What the hell is going on with Sabi Sushi?

Posted: August 24, 2011 in Uncategorized

We get it. We’ve written on the Sabi blog about crazy adventures from the past year, talented artists we’ve met, and side businesses we’ve started as learning experiences. There’s still the question…

What the hell is going on with Sabi Sushi..? You know, the restaurant…the reason we read this blog?

Where are you guys located? Are you open yet? What the hell is taking so long?!!

Well…we’re just 10 days away from launching (more on that to come), so here it is. We’re going to tell you everything about Sabi Sushi in 3 parts: The Location Hunt, The Pivot, and The Launch.

The Location Hunt

This is a series of tales chronicling our exciting, frustrating, and often humorous location search of the past year. Due to the nature of lease negotiations (all our prospective landlords read the blog) – we were never able to divulge any information about the locations we were in discussions with..until today (now that we’ve secured our location).

Here’s a cliff notes version of three (of about 10) locations we seriously considered.

Location #1 – “The Hill”.

misleading, yet epic picture of the Hill

Cliff Notes – The Hill location was a part of our early “college market” target strategy. We knew we could connect with the students, and hoped it could overcome their shortcomings (lack of disposable income, slow summers/holidays).  We found a struggling sushi restaurant that was owned by an otherwise successful sushi restaurant group, and had the brilliant idea to buy them out of their space. This would give us a pre-built space (saving time and $), sushi equipment, all the while getting rid of a competitor (what is that, like six birds with one stone??).

They had poured ~$300k into building/designing/equipping the space, and were looking for a buy-out at that price. We were looking at their poor sales, and desperate situation and procceeded to offer them $80k for everything (equipment, lease, liquor license etc..). They rejected our offer, scoffingly saying “we’re not even on the market, we were just trying to give you nice young guys the chance to blow us away with an offer…not to lowball us! We’re going to turn it around here, just give us a few months..”  – It’s been 8 months since then, and their struggling more than ever, and have put the restaurant up on Craigslist for $50,000.

One Story for the Road:

One of the owners of the sushi restaurant we were negotiating with (for anonymity lets call him Joe, and his restaurant Sushi Dot) took a trip out to L.A. to scope out our chef’s restaurant to see if we (3 young, non-Japanese kids) had any substance behind us. His restaurant group owned several sushi restaurants in Boulder, and wanted to see what competition was coming to town.

Our Chef, Phillip, noticed Joe sitting quietly, observing, and eating his very traditional meal (tuna roll, with Tamago). This meal is often considered the “judging” meal in a sushi restaurant. Phillip, being the friendly guy that he is, began unknowingly chatting with our rival.

As Phillip told us: “soon enough, he admitted that he was Joe from Sushi Dot, and that he came out here to see what competition we would be.  I looked him straight in the eye and told him ‘listen. I know you’re here because you’re worried about us becoming competition for you in Boulder…but just take this into consideration. When these Sabi boys open up, with the food quality, financial backing, and marketing power that they haveits not going to be competition – they’re going to blow you out the f*&king water.”  And then Phillip laughed as he told us that we should’ve seen the look on the rival’s face.

Location #2 – The 29th St. Walking Mall

cliff notes – Dan worked undercover at Noodles & Co (learning the best practices from one of the leaders in our industry) where he noticed that this location near our house was actually doing phenomenal business. And so was the Chipotle next door. And Smashburger. And Modmarket…we soon realized that this location was a hot-bed for fast-casual restaurants. They were outperforming their average unit volume (AUV) by over 25%!

We initially met with a lady at the leasing office (lets call her Nikki) and she was super excited about our concept. She called in her colleague (fellow sushi lover) and they giggled with enthusiasm about the potential of having us in their out-door walking mall. They were a part of Macerich, the corporate titan of commercial real-estate. In fact, that weekend Nikki flew out to L.A. to try Phillip’s signature sushi, and immediately gave corporate the green light to go ahead with negotiating a deal with us.

The relationship between Macerich and Sabi was an abusive one. They would continually miss deadlines for providing us with key materials (ie. the lease). Then, when the materials would arrive, key deal terms which were already agreed upon would be changed in their favor in the fine print.

They tossed us around like a rag doll in the negotiations, and gave us a shitty lease with so many F-You clauses in it that it might as well have been divorce papers.

We eventually packed up our bags, gave them a satisfying “we’re done.” email, and moved on from an A+ location because we didn’t want to be in business with landlords that cared more about their bottom line than their tenant’s success.

One Story for the Road:

We’d never negotiated a lease before, so we tried to do our homework. Through a few methods that I cannot reveal, we were able to obtain leases of other restaurants. We studied them, cross-compared each line of legal jargon, and revised our own lease based on the “best of …” all the other leases.

We went into our first meeting with Nikki to discuss the lease, and made our first request to change a deal-term. She immediately told us “sorry guys – no way. We NEVER do that. Company policy.” Then, in perhaps one of the most satisfying moments of Sabi. Trevor pointed out…”actually…if you look here, on page 33, line 16 of Chipotle’s lease, you actually agreed to that exact provision…” Nikki’s jaw dropped, she had no idea how we had seen anyone else’s lease, and realized that her negotiating leverage on each deal term was gone, because we’d already seen what she would do for all the other tenants.

NOTE: As a start-up, there are few moments where you’re armed with MORE information, certainty, and leverage over your opponents…when it happens, cherish it.

Location #3 – Denver University

The Original Chipotle (formerly a Dolly Madison Ice Cream Shop)

Cliff Notes: This location was just a few feet away from the Original Chipotle in Denver, CO. Unlike the two above deals, we actually got along well with the existing tenant and with the landlord (learned from our previous mistakes). The only downside was that the landlord, an experienced elderly man, didn’t have much risk tolerance. In the end, we had to walk away because he was asking us to put down a $100,000 security deposit…you know, because as a start-up, we have that kind of money available to be tied up in a 10-year security deposit.

Location #4 – The heart of Downtown Denver...

The winner of our year-long location search. It’s a location that allows us to serve all of downtown from one spot. The location where lease terms, construction costs, parking, visibility, and layout are all non-factors.

A little mysterious? A tease? A Cop-Out? Hey, gimme a break. I had to find a way to give you guys a cliffhanger leading up to Wednesday’s post, Part II of What the Hell is going on with Sabi Sushi?  – The Pivot, where we explain how a man named John Prendergast completely changed the course of Sabi Sushi.

Shaan

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