It will take staff training to make her smile, Hanson says. A few prices may be raised and a few portions shaved, but she expects to improve the numbers primarily by putting tighter controls in the kitchen and educating the entire staff in the art of portion control. She expects staffing levels, down to 130 from the opening 180, to drop a bit more, and hopes to develop a compensation system for management based on performance. Hanson herself earns a percentage of gross margins on top of her salary.
With the PR bonanza played out, Sieben's marketing will shift to a more basic strategy. Its outside agency has been released, and the budget has been cut to 4% of sales, to be spent advertising in the weekend sections of the local papers. Hanson has named an assistant to help create regular table tents announcing promotions on special brews and to develop brochures inviting tour groups to visit.
Ron Siebel, who remains president of his family's business while brother Bill heads up Sieben's River North, admits to being surprised by how different the finished brewery is from what he'd expected. "I'd envisioned a basic Sieben's -- and worried about how to fill it. But we kept expanding, almost by accident, the more we talked to restaurant people. Now, we have two complex businesses here, a brewery and a restaurant, and on a day-to-day basis we have to run it as a restaurant so we can charge for the beer."
It is the beer, Siebel insists, that will keep Sieben's at the top of a market that could soon have four brewpubs. "You're going to find the imitators out there," he says," but the public is going to be able to tell the difference." Sieben's beer will be available only on site, although Siebel has already gotten calls from restaurants that want to serve his product. In the future he may offer limited amounts of draft beer packaged for take-out.
When Ron Siebel thinks of the future, however, he primarily thinks of expansion. After 116 years serving other brewers, J. E. Siebel Sons' has a son in the brewery business himself, and Sieben's River North is just a start. "We won't do another brewpub here in Chicago," he says, "but as a group we'll look to other markets. I'm not sure yet how that should work -- the brewpub concept is valid, but it has to be tied to local people. I doubt you'll see a franchise, but that could be possible, too."
EXECUTIVE SUMMARY
* THE COMPANY: Sieben's River North Brewery Inc., Chicago
* CONCEPT: Combination microbrewery/restaurant; beer, with 97% gross margins, to be more than half of total sales
* PROJECTIONS: Sales in second fiscal year of $3.7 million, with pretax profits of $590,000 (16%). Considering expansion to other cities
* CHALLENGES: Sustaining sales when novelty and PR blitz wear off; improving food quality; controlling costs in order to boost net profits and reach acceptable return on investment
FINANCIALS
Sieben's River North operating statement, four-week period
Actual Projected
11/2/87- 10/31/88-
11/29/87 11/27/88
SALES
Beer $138,718 $146,034
Food 112,587 137,469
Liquor 15,870 15,503
Other (emblematics; banquests) 7,191 8,000
Total sales 274,366 307,006
COST OF SALES
Beer 3,968 4,177
Food 55,661 49,489
Liquor 5,737 5,604
Other 1,826 2,032
Total cost of sales 67,192 61,302
GROSS PROFIT 207,174 245,704
OPERATING EXPENSES
Payroll and related expenses 83,259 98,989
Building rental and costs (taxes, utilities) 19,991 19,991
Equipment rental 4,500 4,500
Insurance 3,461 3,846
Advertising, promotion, and printing 23,662 12,280
Other 38,738 31,600
Total operating expenses 173,611 171,206
Depreciation 9,303 9,303
Interest expense (loans and notes) 5,389 5,389
Interest expense (limited partnership debentures) 6,154 6,154
Total expenses 194,457 192,052
NET INCOME BEFORE TAXES 12,717 53,652
KEY PERSONNEL
Laurel Hanson, 36, General manager
Previously restaurant opening coordinator, training director, and troubleshooter for Levy Organization, Chicago, 1982 to '86 . . . general manager, Cardozo's restaurant, Chicago, 1979 to '82.
Bill Siebel, 42, (left), President of general partnership
Also executive vice-president of J.E. Siebel Sons' Co., Chicago.
Ron Siebel, 45 (right), Founding general partner
Also president, J. E. Siebel Sons', a 116-year-old brewery consulting-and-education company, and operators of Siebel Institute, foremost brewing school in the United States.
COMPETITIVE ANALYSIS
Number of microbreweries in United States and Canada n1 115
Number of "brewpubs" (subset of micro category) n1 32
One-year growth in number of micros, 1987 n1 65%
Typical brewpub Sieben's
or restaurant: actual:
Size of facility 4,000 square feet n2 20,000 square feet
Average brewing capacity 10 barrels n2 30 barrels
Start-up costs $350,000 to $600,000 n2, n3 $2 million
Annual sales (projected) $700,000 to $1 million n2 $3.6 million
Beer price per galss $2.15 n1 $2.25
Cost of sales, beer 3% n2 3%
Average dinner check per pe-
rson $19 n4 $18
Cost of sales, food 35% n4 49%
Sources: n1 Association of Brewers; n2 Brewpub Manual; n3 Brewing Systems Inc.; n4 National Restaurant Association
