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Business Week / August 2006


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AUGUST 24, 2006

Small Bizby Stacy Perman

Oprah's Favorite Burger?

Can a burger joint expand without losing its cool? When The Counter's hamburgers were mentioned on Oprah , franchising was not far behind

OprahWhen restaurateur Jeff Weinstein launched The Counter, a hip build-your-own hamburger eatery with industrial decor in trendy Santa Monica, Calif., three years ago, word of the new hotspot spread widely and a hungry and loyal following quickly developed. In just three months, The Counter turned a profit.

Despite the fact that the casual gourmet burger joint known for its over 300,000 different possible combinations—beef, ahi tuna, chicken, turkey, or veggie burgers, topped with everything from dried cranberries to Danish blue cheese to roasted corn and black bean salsa—doesn't advertise (preferring instead to rely on word of mouth), interest continued to swell.

Last summer, The Counter earned national recognition when it was ranked No. 15 in GQ magazine's seminal list of "20 Hamburgers You Must Eat Before You Die." However, Weinstein, 31, got a real boost in February, when his burgers were mentioned on the Oprah Winfrey Show.

ROLL 'EM OUT.   The Counter's concept seemed so appealing (gourmet burgers but not at gourmet prices: The average bill for a burger, fries, and beverage is $11), that Lou Gurnick, known as the grandfather of franchising (he helped Midas Muffler, Domino's Pizza, and Orange Julius) approached Weinstein about expanding through franchising.

Currently, the pair is in the midst of rolling out 60 restaurants over the next three years in California. The first is slated to open in Palo Alto at the end of August, while another 12 to 15 are planned to launch next year. Nationwide plans call for 400 to 600 restaurants, starting with locations in Florida, New York, Arizona, and Nevada.

KEEPING IT REAL.   Although Weinstein originally envisioned The Counter as a one-off restaurant, a casual place for his family to eat (it's only 10 blocks from his house), he says: "I saw how quickly customers took ownership of it and loved it. We had people coming from all over to Los Angeles to eat here. If this many people liked it, I thought we should bring it to them."

Still, the million dollar question remains: Is it possible to keep the unique elements that helped make The Counter a singular success while replicating it on a broader scale? The country is littered with highly anticipated concepts that have failed or lost their cachet along the way to expansion.

Take Krispy Kreme ( KKD ), once the darling of doughnut fans and Wall Street alike. It lost much of its initial luster as it rapidly expanded to every strip mall and supermarket across the country (see BusinessWeek.com, 3/8/06, "New CEO's Hole Story" ).

JEANS MENTALITY.   "It's a good challenge," says Ron Paul, president of Technomic, a food-and-restaurant-industry consultancy based in Chicago. "There is a risk when you leave your homegrown territory and try to develop the same culture. It really depends on being able to execute the concept and keep control of the elements." Paul cites Uno's, a Chicago-based chain, as one successful example. "Every chain started with one unit."

Weinstein, something of a food industry veteran—he was one of the founders of the upscale Los Angeles eatery Firefly—and a graduate of Johnson & Wales University College of Culinary Arts, is well aware of the potential pitfalls of taking a successful small business and trying to duplicate the same success on a bigger scale. But, he says, "We have the mentality to zig and zag when we need to. Most [businesses] forget to act like a small company. That is who we are. I go to work every day in jeans and sneakers. That is who I am."

PEOPLE FIRST.   Weinstein doesn't want to create the next Burger King ( BKC ) or McDonald's ( MCD ). In fact, he is concerned enough about the potential commoditization of The Counter that he says he has factored that into the expansion in a philosophy he calls "counter-wisdom." For one, each restaurant is limited to 3,000 square feet to maintain the modern but intimate setting and avoid having it feel like "a factory."

From the outset, Weinstein says that the key to maintaining The Counter's culture without homogenizing it as it grows and expands is to rely on the best employees he can find. "I'm front-loading the right people in place," he says.

"I've got a chief development officer…operations, training, and real estate departments. We are making sure that everyone who is with us has got the right culture and understands the brand the way it should be. We have a careful screening process. We aren't just hiring anybody, that is a big piece of the puzzle."

FAN BASE.   Weinstein says he will not sell single-unit franchises. All operators must purchase a minimum of five units, all of which must be in the same geographical area so that owners are truly familiar with their customers and location. "We have strict controls," says Weinstein. "We want the vibe to be the same. It's about growth,…not churning [franchises] out just to make money."

Technomic's Paul thinks that Weinstein has a good shot at multiplying his success. "What makes a place special is not necessarily that it is one unit, but that it takes a different approach in menu, gives customers variety," he says. "And there is no reason why people [in other locations] wouldn't want that. It is the concept that makes it a success; the failures are those that take an item menu and build a chain around it. He has a concept." And Weinstein already has a fan in Oprah.