New investors entering local restaurant biz

Posted on Nov 14, 2011

STEVE SINOVIC, NEWS-PRESS STAFF WRITER
August 6, 2011 2:32 PM

A changing of the guard is under way in the local restaurant and bar scene, according to a business consultant who believes many Baby Boomers are fueling the trend on both the buying and selling ends.

Business broker Matt Olufs, who has worked in the industry for nearly four years as owner of Compass First, says confident investors are looking to put their capital into well-chosen new dining and drinking venues and established businesses, especially in high-traffic areas of downtown Santa Barbara, despite the recession.

Many are using life savings or cashed-out “early” retirement accounts, Mr. Olufs said.

His first piece of advice to any new owner: don’t tamper too much with a going concern.

“I’m always a fan of buying and retooling rather than starting from scratch,” said Mr. Olufs, who graduated from Reed College in Portland, Ore., with a degree in biopsychology. The Seattle native moved to the South Coast 10 years ago after graduation and rarely misses the gray and moist Pacific Northwest.

Mr. Olufs, who has assisted buyers and sellers with numerous nightclub transactions in the downtown State Street corridor, said the business grew out of a need to address the challenges small businesses face.

Providing a guide to commercial transactions and management, Compass First assists buyers through new acquisitions, develops exit strategies for potential sellers, and steers owners through upgrades to their current business model.

Recent clients expanding their businesses through Compass First include the owners of the Boathouse, opening their new Mexican eatery Casa Blanca at State and Gutierrez; and Union Ale, opening the new El Taco Tequila in the previous home of Square One.

“We’ve seen a shift from brokering to consulting on the design of the build-outs and helping with the permitting,” said Mr. Olufs of his own small business.

Many of his clients are stepping into the food service industry with fresh ideas and strong financial backing, trading in their suits and ties for a life at the beach.

“The market is definitely looking up, with a trend leaning towards career-exchanging. We have seen an uptick in recent business sales, and have consulted on several start-from-scratch scenarios in the food service industry,” said Mr. Olufs.

An example is Momma Donna’s, which recently opened at 413 State St. The late-night eatery features the PBJ burger, a culinary creation that apparently is taking L.A. by storm. New owner Donna Lee Frazee worked her way to Santa Barbara through the medical industry, teaching neurosurgeons how to insert blood vessel stents and relieve clots in the brain. She approached Compass First looking for a career change.

“How I got here is a complete mystery to me,” Ms. Frazee admits. “But one look at a happy customer, and I love it!”

Another Compass First client transitioning careers is Chris Schaefer, the new owner of Jitters Coffee Shop at 728 State St.

Prior to running one of Santa Barbara’s oldest coffee shops, Mr. Schaefer was giving presentations to generals deep in the Pentagon, consulting on IT equipment for the Department of Defense.

Weaving his past into the present, Mr. Schaefer hired a UCSB physics student to move the business towards a scientific approach to coffee, with precisely measured portions to provide consistent quality for customers. He’s also tweaking the menu on the food side, emphasizing fresh-baked goods. A name change is also in the works, said Mr. Schaefer, who wants to maintain the “bohemian-ness” of the coffee shop.

Mr. Olufs also helped John Kim, a corporate executive with Verizon, open a sushi deli inside the Albertsons store on Hollister Avenue, a space which used to be a bagel shop. “It’s called Roll-A-Lot Sushi,” said Mr. Olufs. “You can buy pre-packaged or build your own” wrap or roll.

“It’s exciting to open a shop and sell grandma’s apple pie or sushi,” said Mr. Olufs, commenting on the marriage of business and a strong creative urge.

“But sometimes, there’s a disconnect,” he said, talking about people who have given up the dream when they acknowledged the hard-edged realities of running a business.

“There are an amazing number of factors to have all these aspects working in unison: managing employees, doing the bookkeeping, focusing on business development,” said Mr. Olufs.

His psychology background comes in handy as he helps coach his clients to a purchase or sale.

“I am an avid problem solver, and enjoy working through the many challenges faced by small business owners,” said Mr. Olufs. “For me, it is about helping people achieve their entrepreneurial dreams.”

One client he is helping is Andy Winchester, the majority owner of Elements Restaurant and Bar, who is throwing in the towel after seven years as chief cook and bottle washer at the establishment.

His job entails greeting and schmoozing with the guests, running the register, bussing tables, unclogging pipes, helping on the line if a cook doesn’t show up, pouring drinks at the bar, cleaning the restrooms, and schlepping out the garbage.

In the early going, he also climbed a ladder, swinging a hammer along with the construction crew before the place was reopened.

Perhaps the highest-profile example in the shifting restaurant ownership category is occurring at Elements, a pioneer in the farm-to-table restaurant concept. Mr. Winchester, a former banker, has recently accepted a position with a venture capital group that funds socially responsible businesses and will entail some modest traveling.

“I listed it for sale about six months ago,” Mr. Winchester told the News-Press.

He said the business, which launched seven years ago this week, initially had five owners but now has just three.

It was a great run but it’s definitely not a glamour job, said Mr. Winchester, who is looking to turn the page in his own life after running an establishment that many say combines fine dining in a Santa Barbara-casual kind of setting.

“Quite simply, we have run our course with Elements,” said Mr. Winchester. “There’s no disputing the fact that discretionary spending has been cut way back for fine dining and entertainment. There’s definitely a smaller pie for everybody.”

He declined to elaborate how much revenue has dropped in recent years.

With historical revenue in the millions and dozens of awards for food quality and inventive cocktails like the Firetini (flavored with habaneros), Elements also has a strong catering emphasis, which has helped monetize the investment in the kitchen and staff.

For Mr. Winchester, who is looking for someone else to take on the “pleasure, privilege and responsibility” of running the show, several things are elemental: the new owners better have the skill sets to complement each other, work hard, brace themselves for the unexpected, and be totally committed to the enterprise if they want to meet their debt service, pay the help and vendors and, hopefully, take a little profit home.

Mr. Olufs, an investor in the Marquee, a cocktail bar in the lobby of the Granada Theatre, was part of the crew that sold the space that Mr. Winchester and his partners transformed into Elements.

“Now that he’s on his own with Compass, it was an easy choice to look him up,” said Mr. Winchester, who said after some tire kicking in the first couple of months, Mr. Olufs “has honed the interest down to several serious parties” with the experience and resources to acquire the business, which reportedly is on the selling block for around $435,000.

Mr. Olufs is confident the deal could wrap up soon, saying Elements is a solid brand with a strong following in the region, with a client mix that’s estimated to be 80 percent locals and 20 percent tourists.

“We have several people who are interested,” confirmed Mr. Olufs. “Elements’ financials are strong — they present very well as a full-service restaurant — but it (the restaurant and bar biz) is not for the faint of heart.”

For a town that has fewer than 100,000 residents, Santa Barbara has many restaurants and bars per capita. So it’s challenging to get people into the door, which is how a smart niche pays off.

“The focus decidedly is on hopping,” said Mr. Olufs of the migration of food and bar customers. Instead of just going to one place, people want to make a night of it — with drinks and appetizers at one place; the main course somewhere else; topped off with dessert at Pinkberry’s.

Then it’s off to a concert at the Lobero. Or a movie at a downtown cinema.

Perhaps followed by more drinks and dancing.

“Many customers, especially free-spending ones in their 20s and 30s, aren’t fickle,” said Mr. Olufs. “They just want to make the scene.”