Irish pub developer becomes franchiser

Dave Magrogan in Kildare’s restaurant.

Building a Kildare’s Irish Pub, either from the ground up or using an existing structure, can cost anywhere from $600,000 to $2 million.

So why not franchise the concept?

Within the month, Kildare’s will be available for franchising in Pennsylvania and about three dozen other states. Remaining states will soon follow as soon as registration documents are filed and OK’d.

“From a competitive standpoint, the franchisees will have an advantage in their own markets,” the 39-year-old Magrogan said last week in an extensive interview.

Chief executive of The Dave Magrogan Group, known as DMG, a West Chester-based restaurant development and management company, Magrogan, a former Delco chiropractor, opened his first Kildare’s in May 2003 in West Chester.

Future Kildare’s franchisees will know their community and how best to be involved there. And, from a financial outlay point of view, “rather than using our funds, they’ll use theirs – and we’ll collect franchise fees,” Magrogan added. “We’ll provide procedures and quality standards but we won’t have to invest so much capital.”

A seventh Kildare’s opened March 1 in Columbus, Ohio, adjacent to Ohio State University. Others, besides the original Kildare’s in the unit block of West Gay Street, are in Manayunk, Scranton and State College, Newark, Del., and Chapel Hill, N. C.

DMG also has three Doc Magrogan’s Oyster Houses, with a fourth set to open next month near the University of Pennsylvania campus. Other Docs are in West Chester, Moosic and Dover, Del.

The company also owns Harvest Seasonal Grill and Wine Bar in Concord, Delaware County, in the Glen Eagle Square Shopping Center, where the new Whole Foods just opened. Come summer, a second Harvest will debut at 40th and Walnut in Philadelphia.

Expanding its three restaurant concepts, not to mention staying solvent, is challenging, to say the least, during a severe economic downturn, Magrogan admitted.

DMG has stayed afloat due to three factors, he said:

— Landlord participation. This can include financial help with tricking out a building as well as loans against the real estate itself. DMG searches for existing buildings, with heating and cooling systems, kitchen and bathrooms already in place, rather than building from the ground up.

Renovating an existing structure keeps the cost of opening a Kildare’s, for instance, between $600,000 and $1 million rather than the $1 million to $2 million required to start from the very beginning.

— Bank financing. “The door really shut on bank financing two years ago,” Magrogan noted. But signs are that those doors are creaking open again, especially for relatively small loans.

DNB First and Fulton Bank, in particular, have been more active on the local lending scene during the last six months. Not so much Bank of America and Wells Fargo, huge lenders that Magrogan characterizes as “not so interested in small restaurant companies anymore.”

— Private investors. “These are people who believe in our brands, whose options for investing are not as numerous as they once were,” Magrogan explained. “Investing in us is not buy-and-flip investment. It’s for the long-term.”

With 11 locations (not counting the Doc’s and Harvest locations set to open soon) and 750 employees, DMG will register $30 million in sales this year. Magrogan hopes to reach the $50 million annual mark in 2013.

Steady growth has helped attract talented restaurant operations executives, according to Magrogan: Chief operating officer Frank Kasper, who worked for Legal Seafood and Hard Rock Café; executive chef Steve Calise, a McCormick and Schmick’s Seafood Restaurant alumnus; and interim chief financial officer Steve Rockwell, late of Ruby Tuesday’s.

Magrogan and his company have made their share of mistakes, he acknowledged. The company sold its under-performing King-of-Prussia Kildare’s after sinking $3.5 million into the property before it opened in 2004. Because the building was bigger than most Kildare’s, operating costs were higher as well, parking was a problem and salaries and taxes were also steeper than at other locations.

DMG also sold the Más Mexicali Cantina and college-age watering hole in West Chester, six months after he opened it in Feb. 2010, in the former Coyote Crossing space, to partners John and Joanne Caulfield.

“We helped the Caulfields create and launch the brand but that was it,” according to Magrogan. “They wanted to run a family-owned business and this was it. And we didn’t want to dilute what we were doing at Harvest” – a seasonal and fresh food concept first percolating when Magrogan and the Caulfields opened Más.

From these and other experiences, Magrogan and his staffers have learned not to overspend or dilute attention from brands that flourish. And Magrogan also learned to hunt for better opportunities with landlords and developers. He also improved employee training.

Now he’s even more focused on seeking better neighborhoods for DMG restaurants, given that plunking down a new eatery in the midst of other national brands surely can’t hurt.

For instance, the Ohio State Kildare’s counts Barnes and Noble, Panera Bread and Aveda as neighbors.

And the new Doc’s, at 34th and Sansom, in the former space of the former La Terrasse restaurant, is directly across from Penn’s law school, close to the Children’s Hospital of Pennsylvania and near the White Dog Café and Stephen Starr’s Pod restaurant. (Putting a new twist on things, the University City Doc’s will offer a retail fish market and to-go section.)

“In the long run, I hold out the best hope for Harvest,” Magrogan said. “It’s a well-received brand, and consumers like the fact that we use local farmers whenever possible for dishes whose calorie counts rarely exceed 500 calories.”

He has 12 opportunities to open new Harvests on his desk right now. Most are in Pennsylvania, Maryland and Virginia; his favorite, however, is in Tampa. Whatever expansion occurs will be company-owned.

Said Magrogan, “Harvest really has to be opened correctly to work right.”

Source: SARAH E. MORAN, dailylocal.com

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