The ghosts of three failed restaurants whisper cold-blooded tales of market economics, but John Davis meanders unfazed through his newly acquired space in the burgeoning town of Parker.
The 50-year-old transplanted Phoenix restaurateur knows the bone-chilling story: All three boasted good food under established names in a promising location, but couldn’t keep their doors open. Not even in a sumptuous slice of metro Denver’s southeast corridor with demographics to die for.
Yet Davis has placed his bets on precisely the same three spots where others failed. And he has found surprising early success amid an oversaturated restaurant market in the throes of what’s politely termed a correction — or more bluntly, a “bloodletting.”
“I was told of the market saturation while I was setting up,” Davis says, sitting at a table in Otto’s, the burger-pizza-salad emporium he opened in September. “Some people poked their head in and made comments about my sanity.”
Even with national icons such as Applebee’s and Bennigan’s beating a hasty retreat from recession, Parker offers a telling snapshot of what happens when expansive promise slams into economic reality. But it also offers hope that investors such as Davis could foreshadow a favorable shift in fortunes.
Not so long ago, this town numbered 300 souls with a couple of popular eateries. But years of steady migration and double-digit growth cried out for more options. Soon, both national chains and hopeful independents flocked to Parker until the number of restaurants — everything from fast food to fine dining — peaked at 104 in 2007.
Now, the total has contracted to a still-crowded 73.
Call it a cautionary tale of pedal-to-the-metal capitalism, testament to boundless entrepreneurial optimism — or, as one study said, liberal zoning that perpetuates a retail glut. In any event, the Parker restaurant market bit off more than it could chew.
Stevan Strain, owner of the venerable Warhorse Inn and a 26-year veteran of the local restaurant scene, figures the greater Parker area has one restaurant for about every 800 people — roughly double the rule of thumb for what the market will bear.
“Which meant there had to be a bloodletting,” Strain says. “There was no way around it.”
Factor in the economic downturn and you have a suddenly unforgiving environment in a business that’s always been low-margin, says Ben Snow, executive director of the Parker Economic Development Council.
No daytime economy
For all its sterling demographics, Parker suffers the same problem as some other bedroom communities — lack of a daytime economy and, for restaurants, the attendant lunch trade.
Growth of daytime trade now ranks among Parker’s primary goals. Some feel that the medical industry, anchored by Parker Adventist Hospital, eventually could spark a new wave — but one far different from the 1980s and ’90s, when the town lamented the absence of amenities.
“Back then,” says Snow, “it was like someone fired off a flare gun: ‘We need restaurants! We need banks! We need carwashes!’ We needed four or five, but we got 15. Or we needed three, and we got 10.”
Strain remembers when his Warhorse clientele trekked from Castle Rock, Elbert County and even Arapahoe County — and sometimes arrived on horseback. He has adapted to conditions over the years, shifting from a brawling bar and grill to a family establishment and then, when the chains moved in to capture that market, to an elegant steak and seafood spot.
Now his customers most likely live within 3 miles of his location on the town’s historic Mainstreet. He measures the seismic shift from March 2003, when Parker’s 5-mile radius ballooned to 50,000 people. Suddenly, the town popped up on the radar of expansion-minded corporate America.
They all came: Applebee’s, Chili’s, Bennigan’s, Boston’s, Black-eyed Pea, Red Robin. Who could resist the demographics? High household income. Double-digit growth. High homeownership. Families with money to burn.
“But what people didn’t take into account,” Strain says, “is the debt load those families were carrying. It wasn’t the gold mine people thought it would be.”
Economy dives
And then last fall, the economy slammed on the brakes.
“Chains started pulling back and closing them down,” says Parker Mayor David Casiano. “People are making some cuts in spending habits. They used to go once a week. Maybe now it’s once a month.”
In all, six restaurants quit business within a stone’s throw of where Davis now executes his plan to add two more dining spots to the one he launched in September — all in the same strip of storefront real estate.
Well-capitalized after selling off the last of his Phoenix holdings in 2007, he hopes to open a fourth restaurant in Parker within a few months.
Far from feeling daunted by market conditions, Davis calls it “perfect timing in an imperfect world.”
He opened Otto’s American Grill, the burgers and pizza place, as an “emotional buy” in the attractive space where a pasta restaurant went under. TVs blared news of the market crash while he signed his lease.
But buoyed by strong early sales — he says he reached the break-even point in 30 days with an average customer check of $8-$10 — Davis quickly assumed the mantle of market contrarian.
He expanded into the vacant unit next door, a departed online reseller, to provide overflow seating for his 78-seat anchor. Then he carved a doorway through another wall and launched Otto’s Deli in a vacant sandwich shop. Finally, he struck a deal for a former barbecue space a few doors down, to be reborn as Otto’s Cantina.
Davis, whose background is in finance, says his landlord’s willingness to negotiate a manageable lease proved the biggest factor in a market where rates seemed unsustainable.
“Stepping the rent back and getting a tenant in the short run would help both of us in the long run,” he says.
Heart, soul not enough
But for some, like Bill Cardon, it’s already too late.
He worked as the chef at Roman Villa, a classy yet casual Italian place, for five years before purchasing the restaurant from its original owners in 2005. He pumped his heart and soul, plus virtually every penny he had, into the business — and sales increased each year.
But costs rose faster.
Cardon tried print advertising, Internet ads. He worked charity events, put on spaghetti fundraisers for schools and churches at cost, hired local kids, all in an effort “to be your neighborhood restaurant in a town that had kind of lost its identity.”
But things just didn’t fall into place.
With the September market crash, business fell off. By November, he knew it was over.
He closed his doors and laid off 20 people right before Thanksgiving. The county slapped a notice of seizure for taxes on the door.
“I was not just heartbroken but embarrassed and ashamed,” says Cardon, who’s trying to hold on to his home after filing personal and business bankruptcy. “Even two months later, I’m embarrassed to be seen, because I had to close my doors.”
He vows to give his dream another try one day. But for the short run, he figures it will take deeper pockets than his to survive in this market: “I foresee chain after chain after chain.”
Even those restaurants have experienced a shake-out. But many locals point to the Texas Roadhouse as an example of one that has adapted to the market.
John Beck, who scouts regional locations for the company, lives in Lakewood and opened the Parker store as a joint venture partner with his employer. He notes that virtually all Texas Roadhouse sites serve only dinner on weeknights and occupy what he calls a “good value niche” — a little pricier but worth it.
“Sometimes the independents look at the chains as the evil side of the restaurant family,” he says. “But I don’t think this has to do with chains. I think everybody will be fine if value is what they give and Parker feels like it’s getting a good deal.”
The Texas Roadhouse sits smack in the midst of the development that brought name-brand retailers like Wal-Mart, Home Depot and Kohl’s to an area southwest of downtown that some call “ground zero of retail.”
Beck wouldn’t trade places with anyone. And without the expense of serving a meager weekday lunch trade, he doesn’t sweat the lack of a local daytime economy.
“I’ll go to Otto’s for lunch,” says Beck with a grin. “I like that place.”
Davis, the newcomer to the market, hopes to lay the foundation for his fourth, more upscale establishment, by building a financial base with the Otto’s name, focusing on price and variety.
“My approach is to go back to where it all started — give people a reasonably priced meal,” Davis says.
Even the mayor sounds just a little awed that, in these times, another independent restaurateur would hike into town and try to carve out a living.
Says Casiano: “He’s one of the bravest men I’ll ever meet.”
Kevin Simpson: 303-954-1739 or ksimpson@denverpost.com
