Tuesday, December 6, 2016

Keep or Convert? Four Restaurants For Sale in Atlanta

Local restaurant & real estate brokerage The Shumacher Group consistently has restaurants for sale in and around Atlanta and the southeast.  Much of the time the restaurant's name or exact location are not disclosed, but sometimes they are.  Below are four current listings for Atlanta area restaurants actively for sale and my take on each.  

521 Kitchen & Que 
This 2,500 square foot restaurant opened in late 2014 in place of the former Tin Drum in Wieuca-Roswell shopping center.  Off the bat, the restaurant was competing for BBQ sales with The Greater Good BBQ, a Fellini's/La Fonda group restaurant located nearby.  I live very close to this restaurant and only went once and left unimpressed.  If you are a new concept competing against an established and well capitalized operator, you gotta set yourself apart by either offering a compelling value or superior food.  In my opinion 521 offered neither.    
The sales listing indicates that the restaurant includes seating for 70 with rent of $8,300 per month (all in).  The lease has several years left on primary with 2-five year options to renew.  The owners reportedly spent  $300,000 to renovate and update the space.  The BBQ smoker is not included in sale but could be purchased for an additional $16,000.   "Sale does not include name or brand so no books and records other than lease, asset list, fixed costs and expenses will be provided."   
Priced at $99,000  

Burger 21  
An independent franchise of the Tampa-based company, the Buckhead location in Chastain Square opened last summer in place of  Chopstix/Scenario to the left of Publix.   Even before it opened, I questioned the viability of another "better burger" joint in north Buckhead where Cheeseburger Bobby's and FLIP, among others, already exist.  I rarely saw the restaurant busy, and although I live nearby, I only visited once. The food was good, not extraordinary, and did not leave me wanting to return any sooner than I would to any other place.  Locally, the chain also has locations in Buford near the Mall of Georgia and in Johns Creek.  A location on Scenic Highway in Snellville remains "temporarily closed" following a brief nearly 90 days in business earlier this spring. Another location is "coming soon" to Kennesaw Marketplace, while two others are in the works in Midtown and Sandy Springs.
The sales listing indicates that the roughly 3,100 square foot restaurant has seating for 100 and that restaurant's buildout cost over $750,000.  The restaurant is signed to a ten year lease with an option to renew with monthly rent of $10,700 (all in).  New owner would be able to either keep as is or convert to nearly any quick serve or casual restaurant not already present in the center.   
Priced at $199,000  

Momma Goldberg's Deli 
Located in the street level retail of SkyHouse Midtown between West Peachtree and Spring Streets, the 2,250 square foot restaurant opened in early 2014.  An independent franchise of the Gainesville, Florida-based business, the midtown location is off the beaten path and is the chain’s only location in metro Atlanta.  While some might see this as making the location a destination for those who seek out the restaurant's food, I see it as a hindrance, and something that has surely negatively impacted its sales.  Interestingly, although the company was founded in Auburn (in 1976), it's today based in Gainesville, Florida.  A brief internet search shows that at least three locations of the chain have closed in Florida (Fort Walton Beach, Panama City & Tallahassee) leaving them with zero presence in their current home state. 

Locally the restaurant's opening was met with tremendous enthusiasm from Auburn grads like PR maven Tori Allen and countless others eager for a taste of home to open in Atlanta. While having a cult-like following is great, it seems the restaurant failed to grow the following enough to sustain itself.    
The sales listing indicates the restaurant has seating for 55 and that the owner is "breaking even" with "zero effort and no advertising."  The restaurant was opened at a reported cost of nearly $400,000.   The restaurant is currently signed to a "long term lease" at $4,500 per month (all in) with options to renew.  New owner would be able to keep existing franchise or convert to any concept.   
Priced at $69,000  

Fuego Mundo  
South American Wood-Fire Grill Fuego Mundo  is located in The Prado shopping center on Roswell Road in Sandy Springs.  The nearly 2,500 square foot restaurant has seating for 80 (outdoor patio seating adds 20) and was opened in mid-2009.  The full service restaurant features kosher South American fare and in accordance with the Atlanta Kosher Commission, is closed Friday night and all of Saturday. While operating fewer days than even Chick-fil-A, the restaurant seemed to do well with a heavy Jewish population nearby and others adopting a "kosher lifestyle" for its health benefits. 
The sales listing indicates monthly rent of $9,500 (all in) with several years left on the lease with the option to renew.   Opening costs for buildout and asset package came in at $600,000.  2015 gross sales were $1,078,517 with net profit of $216,775 after all expenses, and including $50,000 manager salary.  New owner would be able to maintain current concept or convert the restaurant to nearly any other concept not already present in the center.    
Priced at  $476,000.    

All four of these restaurants have their own set of challenges and while Fuego Mundo has one of the worst locations of the four, I think it stands the greatest chance of continuing a going concern.  521 Kitchen, Burger 21 and Momma Goldberg's are likely to be converted into other concepts.  But what should they become?  Countless concepts are canvassing metro Atlanta for new locations, but is a new concept in a bad location a good idea?     

What do you think should replace any of these restaurants, or should they remain the same?  Do you think a good concept can overcome a terrible location?  What new restaurant with plans to enter/expand in the Atlanta market (i.e. Blaze Pizza, The Halal Guys, Salata, KEBA Sandwiches, Earl of Sandwch, Potbelly Sandwich Shop, Amsterdam Falafelshop, Garbanzo Mediterranean Grill etc.) are you most existed about?

Please share your thoughts below.

17 comments:

Anonymous said...

Potbelly is coming? Where and When?

Greenwave said...

Reading this is so disheartening. Is there ever a place that's in danger of closing down that you DO like? Burger 21 is certainly better than FLIP that's for sure.

Anonymous said...

Burger21 was not exciting although the burger is much better than Cheeseburger Bobby's which is completely gross. This franchisee is in a predicament since the franchise sold a location to a different franchisee down the street further into Sandy Springs. He is smart to cut his loses before the other one opens. They would be too close together.

Anonymous said...

As Auburn people, we've been wondering what would happen to that Momma G's (I've never really liked the concept, but everyone I know does). While supposedly the location was centered around the midtown lunch crowd and lunch catering, it really, really sucks to visit (space itself is fine).

I still don't know why Town Brookhaven or some SEC alum-rich environment with both higher visitor traffic and built in resident traffic wouldn't have been the better choice.

SB said...

Odd that 3 of them are one the same corridor in close proximity. I don't know enough about restaurant sales but I question why anyone would pay to take over a lease obligation. It seems like it some of these examples, the seller should be thrilled to get out of their lease obligations for no $$ in return rather than having to declare BK to avoid the continued rental obligations. Sure if it's a thriving business and you keep it going, you're buying an income stream. I'm just not sure why you'd pay to buy an monetary obligation for a failed concept. What am I missing?

Anonymous said...

We love Burger 21, and definitely much, much better than Cheeseburger Bobby's. I think that's just a bad location period.

Anonymous said...

I'm excited to try Earl of Sandwich although I haven't made my way to Phipps yet. Back when Phipps had a great food court and NO Lego Land I went there often.

Not sure what should fill those vacant spots. I drive by Chastain Square and the place where Burger 21 is every night and never stop.

Anonymous said...

Several burger concepts already failed in Sandy Springs. The boardwalk burger before it was cheeseburger Bobby and the other one that "Flooded" just before it was converted to AT&T.

Anonymous said...

I live in this area too and am not surprised by the BBQ place, it's never busy. That center is hard for anyone with Willys and Goldbergs, I think they kind of anchor that center food wise.

We love Burger 21, but my biggest gripe with this location is the management seems to be absentee. Every time we've eaten there, it's nothing but teenagers working, which is fine except these seem to be unsupervised. The last time we could not find a clean table despite the restaurant being half empty and the floors are always dirty. One again, I think Tacos and Tequilas and Wing Factory have the market in this center. Also, parking can be a bear due to Publix.

Anonymous said...

Burger21 is just not good and is in the bottom rung of a highly competitive and expanding market. The location of Snellville Burger 21 is horrible, the layout of the interior was even worse. If corporate allowed the location and the interior layout that the failed franchisee then they are all to blame for the closing. If you look at the online reviews of Snellville B21 they'd be crazy to bother opening back up should cut their big loses because a lot of patrons won't bother. No second chances in that location.

Ham said...

While opening a new restaurant in the City of Atlanta may seem like great fun I wonder if the better business decision might be to find an underserved community with less established competition. Also, even when folks do venture outside the perimeter they pick an already over developed area like Snellville to focus on. There are several areas around the metro that would probably patronize a well run dining concept, but people need to do a little research and stop following the heard.

Anonymous said...

These locations all have something in common. Interior, inline space with relatively tough parking (lack of convenience at peak hours). Putting the concepts/food aside, they started out tough with these real estate decisions. Not everyone can (or wants to) have a free standing store right up on the road, but your failure rate goes up so much with these weak visibility interior spaces. Lack of windows in these spaces takes away from lunchtime ambiance as well, IMHO. I've done commercial/restaurant real estate for 17 years and I would love to see developers (and restaurateurs) learn from the mistakes of layouts like we see at Prado and Town Brookhaven (jammed surface parking, low visiblity frontage, inconvenient-deck parking) and rethink how we lay out centers like this to maximize customer efficiency. The startling amount of turnover in the restaurant spaces at TBhaven and Prado are a good lesson. I'm not picking on Sembler or Fuqua, as many developers do this, but those are the most glaring examples of this issue lately.

jeff a. taylor said...

Huge problem w all these spaces is that from the outside they could sell anything -- pool supplies, mutual funds, furniture, you have no ID of the space. Oh and I HATE the postage stamp, heavily gated "sidewalk" tables look -- VERY welcoming. And feeling welcome is big part of dining out. Now maybe if you have knock-out, destination fare you can overcome all that mess. But if you are only decent to good, you have no chance.

Stacy said...

Some time ago, I researched franchising and was startled at the long shot (in my view) odds of making a meaningful profit (like to support a family). I'm sure it's possible, but how could anyone in their right mind have spend $750k to build out a space for a burger joint? How could you ever turn a profit with that much debt going in?

jeff a. taylor said...

Debt is a killer for not just burger joints. Given the high failure rate loans are not cheap, so right away cash flow gets pinched and leads to things like capping other monthly expenses in order to service the loan. You can see how that can quickly turn into a vicious cycle.

396 said...

Funny, I never realized how ridiculous those postage stamp patios are until now. When I first moved to Atlanta I used to tell people back in Memphis that there seemed to be a local ordinance requiring every store and restaurant to have a patio and/or valet parking, no matter how unnecessary it was. If you only have room for two tables on your patio, you don't really have room for patio seating.

Anonymous said...

Agree with the comment that Momma Goldberg's or Potbelly would do best in Town Brookhaven. WhichWIch should go. Regarding the 521 BBQ. I also wasn't wowed the first time but we've been back 3-4 times and each time it's better! They'll serve you at the table if you want to sit down which is nice. Maybe they could move to Town Brookhaven too.

Sorry so many restaurants try and fail here. Hope Urban Cookhouse makes it. It's our favorite "new" entry as a family.