Making it on 4th Street

Downtown’s buzziest neighbourhood poses risk and reward

Making it on 4th Street

Making it on 4th Street
Restaurateurs making it on 104th Street: Downtown’s buzziest neighbourhood poses risk and reward
From left, Cristo Crudo, Nick Crudo and father Guiseppe Crudo are excited about opening their new restaurant on 104th Street. Photograph by: Greg Southam , Edmonton Journal

In 2011, when Nick and Cristo Crudo opened a charming, tiny Italian café in a faded strip mall near Alberta Avenue, it was for family. Their mother had died, and the brothers wanted to find a way to spend time with their father, Guiseppe — known as Papa Joe — a longtime chef and restaurant owner in Edmonton and in Penticton.

Another family restaurant ­— the Crudos owned several over the years — seemed just the thing. The boys came home from Penticton and Vancouver, and, together with Guiseppe, opened Cafe Amore, not far from Alberta Avenue. Nick and Guiseppe cooked, Cristo handled front-of-the-house. A family member was always in the 32-seat eatery, greeting customers with hugs and handshakes.

In 2013, the Crudos left the north side for a bigger, better location near MacEwan University.

Now, less than two years later, they are poised to launch another eatery, the Black Pearl Seafood Bar, on 104th Street, just north of Jasper.

This is the Edmonton equivalent of opening at the Met.

104th Street is Edmonton’s hottest restaurant strip, and one of its most expensive, peppered with trendy, independents from the sumptuous boîte, Tzin, to the buzzy and festive Blue Plate Diner.

Restaurant space in suburban Edmonton runs at $32 to $34 a square foot. So with retail space in buildings such as Icon I and II going for up to $45 a square foot (roughly the same price as the nearby towers, Fox I and II, opening within the next two years), 104th may never have been a more expensive gamble. Pressure from competition in the nearby Edmonton arena district when the new rink opens in 2016 is expected to crank leasing rates higher still.

If you can make it here, you can make it anywhere — but success is by no means assured. The very space the Crudos will occupy come February was abandoned in June by Lit, a bar and restaurant open for four years in Icon I. In July, Sobeys decided its downtown flagship store on 104th and Jasper wasn’t financially viable and shuttered the store. Roast, a quaint coffee shop and wine bar in the Mercer Warehouse, on 104th Street at 104th Avenue, lasted 18 months before closing in December 2013.

“It’s not an uncomplicated business model,” says restaurant consultant Alex Fraser of the Fifteen Group in a phone interview from Vancouver. “When you look at restaurants, so often patrons think it’s quite easy. They see it’s busy, so (think owners) are making huge amount of profits. But as a business model, restaurants can be very challenging.”

Fraser says net profit of a mere three to four per cent is common among restaurants in Canada.

“It’s not good, but it’s average,” he says.

Alberta restaurants are slightly more profitable than those in other parts of Canada, due to strong disposable income among Albertans. Indeed, in 2012, people in this province spent more than any other Canadians in eating and drinking establishments.

But according to Mark von Schellwitz, Western Canada vice-president of Restaurants Canada, “profitability is lower than most other industries as it is a highly competitive and labour intensive industry, where many new operations do not survive the first three years.”

“Food and wage inflation are tough to pass along to customers without losing market share,” writes von Schellwitz in an email. “Not having enough stable labour is also a big issue in Alberta, which will most certainly get worse in the coming months and years.”

Before 1997, 104th Street was a warehouse district with some light industrial business. But that year, city council approved a new plan for the downtown, and things began to slowly change. Streetscape improvements, such as brick sidewalks and benches, along with a housing grant for downtown dwellers and zoning improvements, began to attract more people and services to the area.

Changes were instigated not just by city council, but by the Downtown Business Association and the Downtown Edmonton Community League. Moving the City Market to 104th Street in 2004 was another key move, and other attractions, such as the neon sign museum on the north end of the street, continue to boost its style.

Today, 104th Street is quintessentially Edmonton.

Kelly Smart of Kelly’s Pub

Kelly Smart of Kelly’s Pub says culinary standards are higher on 104th Street.

The city’s historic roots are represented in the brick and creaky hardwood of the Metals Building, which houses the Burg, and the Mercer Warehouse, where another Transcend café is poised to launch. But the booming economy is reflected in modern skyscrapers Icon I and II, and the Fox towers under construction.

When restaurateurs come to 104th Street, they know customers will be attracted by the old-world charm of the area in eateries such as Dauphine Bakery and Cafe, which has a distinctly Parisian feel.

But Edmonton’s increasingly sophisticated downtown, diners want more than atmosphere. Widely travelled, with booming-economy coin in their pockets, Edmonton eaters want to see the hot trends — craft cocktails and locally sourced food — on the table, too.

Kelly Smart, 39, knew she had to hone her culinary chops when she came to 104th Street 18 months ago, after owning Kelly’s Pub on 116th Street and Jasper for about 10 years, until her landlord sold the building. Smart’s lease cost tripled when she moved to 104th Street, but still, it’s where she knew she had to be.

“The area is so up and coming,” says Smart. “But you have to go all in. There is no halfway.”

Don’t forget leasing rates are just the beginning for restaurant owners. Landlords impose operating costs, including taxes, utilities and common area fees, that can run an additional $15 a square foot downtown.

And the upfront investment to open a restaurant, particularly in new buildings, is also staggering. Smart spent about $450,000 on ventilation and kitchen equipment alone when she opened her 174-seat pub in Icon II in 2013. Still, the foot traffic on 104th Street has made that investment worthwhile.

A report by the Downtown Business Association notes that the downtown residential population, now at about 13,000, has increased by 35 per cent since 2007. On a Saturday during the height of the outdoor farmers market season, some 25,000 people stroll 104th Street, happy to invest in local bison, handmade chocolate, and independent restaurants.

There are lots of tempting choices. The savvy Patricia Bell of the Cavern runs an excellent wine bar and cheese shop from a brick basement near the Phillips Lofts. Geoff Linden’s coffee shop, Credo, boasts a Yaletown vibe that makes caffeine freaks willing to wait in a long line — just to be part of the scene.

Smart says her business is better since she came to 104th Street. But she’s had to play a different game.

“My old menu was very basic, you got a burger with lettuce and tomato. Now we have fancier burgers, with peanut butter on them. Especially in this area — we needed to do something unique because it’s so trendy.”

She also feels the hot breath of Earl’s and Cactus Club, located farther west on Jasper Avenue with a combined seating of nearly 800 seats.

“I have to step up more than the chains, because there is normally more than one of them and here, it’s me. If I fail, it’s my own doing.”

When an entrepreneur wants to open an independent restaurant, failure isn’t on their minds. Words like passion come up a lot, and the decision to take that leap is often a visceral one, connected to a long-held dream, a family tradition, a romantic prospect. The reality can be cripplingly pedestrian. One minute, you’re enjoying the rapt attention of fervent diners. The next, you’ve got three major appliances on the fritz, and your Barolo glasses, which cost $15, each, have developed an unfortunate habit of breaking.

Daniel Costa knows this reality all too well. The 30-year-old owner of two restaurants on Jasper Avenue just around the corner of 104th Street has enjoyed massive success. Three years after he opened Corso 32, a 34-seat Italian joint, it is still booked at prime time Saturday night at least eight weeks in advance. This year, he opened his second eatery next door, Bar Bricco, an Italian spuntini bar, and he’s in the midst of opening a third restaurant next to it. The new property is an 80-seat classic Italian trattoria, as yet nameless.

Devin Pope, left, and his father, Kelly Pope, own the building that houses Corso 32

Devin Pope, left, and his father, Kelly Pope, own the building that houses Corso 32, the popular Jasper Avenue eatery run by chef Daniel Costa, right.

“I’m sorry, I have to take this,” says Costa, leaning into his cellphone shortly after we meet for an espresso at the Cavern on 104th Street.

Costa is struggling with engineering issues in the new location, scheduled to open in 2015.

“I said I’d never open another restaurant after Corso, and now, here I am,” he says somewhat ruefully. “But it’s the love of it.”

Like many small business owners, restaurateurs have to be everything to everyone in their establishments — from plumbers to sommeliers to staff counsellors.

But Costa says one of the biggest pressures for him is the cost of food, which (particularly for local products) can be high. Indeed, City of Edmonton economist John Rose confirms that Edmonton’s food prices are between five per cent and 10 per cent higher than other jurisdictions including Vancouver and Toronto.

Food costs, not to mention a restaurant labour shortage, puts the squeeze on independent restaurateurs, who typically don’t have the profile, advertising clout and deeper pockets of popular chain restaurants including Cactus Club, Earls, and even the smaller, local chains such as Century Hospitality Group and Sorrentino’s.

Lord knows, it’s a fickle business. A bad restaurant review, a chef who didn’t work out, a few light-fingered servers — and poof, your edge is gone.

While no restaurant owners would say much about their lease deals, restaurateurs say the right kind of relationship with a building owner can boost an eatery’s chance of success.

“There are so many different types of landlords downtown and some are more aggressive than others,” says Casey McClelland, vice-president retail with the leasing agent, Colliers International, and a director on the board of the Downtown Business Association. “There’s your local landlords that have owned for a while, and institutional landlords, and each might have different philosophies and practices for how long they want to hold it, which will determine how aggressive they are in rates, and how they structure the deal.”

New buildings owned by big corporations or real estate investment trusts can be particularly expensive for an independent restaurant. That’s because the landlord needs to recover their sizable investment. Some institutional landlords will give tenants money to help erect their space in return for a higher-priced lease. Others may offer a few months of free rent.

McClelland says local building owners, with deep roots in the city, may take a different approach. They could have had a building in the family for years, with no plans to sell. They might structure a deal in which the rent is a bit lower, but they don’t necessarily put as much into it.

Daniel Costa of Corso 32 thinks himself lucky to have the Gather Co. as his landlord. Owned by the father-and-son team Kelly and Devin Pope, the Gather Co. (formerly known as Rose Hill Property Management) owns the building that Costa inhabits, as well as the fully leased Mercer Warehouse on 104th Street, where the latest independent eatery, Rostizado, has just opened to critical acclaim.

Costa says the Popes genuinely care about making the city a better place to live and have been willing to cut a deal for restaurant space that allows both parties to make money. Costa estimates his rent is perhaps 20 per cent lower than one would find directly on 104th Street, even though he’s just around the corner, and he has a lease that will likely see him in the space for at least a decade. He’s excited about his future in the business.

“Edmonton really is going through such an exciting period,” says Costa. “It doesn’t feel like it was, at all, five years ago.”

Devin Pope, 27, merely smiles politely when asked about leasing rates, acknowledging his company’s may be “less” than the big boys. But as he points out, the large landlords have big overhead. At his family firm, there is a staff of two. Devin says it’s important to be “fair” when cutting a lease deal.

“If Daniel isn’t making money, that’s not going to sustain downtown and it’s part of our brand, keeping these tenants happy and profitable,” he says.

Devin remembers a time, some 20 years ago, when his father owned a building next to the infamously seedy Cecil Hotel, which was on the corner of 104th Street in a building that would later reopen as Sobeys in 2008. A Pope family outing was to go downtown to tidy the refuse outside Dad’s building.

“We did it as a family … we saw it at its worst and there was no way to go but up,” recalls Devin. “My father has been in this business 20 or 30 years and it’s been a long tough battle.”

Now that 104th Street has found its footing, the Gather Co. continues to adhere to its vision for the area as a home for creative independent businesses with a stake in downtown growth.

“Our business model is that we go after talented, artistic and driven people, someone with a vision that we see, too,” says Devin, noting his properties on 104th Street are fully leased for the next 10 to 15 years.There’s an art, and a science, to running an independent restaurant. The art is all about the mixture of tantalizing menu and attention at the table that makes diners feel welcome, and satisfied. The science, well, that’s the numbers. Restaurateurs spend hours at the calculator, pouring over the lease, calculating portion sizes, wondering how much staff is necessary to provide personal service — to make the numbers add up right.

Back at Cafe Amore, brothers Nick and Cristo are confident they have both the art and science down pat. They can’t wait to show off the gigantic, mesmerizing fresh seafood tank to customers in their new space at the Black Pearl Seafood Bar. They hope to create a casual atmosphere, a place where folks can pop by for a pint and half-dozen oysters and enjoy a “come as you are” vibe, says Nick.

They’re sure that a lifetime of running restaurants as a family will hold them in good stead, despite the risks inherent on 104th Street. The Crudo clan adheres to what Papa Joe, 65, has been preaching for years about the restaurant business. He makes it look easy from his nightly perch on a stool near the bar at Cafe Amore, as he watches over the chattering crowd. But his advice to newcomers to the restaurant business is sharp.

“You want to hold a knife by the handle,” says Papa Joe with a canny smile. “Not the blade.”

 

 


 

BY LIANE FAULDER, EDMONTON JOURNAL OCTOBER 19, 2014
on Edmonton Journal (http://goo.gl/VbCNcf)