Franchise seeds planted in Denver grow success

Hometown restaurants build popularity in many regions around the country.
Denver Business Journal - by Dennis Huspeni , Special to the Business Journal
February 11, 2011

Some say it’s the energetic, welcoming small business community. Others cite a population willing to try new things.

Whatever the reason, the Denver area is like a greenhouse for franchise restaurant companies.

“Success begets success,” said Dave Prokupek, CEO and president of the growing Smashburger chain. “A lot of restaurant companies started here. There’s money here and a lot of talent. It’s like the Silicon Valley of the restaurant industry in that regard — it’s an easy place to get going.”

Smashburger’s founder, Tom Ryan, opened the first restaurant in Denver, in 2007. Last year, the upscale burger chain, owned by Consumer Capital Partners, opened its 100th restaurant.

In the past 15 years, the Denver area has watched the fast-casual concept for restaurants germinate, grow and mature.

In 1995, two successful fast-casual chains were born here: Qdoba, and Noodles and Company.

“I’d say we’re in the top five in terms of entrepreneurial hotbeds in the United States,” said J.B. Hewetson, Noodles’ director of franchise sales.

“Denver continues to be a wonderful place to live and a business-friendly environment,” he said. “We find the makeup is really diverse. When you’re rolling out something that needs consumer acceptance, particular places are better than others. … This is a good beta test, kind of a litmus test market. You know if it works here, it will work wherever you take it.”

Late last year, Broomfield-based Noodles was acquired by Catterton Partners, an investment group. That came after five straight years of double-digit unit growth and positive same-store sales.

“That really separated us from the pack,” Hewetson said. “For that kind of performance during a recession, few can say they had positive same-store sales and grew their margins.”

There are now 255 Noodles restaurants nationwide, with 30 more ready to open in 2011, Hewetson said. That’s quite a climb for a chain that began with Aaron Kennedy opening the first store in Cherry Creek.

“That [Catterton] transaction put us on solid financial ground and put a lot of capital into the company,” Hewetson said. “We moved from having a good investor base to an even better investor base.”

Noodles’ unique menu — which includes Bangkok curry, Pad Thai, spaghetti, Japanese pan noodles, soups and salads — drives much of that growth.

“We don’t have a direct menu-to-menu competitor,” Hewetson said.

“You don’t grow through marketing. You grow through reaching every guest with every bowl, every time.”

Qdoba also homegrown

Qdoba has grown from a single store in Denver founded by Anthony Miller to the fourth-largest Mexican food chain in the United States, said Todd Owen, vice president of franchise development.

“In general, Denver had large growth from the 1990s with the ‘big cowtown’ stereotype to a worldly, large city with the influence of people from so many other places. Just look at the demographic — the state added 1 million people in a decade. It grew 20 percent. … The population skews a little above the median average for education and above the median income level. That fits the Qdoba offering.”

The Wheat Ridge-based Qdoba, which serves “San Francisco’s mission-style burritos,” is owned by Jack in the Box Inc. There are 70 Qdobas in Colorado, most of which are company-owned. The chain has grown to more than 500 stores nationwide.

That growth should continue this year, Owen said.

“A number of restaurant chains were probably in survival mode,” Owen said. “They cut quality or cut portion size. That’s not a healthy long-term strategy and we didn’t go there.”

Another rising star in the fast casual concept, Garbanzos Mediterranean Grill, started in Denver three years ago. It just opened its 13th store in Boulder late last year, and 15 more sites are in the planning phase, said Alan Mor, president and co-founder.

“A lot of transplants came here from other places,” Mor said. “So you know that if the people of Denver accept a concept, other places will accept it too.”

Garbanzos offers a menu of hummus, pitas, laffas, shwarma and babaganoush, and last year expanded the menu to include soups and new salads.

“The brand is getting more and more recognized,” said Mor, who co-founded Garbanzos with Ken Rosenthal, founder of Panera Bread.

While the Denver area is a fertile ground for growing restaurant chains, Mor said it’s also highly competitive.

“The thing is, if you can make it here with such competition, you can make it anywhere,” he said.

Smashburger’s Ryan said the company’s success comes, in part, because it’s constantly evolving.

“What was working a year ago might not necessarily be working now,” Ryan said of trying to keep the company fluid. “For example, what it takes to do something for 10 stores doesn’t work for 100 stores.”

Smashburger grew to 22 markets in 17 states, and has a backlog of 450 committed franchise restaurants, Prokupek said. The executive team, made up of “highly creative and innovative people,” has been “crafty at anticipating these issues,” Ryan said.

“We’ve been doing it with thoughtful, sophisticated, multi-unit operators,” Prokupek said. “We’ve really attracted qualified, well-capitalized individuals.”

The chain creates unique offerings for each of its markets, like the “Sin City” burger for Las Vegas and “Lone Star” burger for those in Dallas/Fort Worth. Executives also research the local craft beers to offer customers.

“That’s the hallmark of our brand,” Ryan said.

Many of those interviewed said Colorado also weathered the recession storm better than most states, which in turn helped growing companies.

“Denver has been remarkably fertile ground for a number of companies, not just Qdoba,” Owen said. “I doubt that trend goes away anytime soon.”

Many In CRE Industry Embracing the Social Networking Phenomenon

But They're Still Searching for Ways To Integrate Into Day-to-Day Business
By Mark Heschmeyer
February 2, 2011

One of the year's hottest movies, The Social Network, has garnered eight Academy Award nominations including one for Best Picture, and while the Internet phenomenon known as social networking may not yet have garnered as much acclaim among commercial real estate professionals, the industry is widely adopting the technology, according to an informal poll.

Social networking in the CRE business is largely in fledgling state with the industry still trying to harness its reach. CRE companies and individual deal makers are all over the leading social network sites in hopes that one day it will become the next great sensation and lead to more deals and connections.

"I have a hunger to know more about social networking, but I haven't yet figured out how to use it in business," said Gil Daniel of Southeastern Realty Group Inc. in Orlando, FL. "I am a member of LinkedIn and Facebook. I would love to have this as a tool to help sell commercial real estate, but don't know how. I'm all ears."

Like Gil Daniel, Jonathan McLaurin of Silverpeak Real Estate Partners in Atlanta also has his own personal pages on Facebook and LinkedIn and so do many others. Says McLaurin, "As social networking evolves and social networking technology starts to impact a larger percentage of people in the industry, social networking will be more a value-add phenomenon in the industry."

CoStar Group surveyed a random sample of 800 Watch List readers asking whether they or their companies are on Facebook, Twitter or LinkedIn networking and how they use them. We received 76 completed responses. Of that group, three out of every four respondents maintained a personal page on LinkedIn and half on Facebook. And about one-third of the CRE companies they represented had sites on all three networks. And while there was less widespread personal usage of Twitter, one of 10 companies identified that site a "primary" outlet for business communication.

Not There Yet

According to Michael E. Madziarek, senior advisor for Sperry Van Ness | Landmark Commercial Real Estate in Geneva, IL, social media in its present form and how people use it is not a source of information, rather a communication game that people enjoy.

"I do not care if you are attending the CCIM course 101 today and have to see for the next five days what you did in class," Madziarek said. "Because of the way people tag their tweets, you get all kinds of junk. I believe that it needs to be revamped in a way that people find it to be a source of information not a place to have a contest for the most followers and tweets for the day."

"I really don't have time to spend on the computer on social networks because I am busy actively marketing our properties, showing them, and also performing leasing and selling duties," agreed Angela Harwell, a broker / Realtor in Winter Haven, FL. "We have people come to us based on the press releases we issue about our activity - but I'm not sure we need to constantly put ourselves in people's faces."

It's All About The Future

The fact that social networking technology seemingly has widespread acceptance today has little to do with what industry professionals are doing right this instant, but rather is much more about where they see the industry heading.

"I think it is important as far as my business is concerned to stay up with the business networking sites, such as LinkedIn or Plaxo because they could become a real force in the future and I don't want to be starting from scratch at that time," responded R. Dabney Tompkins, Brokerage Services of CB Richard Ellis | Office Properties in Portland, OR.

"Or they may fade and never be much and I don't want to have devoted a huge amount of time to something that is going to end up irrelevant."

Some respondents compared social media adoption to the similar way the Internet was initially greeted with skepticism before being embraced by business. Katie Sherman of Commercial Defeasance LLC in Charlotte, NC, said: "It is incredibly important and crucial in today's day and age. If you don't [have a presence] you're not on the cutting edge and I believe in the years to come if you're not involved in social media then you will not be in business."

Larry J. Socia, director, retail division of Pyramid Brokerage Co. in Syracuse, NY, said: "Generally speaking, it's important to keep up with latest technology and trends to keep abreast of what's going on in the industry and worldwide. Right now, I'm more of an 'old school' person who uses these social networking resources as a means to keep pace with clients and competitors, rather than have a 'Challenger' moment trying to be first in space with cutting edge technology. It helps me look more modern."

Then Socia added: "I haven't used our fax machine in months."

"The jury is still out on the social networking," said Rebecca Horne, filing library museum evidence storage specialists with System Concepts Inc. in South San Francisco. "As the population ages and moves into management and powers of companies, it may well become the standard way of doing business…"

In fact, Horne added that we may be approaching that point: "Today is a very interesting time with Egypt and the Mideast erupting and the "normal" feeds of social networking as news sources have been cut. When the Internet does go down, how does business continue in the daily "new normal?"

It's All About Building Contacts, Promoting Buildings

Valerie Cothran of SunTrust Bank in Raleigh, NC, thinks she knows where it is heading in the future.

"I can use social networking through LinkedIn and Facebook to connect with professionals and basically build an address book of contacts that I can go to," Cothran said. "For example, if I meet someone in passing or have lunch with them at a conference, I may not have an immediate business prospect or connection, but by adding them to my network, I can contact them in the future. Considering I work in Special Assets now, building a network of future contacts is very important as I think about being on the origination side again in the future."

Marty Busekrus, CCIM, a senior associate investment sales with NAI Rauch Weaver Norfleet Kurtz & Co. in Fort Lauderdale, recently gave a presentation at NAI's national convention on the topic of Social Media. His theme was that social networking is all about personal and property promotion.

"I use social media as an extension of my resume," Busekrus said. "I think resumes are almost going by the wayside. Rather than sending an employer your resume, send them to your website. The personal website should be a really beefed up version of your resume. From your website you can link to LinkedIn, Twitter, I have podcasts, etc. These are all great not only for potential future employers, but also future potential clients. All of these "things" may not win you business, but it will get you in the door and you will absolutely be at the forefront of technology and your clients should see that."

"Most people start researching a person with whom they are planning to do business BEFORE they do business with them," said Nicholas L. Miner, CCIM, vice president - investments for Commercial Properties Inc. a CORFAC International Firm in Scottsdale, AZ. "If you make it difficult for them to find you, they will use your competition."

Paula Greer of Black & Associates in Portland, OR, said: "LinkedIn has been good for wider realm of industry information. And for finding potential contacts for my own business. I have also used it for referrals to business associates that are not on LinkedIn when I see requests that I know would be of interest to them."

It's A Generational Thing

"Some is much ado about nothing," said Steven R. Miller, brokerage vice president Industrial Services Group of Colliers International in Greater Cincinnati. "I also think it is "generational" I am in my fifties and find that my age group or older are still very much "old school:" phone calls, faxes and snail mail. My contacts and clients of a younger grouping are IMers, texters, Facebook-, LinkedIn-, iPad-types and certainly Twitter. I do not twitter, I do feel it a necessary function to employ some social networking sites and technology but like most things I believe there is a point of diminishing return with some of this."

Joseph Scarpa of Green Paradigm Realty in Pennsville, NJ, said: "The millennial generation is growing up with this technology… naturally adapting to collaboration, research, and communications… business soon - if not now - will have a social networking presence to accommodate the next maturing generation."

Kevin Peixoto, principal of KP & Associates in San Jose, said: "I don't see social networking as a primary tool for business communication in the commercial real estate industry at this point. It may be a useful tool in the future. I believe as communication evolves with younger generations that use Facebook and other social networking websites for business communication, that this form of networking and communication may become more popular with younger generations and it may find its place in the commercial real estate industry."

Keeping It Professional

One of the stumbling blocks some see blocking wider adaptation of social networking in business is the cross-pollination of what information professionals are willing to share and don't want shared.

"I use it primarily for branding and so clients can find out a little about me. I think it will become more important overtime," said Tim M. Noonan of the National Multi Housing Group for Marcus & Millichap in San Diego." But, at the same time, I think it is good to keep as much about your personal life personal. I like the fact that people can find me if they needed to but they don't know about my family and what I do away from the office."

Steve Basurto, an investment sales broker with CLB Real Estate Services Inc. in Temecula, CA, said: "The social networking sites I believe are still in its infancy regarding commercial real estate. I'm sure there is some value in having a presence on any one of these sites. As time goes on the information obtained from the sites will grow to be what they are, however in this business, certain information is deemed proprietary and I can't envision it being shared that way."

"I think in the brokerage business those sites are tough to use because the dissemination of information is impossible to control once posted via reposting and re-tweeting," said Nate Oleson, vice president of ARA ? Pacific in San Francisco. "In addition, investors are very particular on the type and quality they want to purchase. Also, most of my clients (private clients) don't use or have Facebook, LinkedIn or Twitter. The use of it may expand in our space but it is a ways out."

Email and Face-To-Face Are Still King

In the survey, we did not include the choice of email as a preferred option for personal or business communication. If we did, it likely would have gone home with the Oscar. We did ask if any of the three social networking sites had trumped email as a preferred method for communicating with friends and business. More than half answered a resounding "No!" while almost one in four also said "Yes" or "Not yet."

"Email is still king," said J. Francis Mahoney, SIOR, Cushman and Wakefield of Pennsylvania Inc. in Philadelphia. "Business owners and/or company executives charged with large real estate decisions are too mature/aged/busy to devote a huge amount of time to searching the social sites. They still seem to be the province of the young."

"Personally, I do not see what the fuss is about," said Karen Van Hamme of Principal Life Insurance Co. in Des Moines, IA. "I prefer to get my business communication by reading newspapers and journals (online) and emails that push the news to me rather than social networking sites. I see little value in my business of CRE research. I need more than 120 characters to get the info I need, and I want it from reputable sources, not random "twitterers."

Fred B. Cordova III, senior vice president / CART Western regional director for Colliers International in Los Angeles, and author of the firm's The Aggregate, said: "I believe in spreading knowledge an insight and sharing it openly, but it needs to be thoughtful and worthwhile. Everything else is just noise that no one has much time for. With all of the email noise, picking up the phone is more important than ever! Trying to deliver a personal message to 5,000 of your closest friends via Twitter or Facebook, just does not seem to me to be the way to go in our business."

Still, Cordova offered the one pervasive caveat that seems to be out there about social networking in commercial real estate.

"That said," Cordova added, "we are looking into it to see if there is a way to do it and protect client privacy. It does seem to be the wave of the future and with iPhones and iPads… we feel it bears serious consideration."