Spring Brings New Deals

I have been dying to write this blog post as all the details were being settled and all the documents signed. There is a long blog post in me about my love-hate relationship with lawyers. One of whom is my partner. Another time.

Nonetheless, as I write this the sun is bright and warm, and the air smells sweet from new blossoms and feels soft on my skin. Spring is here, and it is the time to leap forward with excitement and hope. As the last nails are hammered in for Takoma Beverage Company, they are only a moment from bursting into life. It has been an incredible—and incredibly fast—journey with founders Seth and Chris, and I am thrilled to see the opening just ahead. I hope you will come visit the store sometime to see for yourself what makes it such a great concept.

And more is coming to life in this season of naissance. We have partnered with two incredible concepts, and we are fundraising for both. Take a look below, and feel free to reach out to me if you are interested in hearing more.


 

City-State Brewing Company
The Flavor of the District

Founders James Warner and Kim Carnahan are committed to paying homage to their adopted hometown of Washington, DC, but they know that it will take more than a name to make a mark on the DC beer scene. James quit a promising career in politics to go all in on his hobby. He has worked in every capacity in the business, and all the while with the intent to learn as much as possible about the beer business so that City-State can be as successful as possible. I was sold on the beer at first taste, and it didn’t take much longer for me to be sold on the team. With a solid business plan in place and a significant amount of money already raised, James and Kim are far along in the process. Mothersauce will join with them to get City-State across the finish line and open for business.

The Eleanor
Bowling Lounge, Music, Bar & Grill

Adam Stein is a well-respected Chef and industry veteran who has launched multiple successful concepts over the years, and now he is ready to launch his own. The Eleanor will help to define Ivy City as the District’s next great neighborhood. The 7,000 square foot location will feature four bowling lanes, event/music space, a movie screen, bar and lounge area and an outdoor patio geared for large scale food and drink events like pig roasts and crab boils. Think of it as a cooler, bolder Spider Kelly’s. The Eleanor has the size, the style and the skill to make a huge impact that will go far beyond its neighborhood. With an LOI in hand for the location, the founders are ready to get going.


I hope that you enjoy this season and the hope and excitement it brings. It is great time for our company, and if you are interested in being a part of all that we are doing, feel free to reach out to me anytime at nick@mothersaucepartners.com.

 

Restaurant Forecast for 2017: Sunny and Warm, but Mind the Thunderstorms

If you have lived in Washington for some time you know that the weather for summer is pretty much the same: hot, often sunny, Amazon-like humidity and a chance for a violent thunderstorm every day at about 4:00PM.

Once you get over questioning why you live here and not in San Diego, you adapt and realize that it is pretty nice here—just find a pool and you’ll be fine.

Same goes for 2017 for Mothersauce and the restaurant business in DC (first up for us: Takoma Beverage Company). I think the weather will be great, but we need to watch out for the storms.

There has been a lot of talk about a local restaurant bubble as well as a national one, and the talk is not going away. To be sure, there are serious issues in our business that are creating problems for many businesses, and it may get more challenging before it gets better.

But I wouldn’t start throwing around the “B” word. I think that kind if hyperbole is great for headlines, but I think it can distract businesses from focusing on what the real issues are. I think that the underlying issues are going to lead to more of a correction than a crash, and there are several areas and specific businesses that will continue to grow strongly this year and beyond.

What are the issues?

Well, there are a lot, and they can be very geographically unique. There are a million reasons why a restaurant or several restaurants in an area can fail, but added up together they are not necessarily indicative of a massive trend.

Still, there are some issues that are universal, serious and not going away: the continuing labor shortage, high rents and segment saturation.

Labor. It is always hard to find good people, but the complaints I hear from operators across the country about staffing have never been this severe. It is an employee’s market out there which is great for the talent, but it strains businesses as they try desperately to fill their schedules. The glut of openings means that there are lots of open positions and not enough people to fill them. Service suffers consequently, and there are operators stalling their own growth to avoid this.

Part of the solution starts with better training and incentives. We need to let people know that this business can be a good career option at any level with tremendous opportunity for growth, and then we need to make sure these people are well trained and ready to succeed.

High Rents. The landlord perspective would be valuable here, but until I buy a building, I can’t offer it. What I can say definitively is that rents in the most popular area for restaurants have been very high for a long time. It is no revelation to state that the rents climb as an area gets hot, and then they decline much slower on the other side.

Rent can be a killer for a restaurant. Already tight margins only get tighter with high rent, and if there is no help from the landlord, if a potentially great long term restaurant suffers a minor setback or needs some time to grow its business, the runway might end before they make it.

But isn’t it in the landlord’s interest to have a sustainable, long term tenant? You would think so, but many landlords require a portion of the lease guaranteed, so the tenant can be stuck with the rent long after they close—and that sure is fun.

To me, the ideal scenario is to see the tenant-landlord relationship as a partnership where both can be successful. Restaurants often put a lot of money into spaces that improve their value, they can make a building and even a neighborhood more popular and valuable, and if they are doing well they can stick around paying rent for a long time. These are all things that help the landlord. Lower rents and more managed leases are the way to go. I’ll hold my breath…

Saturation. A word that we started throwing around in Clarendon 10 years ago. Yes, 10. It may have taken longer to get over and past that breaking point, but it was pretty clear it was coming. At a certain point, a market can only sustain so many places—there just aren’t enough customers to go around. The customer base gets spread thin, a couple stand outs do well, a lot of places teeter on the edge of profit, and a lot of places have to close. Then it starts to look like a wasteland of empty spaces.

Zoning requirements for ground floor retail in new developments have been awesome at creating vibrancy in neighborhoods, but at a certain point if every single new building has retail options, there is too much space. The rents don’t drop as you think they might, but tenants stream in anyway, and…boom.

There are at least a couple former restaurants spots in Clarendon that are rumored to switch use, and I think that is great. I know this contradicts the rent theory in a way in that less space available will create higher rents for restaurants, but what I think works best is to find that sweet spot—other retail uses can pay rent as well and fill empty storefronts, and the best concepts can fill the best space and be successful.

There are a lot of smart people out there thinking about this, and a lot of us are reading and listening and talking about these issues as we forecast this year and beyond.

I will continue to research and solicit input, but I think that we are not in a bubble in the sense that we are awaiting a big crash like real estate in 2008. I think a correction is already happening, be it in my neighborhood or nationwide, but I believe that we will keep growing, and that there is tremendous opportunity in our business. For that reason, I believe 2017 will be a great one for Mothersauce. We just need to keep our eye out for those storms.

Clarendon Metro

Carnage in Clarendon: Restaurant Trends in Arlington’s Hottest Neighborhood

“Define the definition.”

What the Hell is that supposed to mean? Beats me, but I said it. What can I say, it was my first podcast. I was recently a guest at the ARLnow.com offices for their series, “26 Square Miles-An Arlington Podcast.” Given my background and given the popularity of restaurant articles on the site, I was pretty sure that I was going to be asked about the recent spate of closings in Clarendon. It is a topic worth exploring for sure, and I did my best to contribute to the conversation.

If you are up for it, take a listen here. We jump right in, and then pull back to broader industry trends outside of just our neighborhood. At the end, we talk about the inspiration for Mothersauce, and the plans I have for the company.

So just what has been going on in Clarendon? Well…

Tagliatelle, Brixx (6 months), Park Lane (8 months), Ri Ra, Boulevard Woodgrill, Fuego, Spice, Hard Times, American Tap Room , Amsterdam Falafel.

That’s 10 this year, and I have probably left someone out. Rumors swirl about more closures on the way, and many in the neighborhood are seeing their numbers fall.

So what is behind the Carnage in Clarendon? Hyperbole aside, a lot.

Clarendon has come a long way since the days of my youth when we would head there for Vietnamese food and not much else. The Metro’s arrival, and the brilliant planning by County leaders about how to develop around Metro laid the foundation for the success many businesses have been able to enjoy subsequent. That was 40 years ago. The past 10 years the growth has exceeded even the most optimistic forecaster’s dreams, and Clarendon has become the destination nationally for development. It hit all the right metrics and the residents and businesses flocked.

But there is a limit.

Many of us who have been in the neighborhood for some time felt that the saturation point was inevitable, and we feel we hit it a couple years before half of the businesses above even opened. As operators raced to benefit from the exploding customer base in Clarendon, rents skyrocketed to levels that were just ridiculous. Businesses signed on to high rents right as the market became flooded with concepts.

At the same time, external trends worked to shrink the famous customer base. DC exploded. 14th St., Shaw, Navy Yard, Barracks Row, NoMa. Neighborhoods few would venture to five years ago have become sought after hot spots only a short, cheap Uber away. We have certainly felt that at Spider Kelly’s.

Stuck with high rent and fighting with similar concepts for a shrinking customer base doesn’t leave a business with a lot of runway to make it. This is only heightened if the concept offers nothing particularly distinct.

And so here we are.

As the culling continues, what remains to be seen is what comes next? Many of the concepts that close will be replaced by new concepts (Ri Ra, Boulevard Woodgrill, Hard Times). Others are rumored to be switching to retail. Still others remain dark with no signs of what is to come.

Clarendon is still a great place to live, work and do business, and there is still tremendous opportunity for success. What made it so attractive many years ago continues to be what will make it attractive in the future—proximity to the city, access to mass transit, great schools and parks, and of course a vibrant commercial corridor with great businesses.
The difference is that those of us still here need to work harder, be smarter and continue to try to grow our businesses to offer our customers what they want. Why do you think we built a Beer Garden?

I am a native Arlingtonian, and I still live in the County. My daughter goes to Arlington Public Schools and many years ago when the planning was being done to grow Arlington’s commercial centers and preserve our unique neighborhoods, it was my Mom, Judy Freshman, who helped with the plan. I am invested heavily in the County, and in Clarendon, and I am very optimistic about its future.

In the meantime, at Spider Kelly’s, we will continue to focus on getting better at what we do, and watch to see who is still around when the dust settles. Hopefully, we will be.

Full Podcast: http://arlnow.libsyn.com/ep-12-spider-kellys-co-owner-nick-freshman

Barton Springs

DCA>AUS

Mothersauce Partners went nationwide recently with an exploratory trip to Austin, TX. What an amazing city in the midst of an amazing time. There is a palpable energy to the town that is inescapable—what was for years a quiet capital is now undergoing explosive growth. It seems that everyone there is trying to figure out how to make it work.

The food and drink scene in Austin is in the midst of a powerful transformation in concert with the city’s growth as a whole. Standbys like barbecue and Tex-Mex are having to adjust as new concepts gain a foothold in the scene. Navigating this as a newcomer can be tricky, but it was made easier thanks to Rachel Charlesworth. Her Instagram, ATXEats, boasts almost 14,000 followers. If you want to know where to eat—just follow her.

Unfortunately, no one told me how to dress. After my third meeting where I was in a blazer and dress shoes, and the other party was in flip flops, I started to get Austin. I shed my DC armor and began to enjoy myself a bit more.

I tried to hit a lot of the spots—Launderette, Uchiko, Fleet Coffee, Easy Tiger, Tamale House East and so on—but there were just so many on the list.

A special shout goes out to the dynamic CEO of an Austin institution, Mason Ayer at Kerbey Lane Cafe. It was great to hear about the history of an iconic company and learn about what the future might hold for them.

Also, the kick ass team at SMGB Hospitality is ready to take over Austin—and beyond. Their upcoming project, Old Thousand will no doubt make an immediate impact. These guys are real pros. Thanks for all the time, gentlemen.

I think a lot about startup culture in this country and how it is always talked about in tech, but it is as prevalent in food as much as anywhere. Restaurants are startups—aspiring restaurateurs have a great idea to meet an under-served need, they scrounge for some capital, then they take a huge risk and hope to make it big. Austin is full of these people, as is DC, and it is a big part of what makes the cities great.

I was lucky enough to meet with some of these food startup folks down there who are ready to disrupt the Austin scene for the better, and I hope to have some info soon about how Mothersauce Partners will help them do it.

In the meantime, my last meeting summed up Austin perfectly. I had heard about Barton Springs Pool, a spring-fed pool in the middle of a city park, and I wanted to jump in before I left. Turns out the guy I met with last was a swimmer, and he offered to take me on the way to the airport—and jump right in with me. Now that is a cool guy, and it was a great meeting.

I started the trip in a sport jacket, and I finished it in board shorts. Thanks, ATX. I will be back soon.

barton-springs

second restaurant location

Introducing Mothersauce Partners: Restaurant Consulting and Investment Opportunities: A New Approach

I am excited to announce the launch of my new venture, Mothersauce Partners. Mothersauce is the culmination of a 20-year career in the greatest business in the world. I have spent my entire career behind bars, inside walk-ins and standing ruefully over grease traps–and I can’t imagine doing anything else. With Mothersauce, I hope to give a new generation of entrepreneurs the chance to achieve their dreams of ownership and be able to introduce their talents to a greater audience.

But first: The name, right? What does Mothersauce mean? Chefs will instinctively recognize the nod to French Chef August Escoffier, who is credited with elevating cooking to a respected and noble profession—in the late 19th century, mind you. It took some time for it to be as respected here in the U.S. Of the many things Escoffier did, perhaps most notable was to record and classify five basic sauces that form the backbone of French cooking—the mother sauces. These sauces provided the base for countless recipes that followed.

Cooking has come a long way since 19th century France. Many world cuisines have their own core ingredients and recipes, but to me the idea is the same now and wherever you go. Recipes always start with a solid foundation—how many recipes have you read that start with chopping an onion? Those recipes then grow, diverge, flourish and eventually become something completely new, but the ingredients for their success remain largely constant.

Through this venture, we aim to facilitate that “new.” Mothersauce Partners will provide the solid foundation—the mother sauce—from which these culinary entrepreneurs will launch their passions. With investment capital and seasoned expertise, we can offer them an opportunity to take that great leap.

We also want to continue to add to the culinary scene—and by extension, the culture and community—by selecting the talent with the true vision. We are looking for the rising stars who want to elevate their particular specialty to new heights and become impactful members of their communities. We will look to do right and do good.

I hope that many of you will join us. If you would like more information on investing, sign up on the site. If you are a concept and you are ready to talk, do the same.