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.”
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