Krejcie started circulating his prospectus in August 1986, and by the end of November had raised $800,000 from 35 limited partners. It wasn't the terms that most attracted investors, Krejcie recalls, as much as his enthusiasm for the romance of the project -- and perks that included $100 of noncumulative credit each month for free food and beer.
Krejcie found spending money even easier than raising it. Final construction costs ran $1.75 million -- $87.50 a square foot. Added to the soft costs of $250,000, preopening costs were double what the partners had planned.
"If I had sat down with the six general partners and said it would cost $2 million, not one of them would have stayed in the project," Krejcie admits. "But I figured once we had a million, it would be easy to get the rest."
Krejcie was right. Sieben's preopening debt included $550,000 in leased restaurant and brewery equipment, with a five-year payback at between 13% to 15% interest, and $500,000 of bank debt at 1/2% to 1% over prime.
For Ron and Bill Siebel, the beer was the key: two ales, a lager, a stout, and an occasional special, each different in style and design. It took five months at Siebel Institute to formulate and test the products. Out of the institute at the same time came Sieben's brew master, Peter Burrell, a 30-year-old geologist-turned-brewer chosen from among the students.
In April 1987, Krejcie, enmeshed in the construction project, hired Laurel Hanson to steer the operation ot its scheduled September opening. Hanson had just launched a consulting career after five years with the Levy Organization, a Chicago-based operation with more than 20 restaurants. She had been director of training, then project coordinator for start-ups, and in the latter position she had opened some 18 different operations, including a 387-seat house. When Hanson spoke, the partners listened.
Hanson was skeptical of Sieben's menu plans -- "too beer-hall oriented," she said, "just a few sandwiches and pretzels and mustard." She decided she would keep the original ham, liverwurst, and salami sandwiches that had been the hallmark of the old Sieben's. But then she expanded the menu from those three items to a three-page extravaganza ranging from chili dogs to roasted marinated breast of chicken, with four salads, three soups, six appetizers, and five desserts. "More than a meal," she labeled it, "good Midwest American food." She'd stress quality and value: bratwurst from specialty markets, a restaurant exclusive on the city's best corned beef, and call brands in the liquor well.
Hanson admits "the idea of the change made the partners nervous and scared," particularly since her new menu would demand a $255,000 kitchen, not the basic $55,000 one planned for in the budget. But consider our target customer, she argued: men and women between 25 and 45, earning in the $25,000-to-$55,000 range. They eat out regularly, and demand a broad range of choices. Beer would remain the main profit generator, she agreed, but a broader menu would mean vastly increased volume, even if it pushed food costs up.
Hanson set her prices after conducting three different price/ration feasibility studies, looking first at other operations in River North, then at other high-value restaurants in Chicago, and finally at other brewpubs across the country. She charged less than her neighbors -- $4.95 for a chef salad, $12.95 for a sirloin strip steak or the Saturday-night rib special -- accepting higher food costs and lower margins. "We sell more beer doing that," she insisted. With the final menu, food sales are expected to generate 45% of total revenue -- at 36% cost of goods sold.
Sieben's counted on a public-relations splash to announce the launch. While the partners spent $6,000 for advertising in the local newspapers, most of their marketing money went for promotion. An outside agency flooded the press with stories about the return of the brewer's art and tradition to the city of big shoulders, winning free coverage on all the local TV and radio stations and most of the newspapers in town. Before the opening, the streets were flooded with 30,000 copies of the new menu, printed inside a newspaper headlined "Sieben's Saga Spans Centuries" and "The Tradition Continues."
No sooner had it held its grand opening than Sieben's was "discovered." The Chicago Sun-Times reported "the herd has been marching to Sieben's in droves." And within two months the place was operating at a profit, with a Saturday-night wait that stretched up to two hours. While area critics panned the food (see "The Beer's Great, But . . ." page 88), the room's 398 seats were turning one and a half times at lunch and three to three and a half times at dinner, with the average check per person running $7 at lunch and $18 at dinner.
On November 1, with construction still unfinished, the general partners asked Jim Krejcie to resign as the president of Sieben's. By late November, the operation was grossing $270,000 for a four-week period, more than double the $120,000 that the business plan had projected. On January 1, Laurel Hanson was named general manager, with a limited partner's share.
Its preopening public-relations campaign gave Sieben's a huge push. But the "herd," commentators say, inevitably will move on, discovering the next hot spot. Then the concept will be tested by the staff's ability to execute.
Jim Krejcie, now general partner without portfolio, is critical of the direction the operation has taken. "This is a restaurant business, not manufacturing," he insists. "We should be taking 25% to the bottom line [aftertax income], but our food costs are extremely high because of the cost of the menu and because nobody is watching the buying. I'd like to chop the menu in half; I'd rather be known for the greatest hamburger in town than try to be everything to everybody. The other partners are already talking about the next project, or franchising, but we don't know what we're doing here yet."
While Hanson acknowledges that her food costs are too high, she stands behind the menu, expecting to be able to hit 36% once the inevitable jitters and loose ends of the opening are worked out. "We can be very high achievers once we have our controllable expenses down," she predicts. "I'm aiming for a pretax profit of from $45,000 to $60,000 on $270,000 of sales each four weeks -- if we did that I would smile all the time."
