John Kunkel has founded and grown new concepts even as the economy was forcing other operators to lick their wounds.
He introduced his first restaurant, Taste Bakery Café in South Beach, Fla., after Sept. 11, 2001, a time when many hospitality ventures stood still. Three years later he sold a flourishing Taste to focus on his newest venture, Lime Fresh Mexican Grill. His optimism about the fast-casual Tex-Mex chain’s prospects has not dimmed despite the recession.
Today there are four Lime Fresh restaurants and plans to open two more in South Florida in early 2009. The goal is to add at least 10 stores annually beginning in 2009.
Kunkel opened his first Lime Fresh Mexican Grill in South Beach in 2004 with less than $250,000. If $250,000 sounds like a modest amount, it’s because Kunkel not only served as founder and chief executive of the Miami-based company, but also general contractor, line cook and sweat equity specialist.
Kunkel, 37, is the first to admit that his management style of expanding Lime Fresh Mexican Grill into an emerging brand in South Florida is unabashedly hands-on.
After that first Lime Fresh in South Beach, Kunkel opened restaurants in North Miami Beach in November 2005 and Pembroke Pines in December 2007. A fourth unit opened in Coconut Creek in late November, and units are planned to open in midtown Miami and at the University of Miami in 2009. Stores are also slated to open in the Florida towns of Boca Raton and Kendall in late 2009. Kunkel pegs annual average unit sales at $2.1 million.
Kunkel, a Miami Beach resident, also is keeping his eyes open for potential markets in Georgia as well as other regions in Florida.
“We’re looking at two or three sites on any given day,” he said.
Kunkel wants to expand but says he’s in no rush. He says he is very choosy about his franchisees. In fact, the chain claims only two franchisees, including one who runs two of the seven restaurants that are open or scheduled to be open by the end of 2009.
“I’ve turned down deal after deal,” he said. “Just because you have the money to open 10 stores doesn’t mean you should open 10 stores. I’m strict and picky. The restaurant business requires a personal and professional commitment that people don’t understand.”
CHAIN FACTS NAME: Lime Fresh Mexican GrillHEADQUARTERS: MiamiMARKET SEGMENT: fast casualTOTAL NUMBER OF UNITS: 4AVERAGE UNIT VOLUME: $2.1 millionCHECK AVERAGE: $15 to $17LEADERSHIP: John Kunkel, founder and chief executive; Donald Tims, chief operating officerYEAR FOUNDED: 2004
Franchisees need experience in running fast-casual eateries and money up front to buy into Lime Fresh Mexican Grill, he said. Initial investments include a $30,000 franchise fee, plus 6 percent of gross sales and 1 percent of sales toward a marketing fund. Generally speaking, the overall startup costs for a Lime Fresh franchisee range from $350,000 to $550,000.
“We don’t do liens against the equipment,” he said. “Operators need to come to the table ready with the money. We want operators who are able to run the store. I want the best operator, and that’s my chief concern.”
Andrew Hirsch, 27, who worked at Aramark for five years in corporate dining, is a Lime Fresh Mexican Grill operator who was impressed by Kunkel’s business operations. Hirsch took over the North Miami Beach store last February and runs the newer Coconut Creek location.
“What really surprised me with meeting John is that he had an operations manual bigger than Aramark’s,” Hirsch said. “He built the brand from the outside in. He did everything from checklists to forms. He built it to be done correctly, and I said to myself, ‘These are the guys I want to grow with.’”
Hirsch said he supports Kunkel’s choosy approach to partnering with potential franchisees.
“I don’t want another person coming in and potentially harming our name, our brand, with a poor performance,” Hirsch said.
To create a niche in a crowded fast-casual Tex-Mex cuisine category that already includes the likes of Chipotle Mexican Grill, Moe’s Southwest Grill and Tijuana Flats, Kunkel focused on ambience and interior decorating as well as serving up burritos, fajitas and quesadillas.
Kunkel said he liked the energy and buzz of a fast-food restaurant, but disliked the sometimes cold, plastic and sterile environment. So he created a fast-casual restaurant with an upscale feel, decorating the interior with touches such as faux finished walls, hammered-copper counters, wood trim and Chicago brick.
Kunkel wanted patrons to enjoy hanging out in his eateries, much like when he opened Taste Bakery Café.
“I wanted to make available an upscale product that is available in a different type of atmosphere,” he said. “I didn’t want a place where people wanted to just finish their meal and leave. I wanted them to hang out. …I went over the top with the [interior] finishes.”
Al Meyers, a retail management consultant in Dallas, liked Lime Fresh’s move to create a different type of environment for its customers. It’s the type of move that could give the company a competitive edge over its rivals, Meyers said.
“In retail, it’s all about the experience,” said Meyers, senior vice president of TNS Retail Forward. Meyers works out of the Dallas office for the Columbus, Ohio-based retail management consulting firm.
“To get repeat patronage, you need to supply benefits besides just getting affordable food,” Meyers said. “It gives them a differential in the market place.”
He added, “People want the ambience and the decor. [Lime Fresh is] right in tune with a big segment of the market.”
To add to that festive atmosphere, Lime Fresh also serves alcoholic beverages, such as a carbonated, alcoholic lemonade beverage and a frozen sangria drink that’s a citrus-flavored red wine served in a slushy state.
Kunkel’s first Lime Fresh Mexican Grill in South Beach was a cozy 600 square feet, but future stores will be in the 1,800 to 2,000 square-foot range, with the number of seats ranging from 55 to 70. There will also be outside seating, lending what Kunkel described as a “California indoor-outdoor feel.”
Through his hands-on management style, Kunkel keeps a lid on costs. He meets with store operators to review food bills and orders in order to keep operating expenses as low as possible.
Kunkel can wield much influence with his stores because he has no investors and nobody else to answer to. To start his first store in the chain, he used a property investment, savings and the profits from the sale of his Taste Bakery Café.
The demographics of the stores’ customers depend on each unit’s location.
At the South Beach Lime Fresh Mexican Grill, patrons range from high-profile celebrities like Matt Damon and Jay-Z to Miami Beach tourists. At the North Miami Beach eatery, it’s a mix of retirees and lunchtime businessmen. And in Pembroke Pines the store draws families, so it needs more high chairs and offers a children’s menu.
Burritos sell for $6.99, and a family of four can eat for less than $37, Kunkel said.
“We fight to keep the prices low,” he said. “It’s a tough marketplace with salmonella scares, the price of grain—we try to be very diligent with food costs. I do inventory with the franchisees to see if we can save dollars.”
He added: “As higher-end restaurants are slowing down, we tend to increase in business. Sales and traffic are steady or up. Most [other] people are flat to below.”
