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INSIDE DISH: Unlikely pair pilot Ship to profit

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Inside Dish

Welcome back to IBJ’s video feature “Inside Dish: The Business of Running Restaurants.”

Our subject this week is The Sinking Ship, which has an odd-couple origin story that sounds like the setup for a joke heard during the neighborhood joint’s regular Sunday night stand-up comedy series. It goes something like this: “OK, so an accountant and a tattoo artist decide to start a bar …”



Andy Hamaker, 43, and Damon Lyden, 31, met through a mutual friend in 2008. Lyden, a former U.S. Army infantryman who recently had returned from a 13-month stint in Iraq, was inking in Indianapolis for Artistic Skin Designs. Hamaker held down a much more traditional, tie-required job as a CPA. They bonded over music; Lyden played bass, and Hamaker was a percussionist.

They would regularly grab drinks together and shoot the breeze after work. And one day, Lyden texted Hamaker: “We should start a bar.”

Lyden already had a solid base of experience in food service, and Hamaker was intrigued by the entrepreneurship angle. “I liked the idea of having my own business and having the ability to help a lot of people, who otherwise might not get help, in terms of employment,” Hamaker said.

Hoping to eliminate the second-guessing and turf-defending that doom many partnerships, Hamaker and Lyden decided to establish very distinct roles. Hamaker would be the financial mind, and Lyden would be the operations guy.

“If it’s an operating issue, he will just come and ask me, and not just try to change something without telling anyone,” Lyden said of Hamaker. “And if it’s finances, I just ask him. I don’t assume we have money to take out of the bank.”

Hamaker (who is not related to the family that ran the eponymous pharmacy at 49th and Pennsylvania streets) played a pivotal role in obtaining the startup funds. Most restaurateurs are all but laughed out of bank offices when they come seeking commercial loans, but Hamaker was able to offer personal collateral to cover a whopping $610,000 in financing for The Sinking Ship.

The partners then ponied up another $160,000 of their own money to finish an extensive interior revamp of the former home of Steck Plumbing at 4923 N. College Ave. Major expenses included $150,000 in kitchen equipment, $40,000 for a rooftop HVAC unit, and $40,000 for a three-way liquor license. They hired a general contractor for some of the work in the leased space, but tackled other tasks themselves.

The project went way over their original $500,000 budget, and took longer than expected. Needing to bring in revenue right away, they opened The Sinking Ship on Feb. 17, 2011, just hours after installing its point-of-sale computer system.

“I didn’t have time to train my staff,” Lyden said. “When you’re trying to get at least some money in the door, you’re sacrificing service and quality.”

They righted the Ship over a six-month shakeout period, establishing core personnel and best practices. With a staff made up primarily of local musicians—and some with busy touring schedules—they realized that word of mouth from those gigs was bringing in significant numbers of customers, beyond the neighborhood regulars they had been courting. Bolstered by Facebook, the Ship’s marketing required no budget.   

“We’ve never really paid for any advertising,” Lyden said. “And being a neighborhood bar, I’m not trying to grab people from the other side of town. We have who we need. We can’t afford advertising anyway.”

The venue benefitted from some free advertising in summer 2011 when several area residents objected to the renewal of its liquor license, and the local media took notice. Patrons and other supporters showed up in force at hearings, and opposition to the renewal eased. Members of the Marion County Alcohol Beverage Board voted unanimously to renew the license on Aug. 15, 2011.

In the meantime, new patrons checked out the Ship to see what the fuss was about. “That was the best thing that could have happened,” Lyden said. “We had so many people who I wouldn’t imagine would come in normally. … We got an older crowd out of it too. And they would be like, ‘I don’t know why they’re trying to shut you down. You guys are awesome.’”

They saw another bump in business this summer with the institution on June 1 of a citywide smoking ban that expanded existing restrictions to include most bars. While beer and liquor sales at the Ship remained steady, food sales shot up from $19,500 in May to $22,700 in June.

“It was instantaneous,” Lyden said. “It was the day after the ban. All these new people who are like, 'They’re nonsmoking now. Let’s try it.’”

Over the past 12 months, the Ship has posted gross sales of $880,000 and net income of $30,300, according to Hamaker. For now, the two owners are drawing small salaries and reinvesting the profits into the business. Hamaker remains a CPA, and Lyden picks up shifts as a bartender to help make ends meet.

One of their key goals is to improve the financial position of their loyal employees. The Sinking Ship offers a 401(k) plan after six months, and health-insurance benefits after a year. And the owners plan to make long-term employees partners down the road.

“Hopefully we can get things set to one day where we can be employee-owned and people can make their livings off this,” Lyden said.

In the video at top, the owners detail how they met and first hatched the idea for start a bar. They also discuss the sometimes turbulent startup and the milestones that allowed them to breathe easier.

The Sinking Ship is named after a song written by Lyden’s friend Jacob Blaylock, a fellow Iraq War veteran who committed suicide in 2007. He tells the story in the video below, which includes a section of the song performed by the late Blaylock.


 

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The Sinking Ship
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4923 N. College Ave.
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(317) 920-7999
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www.thesinkingship.com
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Concept: Neighborhood tavern in the midtown area of Meridian-Kessler.
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Founded: Feb. 17, 2011
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Owners: Andy Hamaker and Damon Lyden (50-50 split)
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Startup costs: $775,000, covered by $610,000 in bank financing (with collateral supplied by Hamaker) and the remainder in personal investment by the owners.
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Gross sales/net income over the past 12 months: $880,000/$30,300
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Employees: 26
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Seating: About 100 inside and 32 on an adjacent patio
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Goals: To get city approval for staging live music at the venue, and to eventually bring on more employees as owners.
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Good to know: A good portion of the Ship's employees are musicians who travel frequently and have trouble holding down regular jobs. To help put them on more stable financial footing, Hamaker and Lyden are offering 401(k) plans to employees after six months, and health insurance benefits after one year.
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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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