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Business Observer Friday, Feb. 28, 2014 4 years ago

Flex casual

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Naples Flatbread promises an efficient and flexible operation to franchisees. It took Ralph Desiano five years to perfect the concept.
by: Jean Gruss Contributing Writer

Don't box Naples Flatbread.

The fast-casual chain of pizzas, panini sandwiches and salads offers tableside service and a liquor bar, two things that set the chain apart from others in the category.

Maybe that's because owner and veteran restaurateur Ralph Desiano birthed the chain in early 2009 during the depth of the recession. He knew the recipe for success wouldn't come by using the same old strategy. “We've found our little niche,” says Desiano, whose restaurants average about $1 million each in sales annually.

In fact, Desiano has termed his restaurant “flex casual” because of the ability to switch from counter ordering to tableside service depending on the time of day or the demands of his customers.

With five Naples Flatbread locations in operation, Desiano is now ready to start selling franchises in 48 states. He's aware there's plenty of competition in the fast-casual segment of restaurants (see accompanying article), but he shrugs it off. “I try not to worry about things I can't control,” he says.

In the last year, Desiano says 40 to 50 people have approached him about buying a franchise. “It's flattering, but it's not the way I want to do it,” he says. He's looking for seasoned restaurant operators, preferably ones interested in buying a territory of multiple stores in Florida or the Southeast.

A Naples Flatbread franchise costs $40,000. A development agreement for a wider area would cost an additional $10,000 per restaurant. “I'd love to sell a state,” he says.

Desiano and his business partner, Tulsa, Okla.-based entrepreneur Jim Wilburn, have spent in excess of $50,000 to hire Monroe Moxness Berg, a Minnesota law firm, to draft franchise documents that spell out the details explicitly. “We sought out the best legal minds,” says Desiano.

After five years and more than $2 million building the restaurants and perfecting the operations, Desiano says he's ready to shift his attention to selling franchises. “I'm feeling really good, but we have a lot of work to do,” he says.

Efficiency and a bar
Desiano gains an advantage by equipping his kitchen with easy-to-operate equipment, including a wood-burning stone oven, panini presses and sophisticated ovens. There are no charbroilers, fryers or flat grills that are messy and more costly.

That means the restaurant can run with just two people in the kitchen: a manager and an employee. “My underlying thing is to keep things simple,” says Desiano.

So far, Desiano and Wilburn own three restaurants in Naples and two in Tulsa. There are no regional variations on the menus and prices are the same in both markets, proving the concept can work in the heart of the country and in a resort area.

One of the things that make Naples Flatbread different from other fast-casual chains is the bar, which takes up about one third of the total space of the restaurant. For example, at the newest Tulsa restaurant, the bar has 32 seats and the restaurant has room for 150 people inside and another 60 on the open-air patio.

Desiano initially served beer and wine, but he says he added liquor to the menu when customers requested it. He says the average checks and margins are higher at the bar than they are at the tables and it creates a fun, upscale atmosphere that draws the dinner crowd. Beer, wine and liquor now account for about 25% of the restaurant's total sales.

Selling the franchise
Desiano says the challenge now is to step away from the operations of the restaurants so he can focus on selling franchises. “I've got good young talent that I'm nurturing,” he says. “I've learned that I need to step back a little bit,” he smiles.

But finding good managers who will work alongside the staff is tough. “There's a lot of office managers out there,” Desiano says. “They don't want to work hard.”

Still, handing off the sales of franchisees to someone else could be costly, too. One prospective franchise salesman who has experience in this field asked him for a six-figure salary, an expense account and royalties in perpetuity, Desiano laughs.

But Desiano isn't in a rush and he's not worried another flatbread chain might try to beat him. “There's plenty of room for us,” he says. “I think we're primed.”

Desiano is particularly concerned about expanding too fast. He prefers to expand the franchise in Florida or in areas such as Atlanta or Charlotte, N.C., where success is most likely. “California would be a recipe for disaster,” he says, citing the high costs of doing business there.

“I've seen great concepts self destruct,” he says, citing Boston Market and Krispy Kreme as examples of rapid expansions that went wrong. “It's hard to say no to someone who gave you a million-dollar check,” he says.

Fast and furious
One of the hottest sectors of the retail market is the fast-casual restaurant.

It's an establishment that offers counter ordering like fast food, but it promises higher-quality food in an atmosphere of a casual restaurant. Often, staff will bring your meal to your table after you order it at the counter. Panera Bread is one example of this kind of restaurant.

Many fast-casual chains that expanded to the major cities of Florida such as Tampa and Orlando during the real estate boom put their expansion plans for the Fort Myers and Naples markets on hold during the recession.

Now, restaurateurs in Southwest Florida are dusting off those plans.

Commercial real estate brokers say some names scouting the area are easily recognizable, others not so much: Culver's, Chipotle, Ker's Wing House, Genghis Grill, Zaxby's, Noodles & Company, Pollo Tropical, Moe's, PDQ, How Do You Roll, Papa Murphy's and Carlos 'n Charlie's.

“For a long time we didn't even see a new Starbucks,” says Karen Johnson-Crowther, managing director and principal with Colliers International Southwest Florida in Fort Myers.

“I think the confidence in the Southwest Florida market is returning,” Johnson-Crowther says. “There was a lot of money waiting to find a home.”

The success of fast-casual restaurants mirrored the recession, when diners became more conservative about their spending. Typically, someone might pay $7 to $15 at a fast-casual restaurant.

Sometimes a fast-casual restaurant will have a drive-thru window and special parking while you wait for the meal to be delivered to your car. “Everybody's in a hurry,” says Walt Nelson, senior associate with Trinity Commercial Group in Naples, who has helped Culver's locate sites throughout the region.

One of the challenges is that municipalities sometimes confuse the fast-casual restaurants with fast-food chains, especially if there's a drive-thru window, Nelson says.

That definition can create confusion when it comes to municipal taxes on new construction, also called “impact fees.” For example, in Collier County, such one-time taxes are based on traffic count and could amount to $400,000 for a busier fast-food restaurant, but $200,000 for a fast-casual restaurant. “We had a deal die in Collier County because of impact fees,” says Dan O'Berski, Trinity's managing director.

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