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Business Observer Thursday, Aug. 13, 2009 12 years ago

The Italian Niche

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A group of German investors plans to grow an Italian restaurant franchise called Vapiano to as many as 10 Florida locations. Already popular in Europe, Vapiano occupies a niche between fast food and upscale dining.
by: Jean Gruss Contributing Writer

A group of German investors plans to grow an Italian restaurant franchise called Vapiano to as many as 10 Florida locations. Already popular in Europe, Vapiano occupies a niche between fast food and upscale dining.


Even in good times, the restaurant business can be treacherous.

Today, dozens of restaurants for sale on commercial real estate Web sites such as LoopNet reveal the challenges of the business in tougher times.

But a group of wealthy German investors is betting that a new Italian-themed restaurant called Vapiano is just the kind of eatery that appeals to consumers searching for less expensive meals outside fast-food restaurants. The group plans to open eight to 10 locations in Florida in addition to the existing restaurant they own in Estero, near Fort Myers.

Despite the recession, these investors have enough capital to open new restaurants without resorting to outside financing, says Martin Luible, the managing partner for the group and the former chief operating officer for the corporate parent that oversees 55 existing worldwide Vapiano locations in 16 countries. Each restaurant will be established as a separate business with different investors, he says.

Vapiano's success in the midst of a European recession five years ago shows how it might navigate similarly challenging conditions in Florida today. It's also an indication of which restaurants might survive and faith that the economy will eventually recover.

For example, Luible says residents of Munich flocked to that location during the last downturn because it offered good food at reasonable prices, served quickly in a sit-down format. That 220-seat restaurant served 2,000 customers a day.

Vapiano is a bit of a paradox. While its name in Italian means “go slow,” speed is essential. “It's all about volume,” says Luible.

The average check for lunch is in the $10 to $12 range, so the service has to be speedy to make back the $1.2 million to $1.4 million investment in each restaurant. The Estero restaurant reports about $2 million in annual sales, but Luible says other restaurants can generate as much as $5 million annually. He says it takes about three years to achieve profitability.

Guests tend to stay in the restaurant no more than 20 to 30 minutes, though they can linger at the bar where the plush chairs are more comfortable than the stools in the restaurant. Food sales account for about 70% of the restaurant's revenues, with the bar accounting for the rest. “The margins are better on food because liquor is expensive,” Luible says.

Vapiano resides in the “fresh casual” restaurant niche, a mix between fast food and upscale restaurant. Guests receive an electronic card when they enter the restaurant and use at various food stations where chefs prepare pasta, salads and pizza from scratch. A cashier tallies customers' orders on the card when they leave.

Cost control essential
Any savvy restaurateur will tell you that small expenses add up, but it's even more critical in the high-volume niche Vapiano occupies. “It's all about watching costs, especially in fast-casual when we have very small margins,” says Luible.

Luible, 43, a former tennis pro who used to hit the ball around with champion Boris Becker in his younger days in Munich, is so careful with expenses that he carefully places paper menus that customers leave on the tables back into a rack near the entrance.

But labor costs have declined in the recession and the pizza and pasta ingredients are relatively less expensive than beef, for example. The food is made from scratch, which allows Vapiano to control both cost and quality.

Where Vapiano hasn't scrimped is on the decorations and furnishings.

The seats are made with Italian leather, the tables are made from German oak and the counters are built with real marble. It costs as much as $1.4 million to build out and equip the interior of a Vapiano restaurant. “It's all custom made,” Luible says.

It gives customers the impression that a $9 pizza is a good deal in an upscale atmosphere.

Growing the chain
Although Luible worked as an investment banker with Deutsche Bank for 12 years, he became enamored with the Vapiano concept when he visited one of the first restaurants in Munich. He started on the company's management track by washing dishes in 2005, then putting in a stint as a cook before rising to chief operating officer and opening restaurants across Europe.

Luible moved to the Washington, D.C. area in 2007 to start the company's U.S. expansion, garnering the sought-after “hot concept” award from Nation's Restaurant News last year.

A franchisee had opened a Vapiano at Gulf Coast Town Center, a new mall south of Fort Myers in Estero. Luible came to fix management problems and an investor group with franchise rights to Florida recruited him to oversee the 10-store expansion this summer.

Luible plans to add eight to 10 Vapiano restaurants in locations such as Miami and Orlando in the next decade. “You have to be careful not to grow too fast, but protect your brand,” he says.

Each country has its different tastes and Luible has had to adapt Vapiano to American consumers. For example, fountain drinks are considered fast food in Europe but he's had to install them in his American restaurants because customers demand them.

“Here in America, the competition is so much stronger,” Luible acknowledges. A Calistoga Cafe is located just a few doors down from the Estero restaurant.

Luible is promoting the restaurant by holding chamber of commerce and other events to lure prospective customers. “If we get people in the restaurant, they will come back,” he says.

And the key to keeping customers coming back is to maintain a consistent quality at a competitive price. “It's not hard to be successful if you're consistent,” Luible says. “It's all about value.”

Is pizza recession-proof?


New restaurateurs seem to be pretty high on the pizza pie.

Despite the toughest recession in decades, new pizza restaurants are opening on a regular basis from Tampa to Naples.

“Pizzerias are typically more profitable than many restaurants because their food costs are lower and people love them,” says Dougall McCorkle, senior vice president of commercial real estate with Lutgert Cos. in Naples.

Piola, an upscale pizzeria specializing in thin-crust pies made in a brick oven, recently opened a location at Mercato, a Lutgert development on U.S. 41 at Vanderbilt Beach Road in Naples.

“You've got to have one to have your CO,” McCorkle jokes, referring to the certificate of occupancy issued by the local government that certifies the buildings comply with codes. Few large developments on the Gulf Coast are without a pizza place, it seems.

Just up the road in Estero, Chicago executives Jack Canna and Jack Haberkorn opened Aurelio's Pizza. In a nod to health-conscious consumers, it even sells gluten-free pizzas. Further north in Sarasota, Buffalo, N.Y.-based entrepreneur Joseph Jacobbi recently opened a Casa di Pizza near University Parkway.

“To some degree, it's comfort food,” says Gary Hoyle, a consultant with Westshore Pizza & CheeseSteaks, which has 42 locations in the Tampa Bay area. “In good times, our business is very, very good. In soft economic times, it's even better.”

Westshore Pizza is scouting sites in the Fort Myers area for expansion, Hoyle says. He's eyeing restaurant locations where the previous tenants went out of business. “We're looking to grow down there and get franchise operators,” he says.
— Jean Gruss

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