Restaurant owners weigh many factors before expanding

Grand Forks almost had its own Kroll's Diner.

The family-owned restaurant serving up German and American fare has five locations throughout the state. But ultimately, it was the land price that kept owner Keith Glatt from opening up in the upper Red River Valley almost a decade ago.

"Not saying it wasn't worth it," he said. "But I'm not going to make a deal where I have to struggle to make a profit."

Glatt's decision is an example of one of many factors restaurant owners have to consider before expanding to other locales. Still, North Dakota has spawned several mini-chains with locations throughout the state and region.

Some, like Kroll's and the Red Pepper in Grand Forks, are community institutions that began expanding decades after they first opened their doors. Others, like JL Beers in Fargo and Rhombus Guys, are relative newcomers that have used their early success to open up multiple locations.

Considerations

When Jonathan Holth and Shawn Clapp decided they wanted to expand Grand Forks' Toasted Frog, they took location into account.

"We felt like there wasn't anything like the Toasted Frog in Bismarck," Clapp said. "We just thought it was far enough away that it wouldn't compete (with our original location), but not too far that we couldn't be involved."

Holth said Grand Forks was starting to become more vibrant just as they first opened in 2006, a trend reflected in cities across the country.

"Some of the things that were present that helped us be successful in Grand Forks, we saw those same tendencies in Bismarck," he said. They opened there in 2010.

Rhombus Guys, the pizza restaurant owned by Arron Hendricks and Matt Winjum opened a second location in downtown Fargo in 2011, and have since won two awards for serving the best pizza in the state's largest city. Hendricks said the close ties between Fargo and Grand Forks helped them get off to a running start.

"There's a lot of people who travel between Fargo and Grand Forks," Hendricks said. "And so we felt like we already had pretty good name recognition."

The same goes for the Red Pepper, which, after opening a second location in Grand Forks in 2006, opened another in Fargo last year.

"It's probably the most often-asked question I'd get, was 'When are you coming to Fargo?' " said Jeff Tellmann, who owns the restaurant along with his wife Nicki. "We would get that all the time."

For Glatt, the decision to open more restaurants comes down to how successful the business could be.

The stainless steel that Kroll's diners are made of has become more expensive over the years, he said. But Glatt said their construction takes less time than a traditional building, allowing the restaurant to start making money earlier.

"It really comes down to can we make money?" Glatt said. "It's always a gamble ... but I thought we could make it work."

Controlled growth

Hendricks predicted that Rhombus Guys would expand further someday, but they have no concrete plans to do so at this point. The owners are hoping that their restaurant, which began in the small town of Mentor, Minn., as the Rhombus House of Pizza, can avoid becoming too commercialized.

"It's just a lot of work," he said, adding that customers "like places that are unique to their communities."

When the Red Pepper opened its Campus Place location near UND in 2006, it initially cut into the business at the original restaurant on University Avenue, Tellmann said.

But now, the original location has become busier and the Campus Place location has caught up, essentially doubling their business in Grand Forks, Tellmann said. He said the Campus Place Red Pepper has a busier lunch and dinner crowd, while the original does well in the evening and late-night.

"At this point, they do about the same amount of business," Tellmann said. "They kind of complement each other."

Fargo-based JL Beers may be the most aggressive in its expansion plans among regional restaurants. After launching in 2009 in downtown Fargo, the beer and burger joint will add its fourth location in the Fargo area soon and has sprouted up in Grand Forks, Bismarck, Sioux Falls, S.D.

The owners of the restaurant have also signed two franchise agreements, and locations in Minneapolis and Minot are now in the works.

Lance Thorson, a co-owner of JL Beers, said their initial appeal was offering craft beers that weren't available elsewhere. In recent years a wave of small breweries has opened in Minnesota and across the nation as part of a trend in toward more flavorful and locally made brews.

Thorson said now they expect to be a nationwide chain sometime in the future as more franchise agreements are signed.

"We're looking at controlled growth," he said, adding that they've had interest from throughout the country and Canada. "Franchising is a little bit new to us, so we're trying to take the steps to make sure that everything, as far as our brand image and identity and the consistency of our product is all maintained as we grow."

Call Hageman at (701) 780-1244, (800) 477-6572 ext. 1244 or send email to jhageman@gfherald.com .