I’ve flirted with acquiring and operating a small business for a few years. My friend Kal and I were actually on the doorstep of opening a falalfel franchise in Chicago called Maoz, but decided against it at the eleventh hour; not because of the menu though – the falafels are amazing. Kal has since started an online publication that aims to bring much needed transparency (financial, diligence) to the space. Check it out at www.thefranchisehound.com.
On that note, I wanted to share one of my favorite restaurant concepts: Flattop Grill. It’s Midwestern based, so those of you who aren’t acquainted, think Mongolian BBQ but with less emphasis on the meat and more focus on developing a great dish. The setup is simple. Four walls, a self-serve bar where you pile on veggies, gourmet sauces, and meats; and a huge hibachi grill. Flattop provides ingredients for staple dishes (Kung Pau, Pad Thai, Veggie Woks) , but encourages you to Top Chef your own meals. The service is friendly and atmosphere is cozy but lively, a far cry from Mongolian’s stadium like feel.
I’ve evaluated many restaurant retailers as acquisition opportunities – both franchised and independent (Flattop unfortunately does not franchise) – and have isolated a few key drivers for a successful chain concept.
(1) Customer Acquisition & Retention. How do they attract customers and how to do the keep customers – especially in recessionary periods.
(2) Sustainable Financial Model. Do they have manageable rent? Do they lack big salary items (chefs, managers)? Do they have above average transaction prices? How expensive is it to build out?
(3) Scalability. Is the business dependent on a certain customer demographic? Does it require a personality (e.g., a chef)? Is the average transaction price affordable across demographics?
In every instance, Flattop meets or passes these tests. Their Asian/American fusion menu is attractive to most US consumers – just think of the popularity of Asian quick service restaurants in America. It costs $11.99 for a a giant bowl of food (very affordable) and $13.99 for all you can eat, which is at the lower end of the price range for dining out consumers, but significantly higher than it’s quick service peers like Panera or Chipotle. The all you can eat option is extremely appealing to college students and twenty somethings. They have a bar AND are children friendly. And their prompt yet high touch customer service makes customers want to come back.
They are a simple four wall concept (i.e., small box store) which means lower rent. There is no need for a full service kitchen – just a prep station – as the cooking is primarily done on the external hibachi. The low rent and simple decor offsets the one significant capital purchase of black iron ventilation to support the hibachi setup. The restaurant does not require a an in-house or high-priced chef as it’s the user who selects the food and a salaried employee who fries it.
Flattop can quickly turnover (fill all seats and then refill with new customers) it’s entire store at an above average ticket price. It has low costs (no kitchen, chef) and a small box space. Customers get significant bang (and flavor – the sauces are amazing) for their buck. While it’s not available for franchising (independently owned), I believe it’s replicable and scalable across the US. Families, college kids on a budget, business professionals, and friends out for dinner and drinks all fit as Flattop consumers. I know I can’t get enough.