Papa’s Restaurant and Deli is closing, but what’s working for restaurants in North Minneapolis?

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Papa’s Restaurant and Deli at 42nd and Thomas closed permanently Sept. 17. Elsewhere in Camden and throughout North Minneapolis, others have opened: Camden Tavern & Grill at 46th and Lyndale, and a second location for Olympic Cafe at Broadway and Penn.

As even the owners of the recently closed restaurant have said, businesses come and go, the sun will rise tomorrow. But the event of Papa’s closing gives an occasion to look at what seems to be working in the geographic area and to get some expert context on the dining out industry.

What happened at Papa’s

Papa’s co-owner Kris Brogan said it came down to “working capital. A restaurant needs working capital for the months when there isn’t any money. We never really had enough of it.” Between challenges with their original landlord (the building changed hands several times during their tenancy), meeting city requirements, and suffering window breakages, their opening was delayed and more expensive than anticipated.

Then later they were not able to get bank loans. They once raised capital through loyal customers, but in recent times financed through a cash advance system where future sales paid back advances at extremely high interest rates. “We had been looking at a funding source that didn’t come through. Finally, we’d given everything we had and there was nowhere to find it,” Brogan said.

“It is sad,” said Janet Zahn of Camden Music School who worked with the Brogans on Music in the Heart of Victory, the free concert series every Friday night outdoors in August. In 72 Facebook messages on Papa’s page, the word “sad” came up most often.

“They worked so hard and so long. It’s always been a challenge, a struggle,” Zahn said. “They gave their all and then some, and then some again. They really tried. It was an amazing effort. And they were so completely dedicated to the community, and we would be lucky to get that again,” Zahn said. It was a more than seven year run.

In the restaurant business, especially opening just as the recession was looming, seven years is amazing, those interviewed agreed. But “It is sad,” Kris Brogan said. “I really feel bad for the community.” When the restaurant first opened, it was partly with the idea of showing how healthy the community is, and attracting other amenities. “ There are a lot of really fine people living here…we had a wonderful time, made so many great friends. That’s what it was about. We’ve found so many people say we don’t want to lose you as friends. It’s just the banging of the head against the wall that doesn’t work.”

The Brogans live near the restaurant, Mick will be cooking for the Lions Club Spaghetti Dinner fundraiser in November, and Kris has maintained her practice consulting with housing developers to work on sites like Gateway Lofts and the St. Anne’s senior housing building. “The restaurant never supported me and Mick, anything we made all went back into the company. You don’t expect to make money until something extraordinary happens. But we employed 10 people. It was hardest telling our staff.”

A closing message on their website says “We have had the amazing good fortune to hire from the community often offering a job to first time job seekers and those needing a second chance.”

Kris referred to the staff as like family, “we could fight, but still come to work every day. It’s amazing how they all figured it out.” Indeed some of the staff were family; daughter Meghan, son Mike who has now gone to work for Little Tijuana at 26th and Nicollet. “The kids will have to figure it out. They’re very tied to the food industry,” where the job market is actually pretty fluid.

Back to the financing issue, Kris Brogan said most restaurants open with investors who don’t care if they get their money back; they do it for a sense of self, identifying with a positive concept. Or, the operators use their own money and then the cash advance system. “It’s great to have city technical assistance and micro-loans, but without additional money behind it, the business has to have a lender. How often can people find lenders? In a downturn, it’s people without jobs who are trying to start a business.”

“There are cities that will pay your rent. Short term it’s a small investment,” Brogan said. “A vacant building’s value diminishes, and the property around it goes down. It’s a downward spiral. We should be finding ways to keep buildings full.” Recently, Vitalife Pharmacy moved in next door to Papa’s but other spaces have yet to find tenants.

“We love our neighborhood and are thrilled to be living where people are trying hard to make this a place that everyone wants to live; rather than live in other neighborhoods where ‘it’s all about me.’ It’s good to be in a neighborhood where there’s room to grow. In this part of the city there’s a lot of great folks, and lots of things to do.”

Experts say:

Tom Martin is a senior director at Cushman & Wakefield/NorthMarq, responsible for site selection for national chains in the “mid-scale American menu” restaurants such as Applebees and Ruby Tuesdays, where entrees average $12 to $15 and the locations do about $2-$3 million a year in business. Not the same, but somewhat comparable in the type of customer drawn, to what a lot of people say they want to see in their neighborhoods.

“The hardest part is that segment, the family dining atmosphere, is not expanding anymore.” Martin remembers the “go-go days” of 2000-2003 when such businesses were expanding like crazy, then three factors combined to put the brakes on. “Construction costs have gotten obscene, no-smoking rules have hurt that segment, the minimum wage has gone up. We’re not a tip credit state.”

In Minnesota, restaurants have to pay minimum wage plus tips, rather than a lower minimum in anticipation that tips will more than make up the difference. In tip credit states, employers only have to pay the standard minimum if there are not enough tips. “The biggest factor is having to pay minimum wage,” so the expansion has been in restaurant concepts that don’t have table service; Noodles & Co., Chipotle, Smashburger. “You go through the line, there are no tipped employees.”

Martin said another factor squeezing the “fast casual dining” market is all the stresses on family members’ time. With everyone doing different things, fewer families are taking the hour or two to go out and relax.

“The guys who are still expanding are offering something unique,” Martin said. “And they’re going into second generation space, it’s no longer a new development scenario.” While he’s referring to small groups of two, three, or four restaurants owned by people who can still have hands on, he said “people will pay for competent, high touch concepts. It’s that or the never-ending burrito for $7 with the farm raised chickens and fresh vegetables. The chef-driven guys may make it work for a while, they’ve got to have some money behind them. They grow slowly, they do okay.”

A study by a group from Cushman & Wakefield/NorthMarq for the Lowry Avenue area revealed $180 million of demand “leaking” to other parts of town because goods and services aren’t available or perceived not available locally. “Yes, there’s demand not being met,” Martin said.

He said restaurants such as Victory 44 that have “a guy with a reputation” and restaurants such as Emily’s that have been around for a while “where people who moved out keep coming back,” will continue to succeed. New owners can do it “if the real estate is right,” the rent or purchase, plus the mechanicals and concept build-out. It’s not enough to just pay the vendors. He said a lot of working capital goes into ambiance, the concept design, before the doors even open. The chains often spend about half of a year’s anticipated revenue, on the physical plant and decor.

Jeff Alexander with IGH Consulting said these rules of thumb also apply in mom and pop restaurants grossing maybe a half million a year. Many come into a business opportunity with a dream of opening their own place and don’t do enough homework to figure out all the costs. Even buying an established business, it makes sense to spend, say $5,000 on making sure what will be needed to comply with codes before committing to the deal. Installing a vent hood involves so many trades, it gets expensive fast; he cited a $100,000 example.

Food concepts are “perishable. It’s a whimsical business— where do you want to go tonight; I don’t know, where do you want to go? (Consumers) try something different every time.” If a business spends, say $400,000 to get going, and has $500,000 in annual revenues, how long is it going to take to pay off the $400,000 – business loans are for five years. Then what if the entrepreneur needs to change concept, refresh their look? Some have the money to spend, they’ve saved up.

A well run restaurant should have a profit margin of about 15 percent, Alexander said; if there’s long-term debt, the payments reduce that margin. A typical operation should have no more than 30 percent of its costs in food (20 percent even better), and 30 percent in payroll and related insurances. “Keep those prime costs to 60 percent of sales. The third cost is occupancy, 10 percent.” Then all the little costs, the credit card fees, phone lines, marketing, interest on debt—those need to total no more than 15 percent, Alexander said.

“If you don’t waste food, and don’t have spoilage…if you watch the food, it obeys your sales. Payroll is time, it’s the most crucial category to watch. Occupancy is also time, you’re paying for it even when you’re not open. But you can sometimes go to a bank,” or the landlord and “show that you can hit the other numbers. You may be able to adjust that cost.”

Alexander agreed with Martin that dining time is now compressed. McDonald’s Sausage McMuffin changed breakfast, he said. People used to have breakfast meetings, “sit at breakfast and take an hour getting ready for the day. Now it’s like ‘can it drop out of the sky while I’m driving to work.’” Breakfast can have a low food cost, however, more profitable for the restaurant.

Lunch time is moving to a half hour, where lunch hour used to mean an hour. When he had a skyway restaurant he could tell that people expected all the staff to be running to keep the line moving; if they weren’t, they’d walk to the next place that was keeping up. “People will stand in line when they know it’s moving.”

“Dinner is more of a special occasion. A child gets straight A’s everyone goes out to dinner to celebrate.” Alexander commented that world events, even neighborhood events, can change a business overnight. He watched downtown restaurant business plummet as workers were laid off after “911.”

He said income levels in a neighborhood don’t necessarily mean a restaurant will be successful. “At 50th and France, there’s a lot of money walking around there but there are still places that close. They may not be managing right, especially the hospitality part. Or maybe their concept is jaded and they need a refresh. By the U[niversity of Minnesota], where the customers are constantly changing a restaurant will last longer. They’re of an age where they want to spend money.”

“A stable neighborhood with the barbecue grills in the back yard is not a walking around crowd. If you’re looking for a place to locate, go to a neighborhood for a series of months. What is the traffic count, is there say a hardware store nearby, is it busy? Uptown goes up and down.”

Martin, the chain expert, said restaurant groups who want to make money look to be in high traffic locations with retailers, grocery, fashion and general merchandisers, to keep their top of mind brand awareness out there, along with the impulse buy—it’s convenient to stop after shopping for a bite to eat before going home.

Alexander said, “Once you have a concept and the traffic, “you’ve got to stay on it day and night to make it continue to be positive.”

Alexander is the restaurant business consultant for Neighborhood Development Center, which offers technical assistance to neighborhood businesses. For NDC he also manages the Midtown Global Market where numerous restaurants operate. Alexander has owned several restaurants and “started in 1966 polishing wine glasses for a French restaurant” in high school.

The Stealin’ Home band played Aug. 24 for Music in the Heart of Victory at Papa’s Restaurant and Deli. Below, “Papa” Mick Brogan watched with Dan Hylton, who would perform next, and photographer Duane Atter.

30 Years—Emily’s F&M

They’re celebrating 30 years in business at Emily’s F&M Cafe by having weekly Sunday drawings for $20 gift certificates, and they passed out free cake all day long for Emily Benincasa’s birthday. The “F&M” recalls Florence and Millie, two sisters who had the restaurant at 44th and Oliver before this family. NorthNews met with Emily, husband Elliot, both in their mid-70s, and son Elliot Jr.

Another son, Mike, used to cook in the evenings when they were open for dinner. When Mike started a family, Elliot Sr. said, “I couldn’t pay him what he needed so I suggested he find better paying work.” He’s been selling coffee to restaurants ever since, and Emily’s stopped serving dinner when the 17-hour days got to be too much for the rest of the family.

Emily said “people used to line up out the door” for her rib dinners, $6.95 for entree, soup, salad, roll and butter. NorthNews asked for the family’s insight on what conditions need to exist for such a restaurant to make it. One is simply longevity.

“Our clientele is from all over. Husbands and wives have had kids, moved out, they all come back. My wife’s been in the business 50 years.” Elliot Sr. said he learned to cook from others they hired.

Elliot Sr. said, “The economy has not been kind to anybody.” And recently there was sewer work going on in the street outside, which hurt business. “We don’t always make money, but we survive. Some customers think we’re expensive, some think we’re cheap.” Many come in every day.

Traffic dies down in the neighborhood after 3:30 p.m. Dinner trade was good when Jackie Ann’s was in business and Baskin Robbins was on the Penn and 44th corner, and then Steamworks.

Breakfast and lunch have always been the mainstays. Before the housing industry collapse, “we used to get a lot of construction workers.” They’d stop in for breakfast. “These guys now are out there cut throating. That’s why I supported the stadium, it creates construction jobs.” There were lots of customers from companies that now monitor more closely how long they’re at lunch or breaks. “They now come in on the weekends with their families,” Elliot Sr. said.

They attribute their success to having a basic, fresh, truly home-cooked menu, and charming waitresses who’ve been with them for 13 to 18 years. “We keep to ourselves and do the restaurant. We relate to our customers,” Elliot said. Emily said, “we acknowledge every single person who comes in the door no matter what. Go the extra mile for the customers.”

As other local restaurateurs admit, they too have resisted downgrading their food or raising prices, even though suppliers raise their prices and tack on fuel surcharges for delivery. “If you’re in this business you’ve got to put some blood into it,” Elliot said, “we’ve gone into our IRAs” on occasion. The extensive remodeling job three years ago put a mortgage back on a building that had been owned free and clear. Emily said “it’s a lot of extra effort, effort is what it takes, extra hours for the same pay or nothing at all.”

Elliot Jr. said “a lot of people depend on us being open. If the 4th of July is on a weekend, we’re open. If it’s in the middle of the week, we close.” The customers give him grief, “Elliot, why are you closed, I had to make my own breakfast. Next time give me the keys!”

Dinner in the neighborhood?

While Papa’s Restaurant was open for lunches and weekend breakfasts, the portions, prices and relaxed dining atmosphere trended toward their dinner times. People say, in neighborhood meetings and conversations, that they want evening dining. But do they dine locally enough to make it work?

Fellow restaurant owner Darryl Weivoda of Lowry Cafe said it’s tough to make money serving dinner. A restaurant needs to be constantly busy to justify having the staff there and the equipment on.

Lili Johnson of Tootie’s agreed. She said their business is slowest in summer when people can be grilling their own burgers outside. The price of meat, and of having everything delivered, make it impossible to charge less than they do for meals, dinner in particular.

Johnson, with husband Neil, discovered how dedicated some customers can be. “There was a group that told us they made a point of coming in weekly during the Lowry Avenue road construction,” their effort to help the business survive.

Elliot Benincasa, Sr. of Emily’s F&M Cafe echoed that delivery charges have gone up; there’s a fuel charge when gas prices go up. “But then people tend to stay in the neighborhood more because they can’t afford to drive, so we see them in here. It works out.” Emily’s used to serve dinners.

Weivoda said, “My comment on Papa’s is like any neighborhood business —you’ve got to use them or you’ll lose them.”

For everyone who goes outside the neighborhood (we all like to explore), wouldn’t it be nice to have one person who seeks to explore our neighborhood? Restaurant expert Tom Martin said there are some parts of the metro area that see more customers coming in than going out.

Victory 44 at Penn and 44th avenues N, frequently reviewed in dining publications, draws customers from all over the metropolitan area for their concept “every table is a chef’s table” and charging $6 to $10 for appetizers, $9 to $16 for entrees and $8-$10 for desserts. For $30 per person, there’s a five course tasting menu, $50 per person if wine is included. This past weekend, celebrity chef Andrew Zimmern made an appearance.

The building that houses Victory 44 recently went up for sale, not the restaurant. The signs state that it’s an investment opportunity with a tenant in place; for about five more years, according to one of the staff. Victory 44 is open Tuesday through Saturday 11 a.m. to 10 p.m. and Sunday 8 a.m. to 8 p.m., closed Monday, and kitchen closed 3-5 p.m. daily.

Other restaurants in Camden

As well as Victory 44, Lowry Cafe, Emily’s F&M, and Tooties quoted earlier, NorthNews made the rounds of other Camden area independent dining establishments to see how business is doing.

The former Rachaels, former Waldo’s location is brand new inside thanks to Neil and Marcia Rodrique. He said he has worked in construction, a friend used to own the building and he remodeled it. They opened Camden Tavern and Grill at 4601 Lyndale Ave. N. recently and anticipate having a grand opening celebration. The decor is a lot of fresh light pine wood, a cabin-y feel.

Up the road, there’s El Burrito Cubano, where burritos and sandwiches are assembled to order at 4729 Lyndale. The Northside Steak House on Lyndale closed, but a little farther south, City Afrique at 4326 Lyndale is open for lunch and dinner, 11 a.m. to 9 p.m. Monday through Saturday. The cuisine is West African, www.cityafriquerestaurant.com.

At Lyndale and Lowry, Bangkok Market owner Touney Xiong said the economy in general is slow, reflected in his grocery business. “People have cut down on spending. They will pick the one thing that’s really important to them, that’s good for the whole family. They used to pick up other small items,” impulse buys just for themselves. “We will be okay,” he said, looking forward to the day when there could be 80 apartment units built along Lowry. “That could mean 10-20 more customers a day.”

Xiong has seen his eat-in business drop a little since Banana Blossom down the street re-opened, renovated post-tornado. Bangkok Market’s kitchen has an eating area open 9 a.m. to 7 p.m. Construction workers from the bridge and contractors repairing tornado damage still come in, Xiong said, and “our food is different, it’s focused on Thai style,” so he expects that people may choose a favorite or try both restaurants. “We try our best,” he said, and agreed that having competition can bring more customers to an area.

Banana Blossom will be at the center of the Hmong Zone during the Lowry Avenue Open Streets and Harvest Festival Sept. 29, a great way to celebrate their re-opening.

There’s Asian food competition from Joy Luck in the shopping center at Webber Parkway and Lyndale. Open 11 a.m. to 10 p.m. Monday through Saturday and noon to 10 p.m. Sundays, they declined to be interviewed for this article. Hui’s Chow Mein was disabled by the corner store fire at Emerson and Lowry.

Camden also has a few franchise and fast food operations: Subway at Lyndale and Webber Parkway or Lowry and Penn, McDonald’s on North Lyndale, and Burger King at Lowry and I-94.

Of course, with transportation, people can patronize about two dozen other hot food options—franchise or one-of-a-kind—throughout the rest of North Minneapolis along West Broadway or Glenwood Avenue. More, on those establishments and any that we may have missed, in a future NorthNews.