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Charlie & Barney's chili chain set to bubble over into Midwest market
Date: 4/26/2004 12:00:00 AM
Written By: Sarah E. Lockyer - Nations Restaurant News
Charlie & Barney's
Headquarters: Indianapolis
Market segment: fast casual
Menu: chili, grill items, soups, salads and sandwiches
Total no. of units: 5
Systemwide sales: about $2.5 million
Leadership: Richard Hogshire, founder and chairman; Bill Church, president
Year founded: 1977
INDIANAPOLIS (March 22) — Richard Hogshire, founder of Charlie & Barney's chili chain in Indianapolis, is convinced there is a place for chili in every town. After opening his first restaurant in 1977 and increasing sales each year since then, he decided it was time for the rest of the nation to taste his chili."We have a very good product, a different niche," he said. "There is room for chili parlors everywhere."
So in January 2003 Hogshire created a team of veteran restaurant operators and developers to initiate a franchise system. Now, he said, "with the company's ducks in a row," Charlie & Barney's is looking to open about 200 units in the next four to five years.
Currently, there are five restaurants, with four in or near Indianapolis and one in Atlanta, where Hogshire's son-in-law runs the operations.
An additional two are under construction in Indianapolis, and two more deals near the city have been signed. In development are licensee agreements for new stores — all slated for completion by the end of the month — in Columbus, Ind.; East Lansing, Mich.; Cleveland; and Philadelphia.
The company is focusing its expansion in Midwestern states, including Illinois, Missouri and Wisconsin, but has heard from interested parties as far east as New York and as far south as Florida, said Tim Lee, one of the company's executive directors of development.
Charlie & Barney's started as one small store selling only its homemade, secret-recipe chili. It differentiated itself, Hogshire said, not only by the great-tasting chili but also by including a toppings bar with sour cream, black olives, jalapeños, hot sauces and cheese, among other condiments, to allow patrons to customize their chili for free. The store took off in the urban, downtown area of Indianapolis, he said.
"People seemed to like chili, and it was a niche that no one was doing," Hogshire said. "Plus, it's easy. It's really easy to dip into a bowl of chili and serve it."
The stores were designed as more upscale than most typical quick-service restaurants, he said, and "suddenly, Indianapolis could feel like Chicago or New York."
After about six years, Hogshire said, he noticed that sales had dipped during the summer, when demand for chili is not at its highest, and so he added grill items like hamburgers and hot dogs and another toppings bar specific to those selections. Now the menu includes salads, soup and sandwiches as well. The average check is about $6.50.
The two original company-owned units, opened in Indianapolis in 1977 and 1978, still produce the lion's share of sales, bringing in about $1.5 million, with systemwide volume reaching about $2.5 million. The company also built an institutional-sales division that sells a canned version of Charlie & Barney's chili to restaurant chains and vendors.
It was through that sales division that Hogshire met Bill Church, a franchisee and developer partly responsible for the Roly Poly sandwich chain's growth success in the late 1990s. Charlie & Barney's had been selling its chili to Roly Poly restaurants, and Church, then a vice president at the sandwich chain, got to know Charlie & Barney's and jumped ship in January 2003 to work as the chili chain's president. He was ready to move the company into the national franchise game, he said.
"I felt like this was a great startup opportunity and that the timing was right," he said. "I love the concept; it has all the qualities of a big-time player."
Admittedly, "startup" may not be the right word for a concept that has been around for 26 years, Church said, but he thinks Charlie & Barney's finally has put together the right team.
"I think with the exception of a few other brands, like Skyline Chili and Steak & Shake, there are no chili parlors out there," Church said. "The timing is right for Dick [Hogshire]." He said the two first developed a friendship and then created a company to manage the rights to license Charlie & Barney's.
Because the company is unwilling to compromise the quality and freshly made taste of its chili, most new units will be close to headquarters, at least at first, so that management can oversee and support each store, he said.
But should an experienced, multiunit operator be interested, Charlie & Barney's is ready to go national, officials said. After all, a national distribution system already is in use, as McCormick & Co. Inc. mixes the company's proprietary spices in California and distributes them to all units, where the chili is made fresh each day. The company uses Sysco Corp. to distribute its canned version to clients nationwide.
"We're definitely thinking national," Church said. "But you need controlled growth to be successful. Too many times a concept comes out of the gate firing and flops."
Tom Coyle, another executive director of development for the company and a veteran restaurant operator, said Charlie & Barney's is poised for expansion success because of its low cost of entry, support from management and, of course, the quality food.
No stranger to chain expansion, Coyle was a president of Roy Rogers, and most recently, the chief executive at Indianapolis-based Shamrock Investment LLC, a company that held the development rights for Roly Polys in nine states.
He said most new Charlie & Barney's units would be 1,800 to 2,200 square feet, and opening costs, including licensing fees, would total between $100,000 to $145,000. With sales at each unit reaching $450,000 to $650,000, "the sales-to-investment ratio is really nice," Coyle said.
Stores will be placed mainly in strip-mall centers or commercial office buildings, with some stand-alone units and other stores, like those found in bowling alleys or food courts, offering a limited menu, he said. Indeed, the company recently signed three separate agreements to convert bowling-alley food centers into Charlie & Barney's units, executives said.
The founder, Hogshire, said the key to expansion success would be gathering the right people and the right locations, as he is confident the food will sell itself. He was quick to say that Charlie & Barney's chili has won "Best in Indianapolis" 12 years and counting.
But the best chili in one region of the country may not be the favorite elsewhere, said Carol Hancock, executive director of the International Chili Society in San Juan Capistrano, Calif.
"Cincinnati-style chili is sweeter, for example, and in Texas they would laugh you out of town with that," she said. The chili society is a nonprofit organization that promotes the "preparation and appreciation" of chili through sanctioned chili cook-offs nationwide.
But, Hancock continued, people always will want chili, noting that more than 1 million people participated in the society's 300 chili cook-offs last year.
"I've heard such things as, 'Chili is on more menus than hamburgers,' " Hancock said. "The market is not something I can put my hands on, but it is clearly there."
Franchisee Jim Fuller, who owns a Charlie & Barney's unit in a shopping-mall food court in Indianapolis, said chili is always a favorite, but the quality of the company's food is the best selling point, regardless of location.
"Our chili is loaded with meat and beans, and we have the best burger in town — I'd say any town," he said.
Fuller said he was excited to hear about the chain's aggressive growth plans. "Anything that helps the franchise grow is good," he noted. "But I am jealous of the one opening in my neighborhood. I wish it were mine."
When it comes to exporting a popular Indianapolis chili to other regions that boast their own favorite recipes, Hogshire said he's not worried, citing the success of the Charlie & Barney's in Atlanta, a town he said is not known for its love of chili.
"There seems to be a flavor that is accepted everywhere, and I have it," he said with a chuckle.
