Walk into Palo Alto's Blue Chalk Cafe and you know almost immediately that you're in a Silicon Valley hot spot. Listen to the conversations wafting through the crowded restaurant: snippets about stock trades, venture capital and the latest tech-industry corporate intrigue.
"So tomorrow I meet with some VCs on Sand Hill," boasts one diner. "I'm going to unload some of that Netscape stock," says a man sitting at the bar. The Bay Area Zagat Survey, a widely used restaurant guide, notes with a hint of irritation that Blue Chalk is largely populated with "loud Stanford MBAs."
And those are exactly the sort of patrons that founders Maurice Werdegar and Duke Rohlen are looking for.
The two own and manage the Palo Alto-based Blue Chalk Cafe Corp., which runs, in addition to the Blue Chalk, six Left At Albuquerque restaurants throughout California. (The flagship is in Palo Alto.) The company has $15 million in annual sales and boasts a blue-chip list of private investors, including some big names at Starbucks, Macy's and Netscape. Werdegar, '86, MBA '92, and Rohlen, '90, aim to open six more Albuquerques in the next year and, if all goes as planned, another eight--for a total of 20 nationwide--by 2000.
What makes Werdegar and Rohlen unusual is not that they took the leap as entrepreneurs. It's that in the highly competitive restaurant industry, where fully half of new businesses close within three years, they enjoyed instant success and are expanding at a breakneck rate.
Werdegar came up with the idea for Blue Chalk when he and his business-school friends concluded there really wasn't much to do in Palo Alto. "We were entertainment-starved at age 25," he says. So he wrote a business plan for a restaurant-cum-pool hall as his MBA thesis. That plan became the Blue Chalk blueprint.
Werdegar and Rohlen grew up near each other in Marin County, north of San Francisco. In early 1992, Werdegar was in his final year at the business school and looking for someone to help turn his thesis into reality. "There weren't a whole lot of people in the business school lining up to start a restaurant," he recalls. That's when he again bumped into Rohlen, who had been bumming as a ski instructor and was getting ready to start law school. "I decided I'd much rather try this," Rohlen says.
Aside from Werdegar's stint as a line cook at The Good Earth during high school, neither had any restaurant experience. Undaunted, they formed a partnership and quickly raised more than $600,000, mostly from people Werdegar calls "very close friends and family who almost pitied us." In May 1993, they opened Blue Chalk, a restaurant with two bars and four pool tables. It wasn't exactly what Werdegar had proposed in his thesis, but it was close.
"It became a restaurant with a few pool tables," he says, "not a pool hall with a little bit of food." The food in fact became the draw, thanks to a menu of Southern standbys like red beans and rice, buttermilk biscuits and "Mom's Old-Fashioned Meatloaf."
Werdegar and Rohlen know their strength is business, not cooking. They refer to their establishments as "concepts," not restaurants, and they work to "tighten" those concepts. They're focused on "establishing the brand," and they aim for "repeat customer experiences." It's a language that's far more TGI Friday's than Chez Panisse.
In light of their rapid success, the owners were itching to expand. But they saw Blue Chalk as simply "a great one-store phenomenon," Rohlen says. Part of its appeal is the site itself: a cavernous historic building with patios, an atrium and skylights. That kind of location, they knew, would be hard to reproduce. So they cooked up a new idea, a concept that would take advantage of the Palo Alto restaurant boom--and could eventually be cloned in other cities.
That new concept was Left At Albuquerque, a Southwestern theme restaurant that opened in 1995 at the site of the old Stanford Pub on Emerson Street. Decorated with vintage signs and 1950s-era ads, Albuquerque serves up high-quality dishes with trendy names like "Towering Tostada," "Bam! Bam! Catfish" and "Prawns on the Range." It also features, more famously, a selection of 150 different tequilas. If you can come up with one they don't stock, they'll buy you a margarita.
Encouraged by the strong reception in Palo Alto, the owners went to work replicating Albuquerque. Two new restaurants followed in 1996, and two more this year. By the end of 1998, there will be a dozen Albuquerques around the country (but still not one in New Mexico).
Werdegar and Rohlen prefer not to talk about how much money they're making, but say that each restaurant is profitable. When pressed, Werdegar allows that "we're doing operating margins of better than 15 percent." With $15 million in annual sales, that comes to more than $2.25 million in profits--without taking into account start-up costs and corporate overhead.
Together, the partners oversee a management team that includes a chief financial officer, a chief operating officer, a corporate chef and a vice president for construction and design. In recent years, they've taken to splitting up other duties. Operating from the company's offices above Longs Drugs on University Avenue, Werdegar focuses on running the existing locations. That means handling everything from staff morale to customer satisfaction. Rohlen oversees the expansion plans--finding real estate, designing the new restaurants and marketing the ventures. In the last few months, he has jetted off to Washington, D.C., Atlanta, Cleveland and Kansas City, laying the groundwork for more locations.
Werdegar and Rohlen say they have learned a thing or two about why so many other restaurants flop. "Most failures come from people who take an entirely food perspective without thinking about what the customer might want," Werdegar says. "Our emphasis and our focus were on creating the concept and the vision--which often people in this industry don't have."
It's a perspective that sees the "Towering Tostada" as a widget. But a tasty widget, to be sure.
