Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, August 8, 1993 TAG: 9308060052
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: By SANDRA BROWN KELLY STAFF WRITER
DATELINE: LENGTH: Long
In March 1991, two 23-year-olds opened the Blue Muse on the Roanoke City Market with plans for the restaurant to brew its own beer.
Within three months, those plans went the way of the first batch: Down the drain.
The idea was good: local brew and a unique menu built around tapas, snack-size portions of alligator, venison and chile rellenos stuffed with ground pork, almonds, raisins and spices suited for "grazing," or nibbling through dinner.
"A delight." judged one local food critic. "Well-conceived and often inspiring."
But the availability of the beer was spotty. The restaurant operators were new to the business. And the crowd that flocked to the place initially began rapidly to stay away.
The Blue Muse closed after six months, at the end of September. It had reworked its menu four times in the first two weeks of operation and made last-minute efforts to cut prices, change the menu and change the management.
The restaurant staff and the Muse family made a celebration out of the closing, throwing a party like the one that opened it.
Leonard Muse, an owner of Fabricated Metals Inc., and Betty Carr Muse, a civic leader, were left with shiny brewing equipment, monthly rent payments of more than $5,000 and no desire to run a business on the market.
but, they were left with a great location for a business - diagonally across from the Center in the Square arts center and the prime corner storefront in the high profile Marketplace Center, historic buildings saved by two Roanoke Valley entrepreneurs, David Saunders and Richard Wells.
The 3,500-square-foot space sat silent for six months until March 1992, when Pat Carroll, who had brewed beer for the Blue Muse, announced he would reopen the spot as The Brewery.
It didn't happen, because two Northern Virginia restaurant operators began to show an interest in the location.
On July 22, 1992, Downtown Roanoke Inc. executives joined Ben Hiatt and Gary Duke, of Entreepreneurs Inc. of Alexandria, in announcing the Lone Star Cantina.
The Lone Star was to be a brewpub with a Tex-Mex menu and occasional live music. The Muse family remained as minor partners in the new venture, which also had about a dozen investors, including some local ones.
Entreepreneurs came with heavy credentials.
Both Hiatt and Duke had worked for Marriott Corp., the Washington-based international hotel and food service company. Hiatt, who was to set up the new place had a business degree from Transylvania University and a master's degree in hospitality management from Florida International University. He was treasurer of the Restaurant Association of Metropolitan Washington.
Hiatt and Duke were operating five restaurants in D.C. and Northern Virginia, employing 120 people.
The restaurant opened last September as planned, but the beer didn't brew, because of an old and obscure federal law that said a brewer couldn't own another retail business, which Hiatt did.
Months passed. In January, the same food critic returned to try Tex-Mex where she last had eaten tapas.
She found the Lone Star's food "mediocre" and `uninteresting," and the service, "vexingly slow. Moreover, its highly touted microbrewery has yet to produce its first glass of beer," wrote the critic.
The beer came in May, but by then the Tex-Mex menu had flopped. Hiatt announced he would try serving more basic fare like steaks, pasta and fish.
In a few weeks the whole venture was over. The chili pepper string of lights. The Santa Fe blue walls. The new menu. Even the late-arriving beer. Not enough.
"There are some bills I don't see any way we can pay. There are some employees who didn't get paid for final few weeks," Hiatt said. "I've opened a lot of restaurants and closed some restaurants, and I've never been in a position where there weren't enough funds to pay the staff."
"I was very up-front and honest with the staff. They knew our problems, but that doesn't make it any better."
He said the unpaid bills include some from vendors and taxes at the city, state and federal level, including sales and payroll taxes.
Hiatt figures his company's losses will be in the $200,000 to $300,000 range. He knows the business will file bankruptcy; he also suspects he will have to file personal bankruptcy.
"I will be working for someone else," Hiatt said the day he was unscrewing pictures from the walls and packing up the spotted cowhide-design tablecloths.
Hiatt said the corporation's losses would be $50,000 more if he included the management fee he company was to collect as part of the deal.
So what went wrong?
"Why do I think we failed? Four or five reasons," said Hiatt. "We were thinly capitalized. We had about three months working capital set aside when typically a venture of that type should have had six months.
"We were right on the edge and that was one of our downfalls. When it was time to step up to the plate, we struck out," Hiatt said.
He said the entire Lone Star Cantina & Brewery strategy had been built around the brewery. "A brewery was our hook. Because of the license problem, we couldn't deliver."
Hiatt also said he misread the Roanoke market in developing the Tex-Mex menu. He now thinks the area is too small to handle such a narrow food concept.
He said it took longer than it should have to train a kitchen staff and while that was going on a restaurant critic "slamdunked us."
Also, Hiatt said his general manager, who had been transplanted from Northern Virginia, was unfamiliar with the area and not as attentive to the business as he should have been.
"I think he was more interested in being in other restaurants than watching ours," Hiatt said.
And there was the matter of the rent, which Muse continued to pay when the Lone Star couldn't.
Hiatt calculated that the restaurant needed to have weekly sales of $16,000 to $17,000 to meet its financial obligations.
"In order to make the space work, we needed to do just over $800,000 a year. Obviously, we felt it was realistic," said Hiatt.
"In our first few weeks we were close to that kind of volume."
But there was the problem of no beer.
"It was amazing how many people would come in and when they found we didn't have the brewed beer would leave. The place had beer, but not `our beer.' So people just exited. And that was very frequent . . . 10 to 20 people a day."
Hiatt said he began to fear the worst about two and a half months into the operation of the restaurant when it began to appear that the brewery license would be a long time coming.
In hindsight, he said he should have hired a lawyer to handle the license problem, rather than do it himself.
The license had to have state and federal approval and it took eight months to get it.
Hiatt said the brewpub concept was new to Virginia. It was only the second in state when it opened. The other is in Charlottesville.
ABC license laws aren't set up for brewpubs, he said.
"We were required to meet the same criteria as Anheuser-Busch in Williamsburg," he said.
But maybe the entire concept of the place wasn't right, he said.
Hiatt said if he was starting over and didn't have the license hassle, he would change the type of place he would do a "very inexpensive type of operation that was not very labor intensive and that could do a lot of volume but with a small average check."
Still, he says with the current rent it will "be difficult for anything to survive."
David Saunders, who negotiated the original lease, said the $20-a-square-foot rent in the Muse lease is the highest for any of the Marketplace space but includes some payback for the costs of upfitting the restaurant.
"If the rent was $5 a month and nobody came in there, the rent would be too much," Saunders said.
He said he has gotten paid the rent every month but the experience has been a "nightmare" for him and Wells just as it has been for the business owners involved.
Saunders and Wells rescued the Marketplace complex, which includes almost a total block of buildings between Campbell and Salem avenues. They look at the corner site as the flagship space in the complex, and yet no business has made it there.
Saunders said he is negotiating with Muse to regain control of the space. "We're friends. That's what has made the deal worse," he said.
Muse has never said how much money he put into The Blue Muse operation, but others estimated that it was more than $200,000. He also would not comment on the Lone Star experience, except to say that the rent was no problem, and he still owns some valuable brewing equipment.
Saunders won't rule out the possibility of another restaurant for the site, but he said he would like to see it leased for retail.
"If there is a more visible place on the Market I don't know where," Saunders said.
The outcome of the Lone Star also is "pretty perplexing" to Franklin Kimbrough, executive director of Downtown Roanoke Inc.. He said City Market retail sales were up 33 percent in 1992 over 1991, from $11 million to $15 million.
Kimbrough said the Lone Star owners' proposal was "everything we were looking for."
"It looked on paper like it should have worked."
by CNB