What The Experts Say

'High-concept places like this tend to be more fad than long-term fashion. If you can't fall back on good food, you've got a problem.'

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PATRICK LYONS

Operator; founder and CEO of That's Entertainment Inc., a Boston-based group of eight restaurants and nightclubs

The herd won't stay forever; if you get six months out of it you're in God's pocket. When that first binge is over, you've got to have a base from which to build your business.

Sieben's seems to have the concept and the product -- certainly when it comes to the beer. The key to the venture's success, however, will be management -- they'll oversee execution and maintain consistency -- and that's where Sieben's seems vulnerable.

The introduction of Hanson and the exit of Krejcie, for instance, is troubling. It seems to have been a committee decision. But was it a committee that came up with this concept? No, it was an individual who championed the project, and that's important. A business like this requires one person with a proprietary interest, someone who believes in the project heart and soul, who'll work 100 hours a week and make sure the salt-and-pepper shakers aren't greasy.

At Sieben's it looks like the proprietary interest of the brewery people, the Siebels, shows through in the quality of the beer. But they've linked their beer wagon up to a food wagon, and if the food doesn't maintain the same quality and standards that the beer does, there'll be problems down the road -- I wouldn't want to be on the tail end of those debentures.

But they've got some time to correct their problems; I'm sure they've got a year. Their foundation is good. It'll come down to details.

NANCY KRUSE

Consultant; principal of Technomic Inc., a Chicago restaurant analysis and consulting firm; a Sieben's customer

They are going to have to come to grips with some fairly serious issues. The first is concept burnout: what is their staying power when the herd moves from their high-concept operation to the next? High-concept places tend to be more in the camp of fad than long-term fashion. For now, people will go to see and be seen, to be first inside the trendy spot. But two years from now, or less than that -- six months from now -- there will be another new high concept on the horizon that will siphon off a lot of their business. That's when they'll be tested.

Then there's the food. I did eat there and was disappointed. The menu was a little too ambitious. And if you can't, in the long run, fall back on good quality at good prices, then you're going to have a real problem. That's where the negative reviews may come home to roost. If you don't learn from them, you may be on shaky ground.

Their price points, which are moderate, make sense, and I think they'll pick up a fair amount of business from the casual after-work crowed as opposed to those looking for a particularly special evening out. But their food costs are way high. They should be 36%.

Still, I like the concept, and it's in a good location -- an area that is very, very hot. For this kind of operation, a very good spot.

JAMES BROCK

Financier, operator; founder of Koolau Brewery Inc., Honolulu, and manager of a venture fund

Their problems at this site are to get their returns up and to control their costs. They spent too much money for what they've got. They have to realize that $13,000 a month pretax, which is what they're showing now, is not an adequate return on a $2-million investment; even the projected $54,000 per period in pretax profit is not enough. This is a very high-risk business. At this stage, I would want to see 24% aftertax profit. I think they can get there, but whether or not they can build a chain is another question.

I don't think it will be easy to replicate. There is going to be at least one chain of brewpubs. Five or six groups are attempting to put one together. However, if anybody can do it, it's probably Ron Siebel, because he has such influence.

He may find that the best way to do it is as a joint venture: he's very well known in the brewing industry, so he could go into an area and find someone who has the desire and experience to run the restaurant and joint venture it. Use his expertise with the brewing aspect as one of the legs, use the success of Sieben's as the leg to draw capital, and use the local manager to run the operation. I don't think it works as a franchise; a joint venture has more chance of success.

Generally, though, the concept is good. At the River North site alone, I think they'll succeed. I don't think there's much question about that.

BILL OWENS

Operator, analyst; founder of Buffalo Bill's Brewpub, in Hayward, Calif.; Publisher of American Brewer Magazine.

The Siebel Institute is a focal point in the industry, one of the two or three places where you can seriously study brewing. So one of the main strengths of this place is that the Siebels are principals and the beer is taken seriously. Their beer margins will be excellent because they sell only their own, not the products of others as well. And if you're producing quality beers, people will come back to you.

If they're making a mistake, it's with food. It should be kept simple. This should be a brewing business with food on its coattails, not a restaurant with the brewery as a gimmick to lure customers. With 49% food costs versus the cost of manufacturing beer at 3%, common sense says emphasize the beers.

Overall, they'll do quite well. In fact, I'd say their projections are off by 25% -- too low. The Siebels have moved to brewpubs at the right time. Today, there are 700 wineries in California, and 22 breweries. Within 10 years, there will probably be 1,500 breweries and still only 700 wineries.