March 3, 2021

Case Study: Red Iguana, Facing Disruptions, Ponders Opening a 2nd Restaurant

THE CHALLENGE To expand to a new location while surviving a disruptive public works project — a light rail line down the middle of Red Iguana’s street — just as the restaurant was experiencing a rush of business from being featured on the Food Network’s “Diners, Drive-ins and Dives.”

THE BACKGROUND In 1965, Ramón and María Cardenas moved from the San Francisco Bay Area, where they were working in a restaurant, to Salt Lake City, where they took over a restaurant called Casa Grande. Their decision to not modify María’s recipes from Chihuahua for the American palate may have slowed growth at first. “People were not used to their kind of Mexican food,” said their daughter, Lucy. In the first years, annual revenue was about $25,000, but María and Ramón gradually built a following.

In 1970, they moved Casa Grande downtown. Revenue continued to grow until urban decay and a recession hit in the early 1980s. By 1984, Ramón was forced to take a cooking job in Park City to make ends meet, while María ran Casa Grande. In 1985, Ramón returned to open a four-table restaurant called Red Iguana in Salt Lake City’s working-class west side. The restaurant did so well — it pulled in some $300,000 in its first year — that María was able to close the ailing Casa Grande. After a fire burned down the new restaurant in June 1986, Ramón reopened 10 blocks away at the current location.

The reasonably priced Red Iguana developed a cultlike following. Its revenue grew every year, hitting $1.9 million in 2003. But in 1998, María grew ill and required Ramón’s full-time care, which forced Lucy to make regular visits from Portland, Ore., to oversee the business. After María died in 2002 and Lucy’s brother died of a brain aneurysm in 2004, Ramón decided to sell. “He was exhausted and ready to throw in the towel,” said Lucy’s husband, Bill Coker.

It was a delicate moment: Lucy and Mr. Coker wanted to take over the business, but they had to convince Ramón to look past his strict views of gender and family. “Because he was a son, a man, my father would have given my brother the business,” Lucy said. “But we bought it from my dad. We got lawyers and accountants involved.” Plus, she added, “he wanted to sell the business to me, not me and my husband, because it’s family. It was at times painful.”

After paying Ramón $560,000 for the company in 2005, Ms. Cardenas and Mr. Coker sped up an incipient modernization drive, improving the electrical system and buying the parking lot next door. Ms. Cardenas, who had worked as a wait staff trainer at various Hard Rock Cafes, had already brought in a computer system, which had helped professionalize the staff. “I wanted to turn it into full service, not, ‘Wham, bam, here you go, here’s your check,’ like in a diner,” she said. To improve food consistency, she had her father cook each dish in front of her chefs so they could write down the recipes, which they had never done before for fear of recipe theft. Revenue increased to $2.7 million in 2006 and $3.8 million in 2008.

In 2008, the “Diners, Drive-ins and Dives” appearance and news of the coming light rail project changed the business’s direction irrevocably. Scheduled to start in 2010, the multiyear project had the potential to dissuade customers from visiting and, during its most intense periods, close the restaurant — a huge loss for a one-location business that had been serving 700 people a day.

THE OPTIONS When Mr. Coker saw the lines outside his restaurant, he thought of Sammy Davis Jr. Mr. Coker, 63, had spent 37 years in the entertainment business, and in the early 1980s he had worked as an assistant director and production manager on a series of Burt Reynolds buddy comedies. On “The Cannonball Run,” Mr. Coker had worked with Mr. Davis, Dean Martin and Roger Moore, stars who had become so popular, he believed, that they had lost their identity. While driving Red Iguana’s branded van around town, he began to hear from locals who had stopped coming to the restaurant because of the long wait and out-of-state crowds. “My experience in the entertainment industry taught me that that kind of popularity can flip and become a negative,” Mr. Coker said, “and once it becomes a negative you become Planet Hollywood.”

To relieve that tension, he decided, Red Iguana would add a second location. Upscale developers had been trying to lure Red Iguana to their new malls and suburbs, but Ms. Cardenas and Mr. Coker owned a house a few blocks from their business and looked upon it as a child. “I love being able to get to my business so fast,” Ms. Cardenas said. “I felt as the owner of the Red Iguana, I couldn’t live anywhere else.”

While deciding on a location for their second restaurant, they heard about a warehouse for sale for $259,000 just two blocks from their first restaurant. The barrel-roof building was the definition of industrial chic, with a concrete pad that could be used for patio dining and with views of a power station and its three 320-foot smokestacks to the west and the cityscape and snowcapped Wasatch Mountains to the east. But to get the money to buy and develop the location, they would have to convince Zions Bank and the Salt Lake City Office of Economic Development that it was a good idea to build a sister restaurant two blocks from the first. The lenders were skeptical.

The restaurant owners had to make several choices quickly, before the rail construction began.

WHAT OTHERS SAY Danny Meyer, founder of Union Square Hospitality Group, which includes Union Square Cafe and Gramercy Tavern: “Though it has worked for some — Nobu, Nobu Next Door — I would absolutely not advise repeating the same concept so close to the first. It’s confusing to patrons, and you may inadvertently hurt morale as staff members will invariably feel they might not be working in the better of the two.”

Anton Schulte, co-owner of Bistro Daisy in New Orleans: “I would probably just hunker down financially and try to weather the business interruption storm. I don’t know their financials but, at the level of business that they say they are at, I would assume they have a little bit of money in reserves.”

Charles Phan, owner, The Slanted Door and other restaurants in the San Francisco Bay Area: “I would strictly look to expansion only if you have a niche in the market that needs to be filled or you’re bringing something new to the table and it is interesting to you and the customer. I wouldn’t do it just because there are extra people around the corner. For me, it never works to redirect somebody to a second location with the same name.”

THE RESULTS Offer your thoughts on Red Iguana’s choice on the You’re the Boss blog at Next week, on the blog and in this space, we will explain how things have worked out for Ms. Cardenas and Mr. Coker.

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