Brewing Up Solid ProfitsSandra Dallas
The line snakes out the door at the Rock Bottom Brewery in Denver, but nobody's complaining. As a khaki-clad waiter passes out complimentary beer, the crowd of young professionals plays pool, checks out the brewhouse, and eyes platters of chicken enchiladas whizzing by.
Rock Bottom diners aren't the only ones with a taste for the brew pub. Wall Street is positively drooling over Rock Bottom Restaurants Inc., which owns six Rock Bottom brew pubs as well as Old Chicago, a chain of 18 pizza restaurants. Last year, net income at the company--No.25 on this year's Hot Growth list--shot up 36%, to $1.9 million, on revenues of $38.9 million, a 57% gain. Michael G. Mueller, a managing director at Montgomery Securities, expects revenues to reach $74 million this year, with net income more than doubling to $4.5 million.
Old Chicago cooked up nearly 60% of revenues last year, but it's the Rock Bottom brew pubs that have caused Wall Street to hoist the stock to nearly 22, some 30 times projected earnings. Rock Bottom was launched five years ago by Chairman and CEO Frank B. Day--a former Burger King Corp. franchisee and Harvard MBA. It's now the most advanced player in the race to build a national chain of brew pubs, a rush fueled by the soaring popularity of tiny local microbreweries. After testing out the formula in its original Denver brew pub for two years, the company began expanding in 1993. Now Day, 62, plans to double the lucrative chain to 13 restaurants by the end of 1996.
Rock Bottom has thrived because, unlike many pubs, it emphasizes good food. And unlike most restaurants, it also does a good job with the beer. "We're very serious about it being a restaurant. Some brew pubs are not; they're more interested in being a tavern," says Day. "We try to keep a balance." It's a mix that works: Some 45% of revenues, about twice the national restaurant average, come from alcohol, mostly beer, which Rock Bottom brews for 20 cents a glass and sells for $3.
Day, who opened Boulder's first fern bar in the early 1970s before launching the Old Chicago chain in 1976, knows firsthand that quality service pays off in the restaurant business. Rock Bottom employees rely on teamwork, run each other's orders to tables, share grunt work, and rotate undesirable shifts. Each new hire serves a 30-day probation period--and must get the approval of 10 employees before becoming part of the permanent staff. As a result, the turnover is approximately half the national average in restaurants.
FICKLE? Of course, Rock Bottom's appeal could go flat. Restaurant customers are notoriously fickle, and some young professionals have already tired of the brew pub. "I used to go to the Rock Bottom, but it's been taken over by women in big hair who've heard men in suits hang out there," says a Denver lawyer, who is doing her partying elsewhere.
So far, others have taken her place. Rock Bottom "is doing 25% better in volume than in our wildest dreams when we opened it," says Day. Now that kind of success is something to drink to.