Restaurants and Retail and Real Estate & Retail and Small Business and Inside Dish

INSIDE DISH: Mug-n-Bun rides on 50-year formula

April 23, 2010
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Welcome back to IBJ’s new video feature, “Inside Dish: the Business of Running Restaurants.”

Our subject this week is Speedway’s landmark drive-in Mug-n-Bun, founded in 1960 and purchased in 1998 by electrician Jay Watson for $1.2 million. Rather than mess with success, the fledgling restaurateur stuck with the eatery’s signature elements, such as curbside service, cook-to-order fast fare, and vanilla-tinged homemade root beer.

Mug-n-Bun has been profitable for 10 of the last 12 years, Watson said. The recent profits aren’t exactly mind-blowing—usually in the five-digit range—because Watson includes himself on the books as an employee and tends to plow earnings right back into upkeep.

While sticking with Mug-n-Bun’s 50-year formula for success, Watson has tinkered with the mix to accommodate present-day diners and shifting economic conditions (see video below). Unwilling to close the eatery during the slow winter months, Watson personally renovated an adjacent building in 2009 to create indoor seating for dining in frigid (or scorching) temperatures. He also broke a 50-year cash-only tradition in January by beginning to accept credit and debit cards. Both moves came with a cost but have had a positive effect on sales, he said.



With repeat customers returning again and again for their favorites, Mug-n-Bun tends to measure its top-selling items in cases and tons. In the video below, Watson takes inventory of how many onion rings, tenderloins, hamburgers and other items he sells per year.



More Dish: Notes from the back of the napkin

Restaurant: Mug-n-Bun
Concept: Classic American drive-in, virtually unchanged since the 1960s, with curbside service, picnic area and new indoor seating. Signature eats include homemade root beer, hand-dipped onion rings and large breaded tenderloins.
Location: 5211 W. 10th St., Speedway
Phone: 244-5669
Web site: www.mug-n-bun.com
Founded: 1960
Owner: Jay Watson (since 1998); $1.2 million purchase price
Total sales/profit: $1.1 million/$24,000 (2005); $860,000/$18,000 (2006); $910,000/$27,000 (2007); $820,000/$11,000 (2008); $870,000/$22,000 (2009).
Seating: 48 parking spaces for curbside service; 110 seats in picnic area; 52 seats in new indoor-dining annex.
Recent projects: Watson opened an indoor-dining annex in an existing building in December, doing the majority of the build-out work himself. The final cost was about $60,000.
Goals: Increase public awareness of restaurant; generate more sales through new dine-in annex.
Good to know: Mug-n-Bun has entered the realm of social networking and currently counts 5,600-plus Facebook fans. The restaurant accepted only cash until finally joining the credit- and debit-card bandwagon in January of this year. While that move has increased sales by as much as 10 percent, Watson estimates, the restaurant must pay credit card companies 1.39 percent of every sale, as well as a 19-cent processing fee for each transaction.

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