and it doesn't take much labor. It's just a real convenient item."

The scheme required a major attitude adjustment. C&B had planned to expand through franchising, but that concept stalled, hamstrung by the steep price of admission, about $300,000. Even the middle-of-the-road option, a pared-down version of Charlie & Barney's that could be built into existing businesses, proved too expensive — about $22,000 to get up and running. The crock program costs $250 plus chili.

"We had to change our game plan," Church said.

Regional appeal

Stores don't need to sign a franchising agreement to get a crock — they just need a bit of counter space. The retail price point for the product is also appealing, particularly in hard economic times.

"In the convenience stores, we're at $3 for a 12-ounce bowl," Church said. "That same bowl at one of the sit-down stores costs $5."

The typical outlet, in Hogshire's estimation, sells 50 to 100 orders each day. Those crocks, often placed near machines that cook hot dogs on rollers, also has created an interesting — and profitable — result.

"When they merchandise this crock right next to their existing roller grill program, all of the stores have seen a 10- to 12-percent increase in their hot dog sales," Church said. Customers "are putting a ladle of chili across their hot dog and making a Charlie & Barney's chili dog."

The push right now is to make sure convenience store distributors — through which Charlie & Barney's operators purchase their chili — all offer their product. Once the pipeline is assured, expansion should continue apace.

"I can see this in five years being a real strong regional brand for maybe a five-or six-state region," Church said. "Midwestern and maybe East Coast."

That would be quite an achievement. While chili seems like a shoo-in for national distribution since it's easy to freeze and store, it faces a major stumbling block: The definition of "chili" is so different from one location to the next that one area's prized culinary treat can be considered an inedible abomination just a couple of states over.

"Everybody and their dogs has a different version of chili," said Carol Hancock, CEO of the California-based International Chili Society. "Some people think it's beef stew with a little bit of cumin thrown in. Regionally, there's the sweet, cinnamon-y, Cincinnati-style chili. But if you go to Florida, it's full of tomatoes and celery and chunky meat. And in Texas it's a bowl of 'red'-no-beans chili made with beef."

Ironically, the only chili-intensive operation to make a dent nationally, in Hancock's estimation, is Chili's Grill & Bar, which, as the name implies, started life as a chili joint in Dallas. However, it only broke big nationally by broadening its menu. Others have had regional success, like Cincinnati-based Skyline Chili, which has eateries in Indiana, Ohio, Kentucky and Florida and sells canned chili in grocery stores in nine states.

Church doesn't see a problem with offering C & B's signature chili to a wider audience.

"I think we have a universal flavor," he said of the recipe Hogshire developed himself. "It's a very mild, clean flavor. It's not a spicy chili. I think that makes us attractive not just to the Midwest but to other regions as well."

Finding a niche

Indeed, Indiana University professor Theresa Williams thinks the folks at Charlie & Barney's may be on to something.

Extending the brand into grocery stores, a la Skyline, would be a terrible idea because competition there is fierce, she said, but selling it ready-made in convenience stores would allow the company to carve out its own niche.

"I think it's a good idea because of the lack of competition," said Williams, director of the Kelley School of Business' Center for Retailing. "And there's ... a large area of opportunity for distribution."

There's just one major hurdle, in her opinion. The company has to maintain a strict quality-control program to make sure all those minimum-wage workers who heat and present the chili do it properly. If they don't, the Charlie & Barney's brand could suffer.

"The execution would worry me a little bit," Williams said. "That's the biggest barrier — quality control and being consistent."

Though crocks are hot right now, Hogshire and Church aren't ruling out the possibility of more old-school, full-service eateries if economic conditions permit. And speaking of old school, the chain's umbrella corporation, the Crossfire Corp., also is reviving another legacy name — Mr. Dan's.

As Indianapolis-area fast food junkies may know, it was a wildly idiosyncratic chain of hamburger joints founded by Hogshire's father, Jim, in 1952. Originally called Gay Dan's, it was named for the stores' mascot, and their Gay '90s-era decor.

At its height, there were 16 locations, but over the years the numbers dwindled. This year, Crossfire resurrected the chain in a former Taco Bell on Keystone Avenue just north of Fall Creek Parkway, with plans for more locations.

"We're beginning an expansion program," Hogshire said. "We've only done this one, but we will expand it further."
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