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Granite City to grow with $6.5M investment

Executives Rob Doran and Steve Wagenheim speak with NRN about how the brewpub chain plans to accelerate growth

This week, the controlling shareholder of Minneapolis-based brewpub chain Granite City Food & Brewery, Concept Development Partners LLC, or CDP, invested an additional $6.5 million in the brand to help accelerate its post-recession unit growth, the company said.

CDP has been an active owner since May 2011, when a preferred-stock transaction made it Granite City’s largest shareholder and also ushered in CDP’s Rob Doran as its chief executive. Doran, a former McDonald’s USA executive, along with Granite City founder and president Steve Wagenheim, have embarked upon a program to remodel Granite City’s 27 locations and pare down the menu to the best sellers.

The company also acquired the Cadillac Ranch dining-and-entertainment concept last November for $9 million, which gave Granite City a second growth vehicle for high-traffic, tourist-heavy areas where the brand typically does not go. The company now operates six Cadillac Ranches in five states. The two concepts will share back-office efficiencies and best practices for food and service to grow together over the next few years, Doran and Wagenheim said.

Granite City opened a new prototype in Troy, Mich., this year and will begin construction on three more locations to start in 2013, with a plan to accelerate new-unit development beyond that. Doran and Wagenheim spoke to Nation’s Restaurant News about how they want to grow Granite City prudently after shoring up operations and the menu during the recession.

With this new investment of $6.5 million into Granite City, is the plan to kick off a new initiative or to accelerate your current plans to remodel Granite City locations?

Wagenheim: What this allows us to do is lengthen our search and look for properties for 2013 and 2014. That’s important for us so we can have seamless year-over-year development. This allows us to follow a solid three-to-five-year plan and prime our development pipeline.

Doran: Over the last year, we’ve remodeled five existing restaurants and opened one. We’re about to break ground in Franklin, Tenn., downtown Indianapolis, and one other location. We had money to grow at two to three units a year, but there were so many great opportunities out there that we wanted to accelerate that growth. All our remodels were already budgeted.

Now that the Cadillac Ranch acquisition is complete, how do these two casual-dining brands complement one another?

Wagenheim: From a real estate site perspective, they’re very complementary. Granite City is more community-based, and we’ll go into suburban markets with a strong combination of daytime population and residential. Cadillac Ranch is a very powerful destination concept that’s placed in tourist developments.

I think the Granite City concept could use a little more fun that Cadillac Ranch knows how to produce, and the Cadillac Ranch people could be helped with Granite City’s support on food and a little polish.

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Doran: Simply, Granite City had the infrastructure to grow but Cadillac Ranch didn’t. You have to be much more careful where you put a Cadillac Ranch, where tourists are looking for a lot of fun. With Granite City, we’re looking for rooftops, swing sets and office buildings.

How is Granite City going to compete in a casual-dining segment that still constantly advertises aggressive discounts?

Doran: The Mug Club [loyalty program] is the most successful marketing tool we have. We can correspond with our biggest advocates frequently that way, and we throw them parties quarterly, like when they’re invited to be the first to drink from our Oktoberfest kegs.

But we made the decision to eliminate discounts. We got rid of maybe 80 different programs. There were discounts upon discounts, and we couldn’t see what worked. There are $7.50 pitcher nights that work around our beer platform, and those will stay, but the rest we’ll have to see how we do without. But our traffic and same-store sales are up since 2010.

Wagenheim: Prior to and during the recession we decided to hold the line on our prices because we weren’t really a growth company. Our per-person average check is a little under $14, but with solid food quality, so we thought, 'rather than discount off of that, let’s go the other way.' We wanted to be known for our service and to give guests more for the money, and it’s working.

If we had to move quickly on a strategic plan, we could. But there was no way to compete with the big boys on a 'two for $20' kind of message. During the recession we got hit hard, but people came back to us when things started to ease up. We’re going back to our strengths, which is a good value proposition for the money.

Doran: We have great beer and a lot of loyalty related to that beer. It’s sold at a good price for a very generous serving, and that’s why the Mug Club members love us.

As outside investors taking on a more hands-on role, what did CDP learn about Granite City before putting more money into the system’s growth?

Doran: Coming from McDonald’s, I’m always looking for the iconic products like the Big Mac, but what surprised me about Granite City is that customers said the icon was the menu variety. There is no one big thing. So we’ve tried to focus on consistency, taking off some of the bit players and making sure our best sellers are our best-prepared items.

Wagenheim: Thank God that Rob and CDP really grasped that the whole menu is iconic and allow us to do this [with their investment]. This was a company that was growing hand-to-mouth. We didn’t have a lot of capital to put back into the company prior to and during the recession. But they’ve put money back into the facilities to work on long lines and added efficient seating to make the restaurant is comfortable for staying all night.

It’s been a combination of focus groups, technology upgrades and remodels, and they’re driving sales really well.

Contact Mark Brandau at [email protected].
Follow him on Twitter: @Mark_from_NRN

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