Subscribe/Feeds

• Subscribe by Email
• Subscribe in a Reader
• Subscribe to Comments
• Become a Facebook Fan
• Follow on Twitter
• View Photos
• Watch Videos

Search

Wednesday, August 17th, 2011

Commercial District Revitalization and Return on Investment by Richard Layman

One of the things that bugs me about local economic development is that elected and appointed officials don’t seem to understand it much. Certain types of government funding add value and spur subsequent independent private investment and other types of funding do not. Ideally, each dollar you spend generates significantly more in private investment.

As Rolf Goetze makes the point in Building Neighborhood Confidence (1976), although referring to neighborhood stabilization, that government programs shouldn’t be fostering dependence but rather spurring people to continue to invest in their neighborhood–”building confidence in remaining in and investing in their neighborhood.”

This is why I don’t have much truck with complaints about “gentrification.” The problem most urban neighborhoods have, if they have problems, is the lack of investment.

The solution to lack of investment isn’t whining or glorifying being poor, it’s investment.

The solution to dealing with displacement is to develop programs to reintegrate the disadvantaged into the economy in substantive ways (such as along the lines discussed in the textbook Community Economic Development Handbook) as well as extracting some housing outside of market forces through the development of alternative ownership structures, either portfolio investment within nonprofit housing organizations, land trusts, cooperatives, etc.

Also see this very old blog entry, “More about contested spaces–gentrification” which derives from something I first wrote in 2004.

The other thing to remember is that it took many decades for neighborhoods and commercial districts to decline, so we have to recognize that it will take a long time for these places to be improved. It takes even longer when we don’t know what we are doing, and we fail to learn from previous practice, not to mention best practice, and we put in minimal amounts of money so that it makes improvement very hard to come about, and we don’t direct money in ways where it can have great impact so that money gets wasted.

So, it’s very interesting to read stories around the country about how in these economic times, many communities are looking into dissolving their commercial district revitalization programs (“Downtown development authorities help make city centers cool, but can West Michigan communities afford to keep them?” from the Grand Rapids Press in Michigan ) even while other articles acknowledge that it takes a long time, more than one decade to truly see results (“Strengthening Manitowoc’s ‘heart’ a challenge: Revitalizing downtown Manitowoc won’t happen overnight; takes work, planning and money” from the Manitowoc Herald Times Reporter in Wisconsin and “Development plan still reshapes downtown 10 years later” from the Oshkosh Wisconsin Northwesterner).

Meanwhile the State of Maryland is working to change the state historic preservation tax credit to a sustainable communities tax credit program. (Press release from Preservation Maryland)

It’s a good move, because Baltimore City garnered most of the credits–because they have the most buildings of any jurisdiction in the state that are eligible because it is the oldest center city and once was one of the nation’s major manufacturing centers–and this upset legislators from other jurisdictions (sadly, as they clearly don’t understand what Jane Jacobs wrote in Economy of Cities and Cities and the Wealth of Nations about the necessity of center cities to thrive as they are the centers for metropolitan economies).

The state historic tax credit in Maryland generated more than $9 in direct private investment for every $1 in credit. The Maryland heritage areas program generates more than $40 for every $1 of state investment.

Yet these kinds of programs, and tourism support programs generally, are always under attack, even in decent economic times.

It makes absolutely no sense to me.

Also see “MAIN STREET NICHES IN A MASS SALES WORLD” (1/11/04) column by Neal Peirce. From the article:

Successful Main Street programs, Rand notes, take years to mature — four or five years to change attitudes and build initial confidence, five to ten or more years for owners to start reinvesting seriously, 15 or 20 for the full recovery and new growth to take solid root.

This post originally appeared in Rebuilding Place in the Urban Space on February 28, 2010.

Tuesday, August 31st, 2010

Richard Layman: Richard’s Rules for Restaurant Driven Development

[ I've linked to Richard Layman's wonderful Rebuilding Place in the Urban Space blog many times. He writes on a variety of topics in an always insightful way, but I'm particularly impressed with his knowledge of urban commercial district revitalization. I was privileged to get to tour Logan Square with him during one of his visits to Chicago and his knowledge of neighborhoods and small business economics and operations is impressive. He graciously allowed me to share one of his older posts with some of his thoughts on restaurants and neighborhood revitalization, with examples from DC, explaining why super-high end or trendy places aren't an absolute necessity. There's plenty more where this came from on his blog, which I highly recommend you check out as a place to bridge theory with practice - Aaron. ]

All neighborhoods and commercial districts can be categorized as healthy; transitioning, emerging; and distressed (using criteria developed by the DC Office of Planning). And each type probably can be further split into early, middle, and later stages.

Healthy commercial districts are not without issues, but the issues vary. Even a district like Adams-Morgan is probably considered transitioning, as is Barracks Row. In some respects, Richard’s Rules for Restaurant-Based Revitalization apply more to transitioning, emerging, and distressed commercial districts. But that makes sense, since those are the districts most in need of “revitalizing.” (For issues regarding problems engendered by the Late-Night Economy, see this entry, “Restaurants and liquor licenses“, from April.)

My rules are focused on building business from the people who are already present in your retail trade area, people who aren’t patronizing your commercial district, because in their opinion “there’s nothing there.”

It’s our job as revitalizers to make sure that “the there is there.”

Chef-driven restaurants aren’t necessary to drive revitalization, although they are nice to have and can be decent draws–but really how great was La Brasserie at driving the growth of the 300 and 400 blocks of Massachusetts Avenue NE? Downtown is still pretty bleak at night despite the number of high quality restaurants such as Occidental, Red Sage, and others. (7th Street is a different story, see below.)

Revitalization is dependent on restaurants. A complete destination has places to see and things to do, things to buy at interesting places to shop, and places to dine.

Without restaurants, where are people going to be able to go to the restroom? If they can’t go to the restroom, they won’t be able to linger and spend time in your commercial district. Patrons of your commercial district will end up being very purposive–when they visit it is for a specific reason, and they leave when they are finished, without taking the time to explore and patronize other retail and service businesses in your commercial district.

Restaurants that augur revitalization have five characteristics, and these characteristics support high patronage amongst a core group of customers that will frequent the restaurant from 2-5 times/month, at least in the beginning. This level of patronage is necessary to provide the cash flow needed to stabilize the risk involved in opening up in a secondary market. Remember the 80/20 rule?–80% of your business comes from 20% of your customers. Ignore this at your peril.

T. Levette Bagwell/AJC. Willie Broughton and his wife, Ruby, owners of the Green Apple Bar and Grill, show off a fried chicken salad on the one-year anniversary of their opening. Before he retired, Willie Broughton already had determined that he eventually would open a bar at the site.

The rules are:

1. Relatively appealing cuisine that isn’t too specialized; food that is attractive to a large number of people–Italian, Mexican, and “American,” seem to work best. You want at least 100 customers/nite. These days Thai food is moving into this category. Chinese seems to have lost its appeal. Restaurants like Indian, Caribbean, etc. are just a bit too specialized, and therefore don’t get the weekly or at least a couple times/month patronage that such restaurants need especially when they are located in emerging commercial districts.

Think Banana Cafe, La Loma, La Lomita vs. Capitol Hill Tandoor or Phish Tea–the latter two have a cuisine specialized enough that local patrons come maybe once every couple months, so they need to draw on a much larger trade area than restaurants that have a more “approachable” cuisine.

2. Good food; it doesn’t have to be stunning but it better be good. (Perhaps Mexican restaurants illustrate this point the best.)

3. Good, good plus, or better service; waiting isn’t fun, and neither is dealing with a server that doesn’t help you get what you want with a modicum (ideally none) of problems.

4. Competitively priced; you can’t have drinks at $8 or most of your entrees costing $13-$20. If your prices aren’t competitive and maybe a little less expensive than the market, you won’t get that frequent patronage that is necessary for your success. Pitchers of margaritas or sangria are good, maybe not pitchers of beer, which seem to attract a rowdier more alcohol-centered clientele.

5. Nice interior; it doesn’t have to be stunning or a $300,000 interior renovation, but it can’t be threadbare, and it has to be appealing.

IMO, restaurants in the area like Banana Cafe, La Loma, and La Lomita exemplify these characteristics. Other restaurants and coffee places that are leading the revitalization of their commercial districts include include Tryst and The Diner which have brought life back to Adams-Morgan during the day, Boss Shepherds (now Peppers) on 17th Street NW in Dupont Circle, Dos Gringos in Mt. Pleasant (they have an absolutely killer Vegetarian Chili), and Mocha Hut and Colorado Kitchen in the greater Brightwood area.

Probably the best example in Washington, DC is Jaleo on 7th Street, which anchored the revitalization of the East End of downtown and is as significant, if not more so, than the MCI Center. Jaleo opened in 1993, years before MCI. Somehow, this restaurant is just as trendy as it was when it opened, and most every weekend they go through $100,000 worth of food (wholesale cost). Now there are a dozen top notch restaurants within a couple blocks of Jaleo, some owned by the same company like Cafe Atlantico and Zaytinya, and these restaurants rely very little on events at the MCI Center for driving patronage.

I have worked in hospitality for awhile, and I find that what distinguishes quality operations from those that struggle is a failure to focus on the guest and the guest experience. The restaurant industry is one of the most competitive retail categories but is still a retail category where independent businesses can thrive and the “barriers to entry” are surmountable.

There is a great resource for restauranteurs, a subscription website called Restaurant Owner, with scads of resources. Reading trade magazines at the very least (Restaurant Business, Fresh Cup, Specialty Coffee Retailer, etc.) is a good place to start because as I say “to stay the same is to fall behind, because your competitors are constantly improving and new places are always opening.” If you don’t go anywhere else, or read anything, how do you learn?

“Soda jerk” passing ice cream soda between two soda fountains / staff photo by Alan Fisher New York World Telegram and Sun archives. Library of Congress.

Quality restaurants share some other characteristics:

1. Understanding that you work for the guest, because after all, that’s who pays everybody. (I know a restauranteur desperately trying to build his bar business, but he adamantly believes that “soft rock”–remakes of the Beatles and Supertramp, and the occasional Carpenters song is the music that should be played. Compare that to the jukebox at the soon to reopen Capitol Lounge.)

2. Listening to guests and employees.

3. Taking in and responding to this feedback. If you don’t respond, listening doesn’t matter.

4. Never fool yourself about what quality is. We all know the saying “You can fool some of the people all of the time, but you can’t fool all of the people all of the time.” Well, if you are the proprietor of a small business, you can never afford to fool yourself. If you don’t provide quality and you refuse to accept the truth, whose fault is failure?

5. Focus on what matters. Until you ensure that your production, service, and ordering and inventory systems work and are robust, gloss (such as balloons) is a waste of your time and energy.

6. Developing robust training and production systems. This sets you up for success by reducing the likelihood of error. The Restaurant Owner website is full of downloadable templates, manuals, and worksheets that can be customized. Weak systems put you behind before you even open your doors to today’s customers

7. Having a sound business model. Understand your metrics and dayparts. Have a (business) plan based on reality and develop your business and marketing plan accordingly. It’s possible to (re)build service and production systems if they are flawed. But a business model that can never yield profits is unworkable.

8. Perseverance and continuous process improvement. To repeat: to stay the same is to fall behind, because your competitors are constantly improving and new places are always opening.

This post originally appeared in Rebuilding Place in the Urban Space. Reprinted with permission of the author.

Telestrian Data Terminal

A production of the Urbanophile, Telestrian is the fastest, easiest, and best way to access public data about cities and regions, with totally unique features like the ability to create thematic maps with no technical knowledge and easy to use place to place migration data. It's a great way to support the Urbanophile, but more importantly it can save you tons of time and deliver huge value and capabilities to you and your organization.

Try It For 30 Days Free!

About the Urbanophile

Aaron M. Renn is an opinion-leading urban analyst, consultant, speaker, and writer on a mission to help America’s cities thrive and find sustainable success in the 21st century.

Full Bio

Contact

• arenn@urbanophile.com
• twitter.com/urbanophile
• linkedin.com/in/aaronmrenn

Please email before connecting with me on LinkedIn if we don't already know each other.