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Settlement talks heat up between Athenaeum, Rathskeller

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The operator of the Rathskeller restaurant, which is locked in a dispute with landlord Athenaeum Foundation over revenue from the Biergarten, is willing to settle the disagreement by splitting the proceeds.

That would seem to comply with the wishes of the landlord, which wants Rathskeller operator Dan McMichael to pay it a portion of the cover charges he collects for concerts at the Biergarten in downtown Indianapolis to help close a $100,000-a-year revenue gap in the foundation's $850,000 annual budget. Foundation directors have given McMichael until July 1 to comply with their ultimatum or he’ll no longer be able to host concerts at the venue.

On Tuesday, McMichael said he presented the foundation with a settlement offer in which he has agreed to pay it 50 percent of the revenue generated from concert cover charges. The foundation is mulling the offer.

“It’s going to be pretty ugly if we have to shut this thing down for a period of time until we get this resolved,” said foundation president Cassie Stockamp. “But that’s not our goal or objective.”

The foundation also wants McMichael to foot the $250,000 cost of soundproofing the east wall of the Biergarten.

It’s unclear if the foundation will pursue a court claim that would force McMichael to pay it $1.4 million in cover charges the foundation says he collected from 2006 to the present.

“It’s just a tragedy of immense proportions that it’s come to this,” said McMichael’s attorney, Robert Bruner, of Tallahassee, Fla.

The dispute between the two sides stems from a letter McMichael received in March from the foundation demanding that he quit using the Rathskeller name because he is violating his lease by charging patrons a fee to enter the Biergarten.

McMichael has operated the Rathskeller since 1995. He said the $5 cover charge he instituted for Biergarten concerts in recent years didn't become an issue until recently. The current 15-yeart lease he signed in 2003 has an option for a 10-year extension. The Biergarten hosted 115 concerts in 2011.

After receiving the letter in March, McMichael filed suit in Marion Superior Court asking a judge to interpret the lease and decide whether he indeed is violating the terms of his lease.

The judge ordered the two sides to hash out their differences in mediation, which failed.

Earlier this month, the foundation countersued McMichael, seeking the $1.4 million in past cover charges and a ruling to stop him from using the Rathskeller name.

“The foundation is the owner of the trade name ‘Rathskeller,’ an exclusive Indiana service mark to which McMichael has no right, title or interest,” the foundation said in its claim.

McMichael followed the foundation’s countersuit by asking the judge to issue an injunction barring the foundation from enforcing its July 1 deadline.

If the two sides fail to reach an agreement and the Biergarten closes, Stockamp said the Rathskeller restaurant will remain open.

“We own the name and the liquor license,” she said. “So that’s not going away, whoever the operator is.”

McMichael said he generated more than $4 million in revenue last year from the Rathskeller and Biergarten, and paid the foundation $282,000 in rent.

His lease is unusual in the restaurant industry, said one commercial real estate broker, in that he pays the foundation a percentage of his sales rather than by the more common way of paying based on square footage.

The lease calls for McMichael to pay the foundation 6.9 percent of his annual sales, according to the lease filed in court papers.

Steve Delaney, a principal at Sitehawk Retail Real Estate in Indianapolis, said most restaurant deals are tied to base rents. But McMichael’s terms are in the range of what Delaney has seen in the few leases he’s been involved with that were based on sales.

“Base rent is the driving factor in 95 percent of restaurant deals,” Delaney said. “To see one [based on] pure percentage is pretty unusual.”

The Athenaeum, 401 E. Michigan St., also houses a YMCA and other tenants in the 94,000-square-foot structure built in 1894 to serve German immigrants. The building needs $6 million in upgrades, Stockamp said.

“It’s not about us being greedy,” she said of her dispute with McMichael. “It’s about us trying to find a very sustainable business model.”

McMichael has launched an online petition to support his cause that had netted more than 5,880 electronic signatures as of Wednesday morning.

“It was an absolute dump when I came here,” said McMichael, noting that he invested $215,000 of his own money in the restaurant. “I’ve tried to treat this place like I own it myself.”
 

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  • Rent
    Most places charge $17.00 per square foot more or less . At least that's what I have found for business or retail space .
  • I agree
    20 years of doing shows and sel the rathskeller I have neve seen it being a Dump. The same as always. This is an old move . Blame issueson previous owners.
  • Explain plese
    Explain "for the needy". Thanks. I've been reading up on the Athenaeum Foundation. I see a building preservation website.
  • Biergarten
    Then just call the outside venue the Biergarten, and drop the Rathskeller. Move forward. The problem seems to be with the name. And I agree- if the purpose is to attract a different tenant, it will be difficult now that business owners know they will be treated unfairly and that high expectations...higher than the other tenants...is the norm. Lesson: make sure your business struggles, get as much aid assistance as you can, and you have success. You have no profit, but you have success.
  • How much is made off the theater,that is rarely used for anything. What did the American Cabaret pay before they sneeked out in the middle of the night. Big building should not rely on one to cover all the shortfalls.
  • Love the Biergarten
    Kevin, to answer your question, the Biergarten is out the back door of the bar area. Actually up the stairs and out the door, but part of the building so to speak. Bow, It is a shame that you think that all they host are crappy cover bands. I have been going for years and I have seen some great music and it is alot of fun! And to clear the air, Kevin f, on the Broadripple comment and 20 year olds, I am 41 and if you have been to the Rathskeller events, you would realize it entertains all ages. I hope they work this out, it is a far different atmosphere than all of the other bars your are comparing it to.
  • A dump? Really?
    I have been eating in the Rathskeller for as long as I can recall (nearly 40 years), and I don't remember the restaurant ever being run down. Management, and ownership may have changed a time or two, but the interior decor is the same as always. Same gargoyle over the fireplace, same statues on either side, etc. The Stammtisch has been moved from the old dining room (by the old bar and fireplace), but other than seating people in the hallway, very little has changed. Upgrading the kitchen is something every restaurant needs to do as business increases. If the place was a dump in the 70s, it is the same dump now, just with higher prices.
    • Location Location Location
      Ok, I've never been to the Athenaeum Building, so help me out here - Where is the Biergarten in location to the Rathskeller? If they are in separate locations, then they should have separate leases. If the BG is in the RK, then the lease governing the RK should prevail.
    • Bow is right
      I also live near it and have mixed feelings about this whole issue. The crappy cover band music is right. And on weekends it turns Mass Ave into Broad Ripple. There are usually 4 or 5 cabs waiting right out front as drunk 20 somethings literally stumble out going "Woo Hoo!"
    • I thought it was a German place?
      I honestly just wish this place would go back to being a German biergarten. Living near the Athenaeum, I get really tired of hearing the same crappy cover bands over and over. Every Thursday through Sunday night, I can hear crappy covers of "Living on a Prayer" and "Crash into me" from as far away as Chatham Tap. I fully support the Foundation. This is a historical landmark, lets not turn it into another crappy bar. There are hundreds of those around town. If you want to hear crappy 80's music, go to Broad Ripple or the Ugly Monkey. Mass Ave is a arts district. If you are going to claim you are a German biergarten, act like it. Right now, the biergarten is nothing more than an overcrowded bland bar. Respect the history of the building or get out of the Athenaeum.
      • Abide by the Lease
        If the lease calls for 6.9% of sales, then he should pay 6.9% of the cover charge as well. 50%-50% is too much. He leases the premises and it is usual for a bar / restaurant to charge a cover when having a band. It almost sounds like Stockamp wants to break the lease because she has another option.
      • giving feels better then receiving
        I think the agreement is a percentage of all monies made at the location and this means split the money and pay the foundation. Don't be greedy with a foundation that is there for the needy. The money is going towards making the building better.
        • Boo
          Dan McMichael took a chance on that building when it was a mess and other ventures there had failed, and his hard work made it come alive again. The Athenaeum Foundation should bend over backwards to make him happy, not try to cash in. And the foundation is going to have a hard time attracting and keeping other tenants if this is the way it treats people.
        • Biergarten
          What does the Y pay in rent? $100,000+ a year seems like a lot for the concert venue to pay.

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