It’s often said that three of every four startups shut down within five years. The fail rate for New York City restaurants is even higher. But Euripides Pelekanos, CEO of Bareburger, seems to have nailed the formula for success.
Not only does the organic burger and craft beer joint he opened in 2009 in Astoria, Queens, continue to pack in diners and win accolades from Zagats and Michelin Guide, but he has since opened 13 more Bareburgers around the city, will soon open 8 more in New York, New Jersey, and Connecticut, and has franchises planned in Boston, Chicago, DC, Florida, Ohio, and Philadelphia.
The New York Post recently named the $8.45 Beef Bareburger the city’s best, and dished on all the celebrities who are fans of the chain’s menu that features organic milkshakes and patties made from sustainably sourced elk, ostrich, bison, wild boar, and black beans.
The average Bareburger store does $2.5 million a year in sales, Pelekanos says. He and his partners take 5 percent in royalties from franchisees, who buy in for $25,000. “You can multiply by the number of franchises and do the math. It’s become an unbelievably and incredibly viable business,” says the 36-year-old entrepreneur, who attributes some of his success to having learned from mistakes made in his first business, a Brooklyn bar called Sputnik.
Yahoo! Small Business spoke to Pelekanos about his fast rise in the burger kingdom.
YSB: What did you learn from your first business that has made Bareburger so successful?
Pelekanos: Sputnik was a valuable lesson. It was one of those ventures that was not thought out. We were 24-year-old guys who said, “Let’s open a bar-nightclub” because we thought it would be easy. We didn’t pay attention to the factors that would determine success. We got a good deal on rent, but a horrible location, we never put out a consistent product, the place had an identity crisis, and we held onto it for way too long and got deeper and deeper into debt. The lesson was “location, location, location” and “know when to cut your losses.”
YSB: What did you do differently when you opened Bareburger?
Pelekanos: We were definitely more business-driven. We started in 2008, when the economy was in the dumps. It was a crazy move, but sometimes your most desperate times are when you come up with the best ideas.
My partners and I pieced that first unit in Astoria together with very little money. It was a combination of borrowing some money from mom and maxing out credit cards—back then there was no money out there. We had a business plan, but banks were like, “Are you kidding me? In 2008 you’re trying to open an organic restaurant where the price point is 25-30 percent higher than your casual diner setting? What are you thinking?”
YSB: You ignored them?
Pelekanos: My brother, who is more of a financial guy, was the supportive spirit saying, “Let’s do it!” He brought in his construction buddies and we put all the pieces together. I wanted creative control to create the brand and menu and marketing. My partner John did all the hiring and training and stocking. And the others kept the cost of building down.
Once we opened, we were so busy in such a bad economic climate and there was so much fanfare and love from the community, it dawned on us the product had hit a chord with the general public.
YSB: So you decided to franchise?
Pelekanos: In 2009 there was still no money. Setting up the franchise model required a substantial amount of money and it was a huge learning curve for us. The legal paperwork, the franchise disclosure documents, the operating manual, the branding manual—it was $40,000 here, $30,000 there—but it started coming together. The first batch of franchisees were friends and family members who knew us and saw the continued success of the first restaurant.
YSB: I’ve heard others in the restaurant industry say that finding the right people is the biggest challenge.
Pelekanos: I don’t care what industry you’re in, people is always the challenge. Managing personalities is what the business has evolved to—picking the right people, and weeding the people out who just want to make money. We all want to make money, but a huge component is a passion and love not only for our brand, but also for the industry and service.
I’ve been approached by a lot of hedge fund and equity guys who just want to dump in money because they see something hot. I’m not wooed by that. I want to find really good people, and not necessarily with restaurant experience, because I can train them through our system.
I’m the first person every potential franchisee meets. If in that first meeting they ask me in the first 10 minutes what my P&Ls look like, I get turned off. Talk to me about my brand, my menu, my competition, my long-term vision, and then talk to me about how much money we make and what it takes.
YSB: Growing from one store to 14 in four years seems like a breakneck pace for a small operation.
Pelekanos: The beautiful part of it is that it’s not me; it’s the 10 other people that work in the company and the franchisees who really drive it. I learned from Sputnik that I can’t do everything myself. If you know how to work with your partners and know “this is what this person’s strength is,” and can put them in a position to really shine, then that’s one less thing you have to learn in your business and you don’t have to micromanage.
Today we’re hiring a CFO, John is hiring four full-time members to train the kitchen and front-of-the house team, and we have an in-house PR team, an in-house web designer, and an in-house graphic designer. We’ve leased 8,000-square-feet of office space and are building a test kitchen where we can try new menu items, train our franchisees, and hold classes for all our servers and counter people to learn what makes us unique and special so they can share that with customers. We’re slowly becoming a real company.
YSB: The kind of professional management you’re talking about doesn’t come naturally to everyone. Where did you learn it?
Pelekanos: I try to read at least 30-minutes a day—Restaurant Briefing to see what the trends are and also leadership and motivational books. I pick up tips and tidbits from every book I read. It’s how I’m wired. I don’t want to do all the work myself. I want to find good people and my job is to treat them well and get them the tools they need to succeed. It sounds cheesy, but if you believe that and put it into play it works.
Also, in the last 5 years I’ve met some extremely interesting people—like the former CEO of Jim Beam, and one of the original Starbucks people, and some awesome restaurateurs. When I have the opportunity to be with those people I grill them to learn what has worked for them and what mistakes they made.
YSB: What’s next for you?
Pelekanos: The strategy a few years ago was blurred. Now it’s so much more clear-cut that it is to tweak our system to make sure there are no holes in it and to really make a big push in the next 5 years.
This is where my ego comes into play: We want to dominate the market for the organic all-natural burger concept, which is what Bareburger is. In every state I’ve gone to there is somebody there who is doing the all-natural burger, but not in the same way we’re doing it with so many more organic and protein offerings—elk, ostrich, wild boar—that those guys won’t venture into.
We’ve worked really hard to put our brand and system together, and now it’s about pushing them out there to the right markets, with the right people, and building a really viable business.