fbpx One Feeds Two | Crain’s Chicago Business: Can Naf Naf’s success be repeated?

Crain’s Chicago Business: Can Naf Naf’s success be repeated?

http://www.chicagobusiness.com/restaurants/can-naf-nafs-success-be-repeated

Two of the chain’s former execs look to grow a local barbecue chain and start a chain of authentic taquerias, looking to be the ‘Lettuce Entertain You of fast-casual restaurants.’

Two former Naf Naf Grill executives who sold the Middle Eastern chain to a private-equity firm are hoping to repeat their success with other cuisines.

David Sloan, founder and former chief executive of Naf Naf, the largest restaurant chain to come out of Chicago since Potbelly, and Franklin Wiener, former Naf Naf chief operating officer, have launched a food accelerator and brand-building company. It’s focused on scaling fast-casual restaurants into regional and national chains.

Operating as Venture Kitchen, Sloan and Wiener last month took a minority stake and managing partner position in Blackwood BBQ, a three-unit Chicago-based purveyor of 15-hour-smoked beef brisket, chicken and pulled pork. And they soon plan to open Tijuana taco-and-cemita restaurant Invicto in Naperville, the first of what they hope will be dozens of follow-ons.

“We want Venture Kitchen to be kind of the Lettuce Entertain You of fast-casual restaurants,” Sloan says. “Our niche will be taking companies that might have two or three stores and scale them to 20. Our passion is to grow and develop projects.”

Sloan, a 42-year-old Elmhurst native, and Wiener, his 32-year-old half-brother who grew up in Naperville, started Venture Kitchen in part with proceeds from their 2016 sale of a majority stake in Naf Naf to Atlanta-based Roark Capital. They exited the company in July 2017 but remain shareholders.

Sloan, a former financial manager, invested in the first Naf Naf in Naperville with the late Sahar Sander and two other partners in 2009. The group shortly thereafter opened restaurants in Aurora and Niles. Wiener joined and took over operations after graduating from law school. From there, they took the chain to 12 locations before striking the deal with Roark, which provided the capital for Naf Naf to reach 38 units and counting in eight U.S. markets, including Minneapolis, Philadelphia, Detroit, Cleveland and Washington, D.C.

Venture Kitchen was founded on the idea of taking the same approach to fast-casual brands that Sloan and Wiener took with Naf Naf: Build a brand from scratch or take on a small, emerging brand, expand it and sell it.

They’re striking while the market for fast-casual restaurants—the space between fast food and casual dining—remains hot. After posting several years of double-digit growth, the segment is forecast to grow about 8 percent this year and 8.3 percent in 2019, according to Technomic, a Chicago-based market research firm.

“It’s still an exciting, very innovative place to be that’s still growing well above the industry average,” says David Henkes, a Technomic senior principal. “If you put together a list of what today’s consumers want, fast-casual hits almost every single need. We’re bullish on the segment.”

Venture Kitchen’s decision to invest in five-year-old Blackwood appears particularly astute, Henkes says, because barbecue remains an underpenetrated segment in terms of the number and strength of competitors—and it’s on-trend with consumers.

“There are a lot of independent operators who have one, two or three restaurants,” he says. “The ones that do have some scale are growing pretty rapidly, and they’re generally seeing double-digit (annual) growth.”

Although barbecue remains a largely regional product because of established differences in how consumers view and consume the cuisine in different parts of the country, Blackwood is established in Chicago and, though small, has space to grow, Henkes says.

EXPANSION PLANS

Venture Kitchen is scouting another downtown location and suburban sites for Blackwood, with plans to open at least two more locations in 2019. With Blackwood, which has three restaurants downtown that do a brisk lunch business as well as a growing catering arm, part of demonstrating the chain’s value is proving it can perform as well in the suburbs over multiple mealtimes as it does in dense downtown areas at lunch, Sloan says.

In the month or so he and Wiener have been involved with the mini-chain, they’ve squeezed out tens of thousands of dollars in costs by renegotiating contracts with vendors and streamlining operations and headcount, says Stephanie Simpson, a Blackwood partner.

“It’s one thing to bring in capital, but with Franklin and Dave, it’s not just capital—they’re true strategic partners who have just been through the exact same experience (with Naf Naf) that we hope Blackwood can go through,” she says. “We felt instantly they could help us scale Blackwood beyond the proof-of-concept stage.”

On top of that, she says, Venture Kitchen knows what institutional partners are looking for when they seek to make an investment.

Among them is authenticity. With Venture’s Mexican street food concept, Invicto (which translates to “undefeated”), “we are making no compromises in terms of the authenticity of the food,” Wiener says. “We are going for truly authentic Mexican street food that can speak for itself.”

Though taquerias are omnipresent across the U.S. (and across Chicago), Sloan and Wiener say Invicto will create “more of an experience” and wedge into prime real estate in the Loop and upscale suburbs where existing taco stands tend not to go.

Invicto restaurants will make their own corn and flour tortillas and cemita buns, and serve tacos with traditional Mexican fillings—carne asada, pollo asado or aguacate frito topped with diced onions, cilantro, salsa and avocado sauce. They’ll also serve margaritas, micheladas, palomas, beers, agua frescas and Mexican-inspired milkshakes.

Sloan and Wiener recruited a chef from Mexico and have imported tables and chairs from south of the border. Signs in the restaurant are hand-painted and all text is in Spanish. “The consumer is saying Chipotle had their great 25-year run, and they’re looking for something new,” Sloan says. “We’re trying to fill that hole with a more authentic experience—not only with great food, but in a space that’s not just an industrial, stainless-steel box.”

After Invicto opens in Naperville, the partners will begin building a second in Vernon Hills and then another in the Loop. They expect both to open next year.

Sloan and Wiener, along with Chicago-based attorney Patrick Wartan, are also launching next month the U.S. branch of One Feeds Two, a nonprofit version of Tom’s Shoes for the restaurant business.

The U.K.-founded, Richard Branson-backed charity buys a school meal for a child in a developing country for each it sells in its own restaurant. All of Venture Kitchen’s restaurants will participate.