Restaurant growth is on the menu

Like most of us, entrepreneurs enjoy going to restaurants -- many just never want to own one.

The financial risks and high failure rates tend to scare them away from the table, even those who have been wildly successful in other ventures.

To counter such fears, or at least offer some insight into running a successful independent restaurant, consider the case of Hector Ruiz and Erin Ungerman.

They're the husband-and-wife team behind Minneapolis restaurants El Meson, Cafe Ena and Indio.

"It's probably one of the harder ways to make money, for sure," Ungerman said. "So you do really have to love what you do."

Experience, luck and long hours also help, Ungerman said. Talent does, too.

Ruiz brings entrepreneurial drive and kitchen skills honed at such local restaurants as Prima and Three Fish. He also completed the Cordon Bleu culinary program in Mendota Heights, which led to an apprenticeship with master chef Alain Senderens in Paris.

Ungerman, who had worked at Prima and other restaurants, visits each of her restaurants twice a day, making sure things are running smoothly before settling in at one for the evening. She is often seen chatting with customers and suggesting selections from the wine list she has carefully assembled.

"Restaurants are like children and babies, or a plant that you need to be constantly taking care of and watering," Ungerman said during an interview at Cafe Ena, the Latin fusion restaurant named for the couple's young daughter. "If you neglect it at all, it'll start to shut down, it'll start to go."

Their hands-on approach has added up to a recipe for rapid growth: In just five years, they have managed to buy and make over El Meson and open two other restaurants.

They've done so on a budget, stretching resources thin at times but suiting their do-it-yourself attitude.

"You can do it and you can make really great restaurants," Ungerman said. "If you've got the patience and the time and you don't mind working. You don't have to spend $3 million to open a restaurant."

They now have 50-some employees. Revenue last year was close to $2 million, with slightly more than half coming from Cafe Ena and the balance from El Meson.

Indio opened only a few weeks ago, but people already are rooting them on to open their next one.

Expanding through catering

That's off the menu, likely for the next year or two at least, Ungerman said. They first want to make sure each of the restaurants they have now is doing well.

She also would like to take a step back from daily operations to focus on building up the small but growing catering business that they've run from their restaurant kitchens.

"That's a great way for us to grow without expanding," Ungerman said. "We already have the staff and the licensing to make that happen."

They're also closely monitoring rapidly rising commodity costs, adjusting prices or tweaking the menu to offset increasing expenses facing all restaurants.

The pair were working at Prima when they left to work at, and then buy, El Meson on a contract for deed, Ungerman said. They took over in June 2003, remodeling the interior and revamping the Spanish-Caribbean menu.

A few months later, the couple had a hit on their hands after a favorable newspaper review brought in a flood of new customers. Success at El Meson has helped underwrite their growth.

"El Meson has made these two other restaurants possible," Ungerman said. "We call it the workhorse, the little engine that could."

In 2005, they signed a lease for the space that would become Cafe Ena. Ruiz and Ungerman live in south Minneapolis, and Ungerman grew up nearby and had shopped at that space when it was a Grand Dairy.

"I was really familiar with this area and really familiar with the potential for a restaurant here," Ungerman said. "We would always talk, even before we had El Meson, about how it would be such a great corner for a restaurant."

Two and a half years passed before Cafe Ena opened in May 2007. They did much of the tiling, painting and other work to get the restaurant ready, with help from Ruiz's father and others.

Instead of spending $15,000 or more on new tables and chairs, they bought fabric to re-cover the seats of chairs they already had and got a carpenter friend to make tabletops for them, Ungerman said.

Financing for Cafe Ena came from four sources brought together by consultants from the Metropolitan Economic Development (MEDA), a Minneapolis nonprofit that works with minority-owned and managed businesses. People's Bank of Commerce put the deal together with smaller amounts from the Urban Initiative Program, the city of Minneapolis and MEDA.

Jumping into Uptown

They weren't looking to launch another restaurant so soon after opening Cafe Ena, Ungerman said.

But the opportunity to go into the former Pizza Nea digs in Uptown was irresistible. The space needed little work, and Ruiz was eager to create a menu featuring dishes from Mexico, where he grew up before moving to Los Angeles.

The expert says: George Jacobson, director of consulting services at MEDA, said the Minneapolis nonprofit has been working with Ruiz and Ungerman to improve their capitalization.

The goal is to find financing on more favorable terms than the bootstrap sources the couple has used in some instances, Jacobson said.

"We're looking at providing him a more appropriate financial structure ... to get them a more solid capital structure behind the company," he said.

Beyond that, MEDA's emphasis is on sticking to basic business disciplines like marketing and customer service.

"Those are extremely important in businesses like restaurants where the community can be very fickle," Jacobson said.

Todd Nelson is a freelance writer in Woodbury. His e-mail address is todd_nelson@mac.com.