Growth | March 2015 | By Kevin Hardy

Test Run

Restaurant incubators let operators explore new concepts before opening their doors to the public.
Quick service restaurant entrepreneurs develop new concepts in incubators.
Rise Biscuits and Donuts was originally designed in owner Tom Ferguson’s catering facilities, which served as an incubator. Rise Biscuits and Donuts

When Tom Ferguson wanted to develop a burger food truck, he had a few advantages. By working out of his existing facility at Durham Catering Co. in Durham, North Carolina, he had ready access to a kitchen, staff, and equipment. It’s the same way he tested a now-shelved pasta concept and then launched his quick-service brand Rise Biscuits and Donuts; by working out of the pre-existing kitchen, catering employees were able to experiment in a makeshift doughnut lab for six months.

“Everybody kept their day jobs at Durham Catering, which made it a lot easier to tweak it and figure it out over time,” he says. “It makes it really easy to just jump on a new concept and execute.”

The company offered doughnut and biscuit samples out the back door until it perfected the recipes. Ferguson says his in-house incubator gives him a fundamental advantage in developing new concepts: He can learn from trial and error with relatively low stakes. And it also makes it easy to kill ideas before he’s in too deep. He held off on a homemade pasta concept after realizing it wouldn’t work with a quick-service model. Now he’s developing a chicken fast casual from the same space.

“I see no disadvantages,” he says. “I think it’s a win-win.”

By testing his menu items with catering customers and the general public, Ferguson says, he is able to tap into the growing sophistication and changing tastes of his customers.

“This is a new culinary world. People are watching food shows from the time they’re five,” Ferguson says. “They’re so vocal in restaurants right now. That’s where I turn the table on them. Instead of me thinking I’ve got it all figured out, I’ve listened to what they say. We’ve listened to the things they’ve said and we’ve made some changes.”

Ferguson’s path is not unique. Operators often spin off concepts into new developments. But lately, restaurants are emerging from business incubators designed to spark growth and educate entrepreneurs while also minimizing initial risks. Incubators, which are often funded by local governments, are nothing new in the technology sector. But they’re just emerging as a major player in the world of restaurants. That’s because operators know that snagging the first few customers can put a new quick serve on the road to success, and incubators help streamline the process of building a customer base and drumming up buzz by putting new concepts in front of hungry folks, be it through a good location or access to resources.

Phil Romano, known for launching Romano’s Macaroni Grill and Fuddruckers, is encouraging new restaurant development with Trinity Groves, a 15-acre restaurant, retail, and entertainment center in West Dallas designed to help new restaurants get off the ground with mentorship from experienced restaurateurs. Washington, D.C.’s EatsPlace operates as a neighborhood restaurant, food incubator, and restaurant accelerator by playing host to pop-up restaurants and guest-chef residencies. In addition to hosting food-product entrepreneurs, Mi Kitchen es su Kitchen in Queens, New York, allows new restaurant operators to use its space temporarily to train staff and develop a menu while their restaurants are under construction. And many cities boast commissary kitchens that serve as base camps for food trucks and pop-up restaurants.

“This is a relatively new area for incubators to be working in,” says Thomas Strodtbeck, a senior director with the National Business Incubation Association and CEO of Strodtbeck & Co., a United Kingdom group that works with business incubators, professional associations, and government organizations. “I suppose this is kind of the natural evolution of
our industry.”

Food incubators have helped entrepreneurs get their unique recipes onto retail shelves for years. But generally, Strodtbeck says, incubators have shied away from getting into the restaurant business because of high up-front costs. Because they provide mentoring on everything from cooking to payroll, though, incubators can help propel a talented foodie or just a great idea to the next level.

“Restaurants as much as any business are fraught with challenges on the business model. And the thing an incubator can do is help a young entrepreneur who might be a great chef figure out the business model,” he says. “There are all sorts of business-model decisions a restaurateur has to make that are separate from the fact that they’re a really great chef.”

Restaurant incubators follow the same logic as pop-ups and food trucks: They allow for food and concept testing with a smaller up-front investment. They therefore have potential in many cities across the country, Strodtbeck says.

“It could work in any place with a pretty large urban population and particularly a young, hip population,” he says. “Incubators try to be market-responsive. So if the market says there’s a growing culinary interest and a growing number of people who want to get into that, I could see it growing.”

Of course, incubators aren’t useful for the culinary education alone. Business incubators exist all over the country to help would-be entrepreneurs test their concepts without having to worry about details such as rent or utilities. Several incubators across the U.S. serve restaurant developers but also entrepreneurs from many other business categories.

Most incubators offer a variety of services and resources to help their businesses grow. For example, the incubator Chefs Center of California has partnerships that allow it to offer business development classes and workshops, so operators can learn more about business administration. Other incubators employ their own marketing and graphic design staff that handle the clients’ needs while also helping individual operators on things like social media, signs, and fliers. Often the benefits an incubator provides are as simple as letting entrepreneurs use its computers, Internet, printers, fax machines, and even postage meters.

After incubating minority-owned businesses in Philadelphia for 25 years, The Enterprise Center is gearing up to open up its Common Table, a restaurant incubator in West Philadelphia. The idea for a restaurant-specific program came from the organization’s work with Carl Lewis, who was looking to transition from a career in catering and hotels to an American-Caribbean restaurant.

“There was a void in people transitioning from a catering business to brick and mortar,” says Enterprise Center senior director Bryan Fenstermaker. “The concept kind of transitioned from there.”

Upon opening this spring, Common Table will host a rotating group of entrepreneurs who will receive financial counseling as well as training in marketing and restaurant management.

Fenstermaker says the West Philadelphia space is flexible enough to incubate everything from food-truck concepts to full-service restaurants. Entrepreneurs will receive business mentoring, but they’ll also get to run the shared restaurant for several weeks at a time to see if their concepts have legs. They’ll direct the staff and possibly even take the front-of-house crew with them to their permanent location, Fenstermaker says.

“Most of the folks have been in the industry but have never been in the lead. So being there every night in this chef role could be very stressful,” he says.

Ultimately, Common Table’s hands-on approach is designed to test both the concepts and the would-be restaurateurs.

“What we’re trying to alleviate is someone investing their life savings into something that might fail,” he says. “We don’t want that to happen. We want to give them a glimpse and taste of that so they know what to expect.”

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