MUFSO 2012: Lessons from failures essential to growth, operators say

This is part of Restaurant Hospitality's special coverage of the 2012 MUFSO conference, taking place Sept. 30-Oct. 2 at the Hilton Anatole Hotel in Dallas. Tweet with us using #MUFSO.

Restaurant owners are bound to make some mistakes, but how they recover from those mistakes can have long-term ramifications, expanding multi-concept operators told the MUFSO audience.

Jimmy John’s Gourmet Sandwiches founder and c.e.o. Jimmy John Liautaud launched his first location under the assumption that, “if we build it, they will come.” But no one did. So he knocked on doors of local businesses with samples of his sandwiches, and the concept became a hit. Today it has grown to an empire of nearly 1,500 restaurants, with an average of one unit opening daily, said company president James North.

Alfredo Sandoval, managing partner of Mercadito Hospitality, admitted that self-financing the company’s first three Mercadito restaurants in New York forced him to limit the location sizes. Once he relocated to Chicago and found outside financing, he succeeded at opening a larger restaurant, where the $8 million in annual volume dwarfed the $2-$3 million the New York locations earned. Seeking outside help “was probably the best thing we’ve ever done,” he said. Since moving to Chicago his company has opened another high-volume Mercadito, in Miami, and partnered with star chef Ryan Poli to debut the Spanish-themed Tavernita and its more casual sidekick, Barcito, two of Chicago’s hottest tickets.

Fox Restaurants c.e.o. Sam Fox said he followed bad advice for his third restaurant, his first attempt to open outside of Arizona. The location turned out to be a bust. “It was supposed to do $5 million in volume, and it did $2 million,” he recalled. Construction costs ran about double the projections as well. Fox said the project nearly bankrupted his budding empire, which now has 34 locations and 12 concepts, including True Foods and Sauce.

With 16 restaurants in Arizona, Fox said, the company is actively eyeing sites elsewhere. “We have had some of our biggest successes outside of Arizona,” he added.

Kent Rathbun, whose star rose with his initial restaurant, the fine dining Abacus in Dallas, said he erred early on when initially he didn’t tie that location to his new concept, Jasper’s, an upscale fine dining restaurant that focuses on small plates. After creating the Kent Rathbun Concepts umbrella, he said, “I saw a huge change in the amount of exposure we began to get and the payoff from that.” Jasper’s was able to piggyback off the higher-profile Abacus, he said.

Today, Jasper’s is in three Texas locations and Rathbun considers it a growth vehicle along with a third concept, the casual Rathbun’s Blue Plate Kitchen, a farm-to-table restaurant with a single Dallas location. Jasper’s, Rathbun noted, outperforms  Abacus because of the latter’s steeper food and labor costs. “The margin at Jasper’s is probably three times what it is at Abacus,” he said.

Find more MUFSO 2012 coverage online at Restaurant Hospitality's sister publications, Nation's Restaurant News and Food Management.