"You Cannot Scale Cool Fast Enough," Says Eureka! CEO About the Brand

Photo courtesy of Eureka!

Photo courtesy of Eureka!

Eureka! is one of those brands that comes across as a one-off, independent restaurant concept. The brand even has 22 separate social media accounts on both Instagram and Facebook for each of its locations— the latest opening last month in San Diego, Ca.

“I've done that consciously,” said Justin Nedelman, CEO and co-founder of Eureka!, a multi-unit gastropub that was born soon after the economic recession of 2008 began.

“At that time, in the recession, I think people with money were trading down, but they still wanted service; and folks that had limited income and still wanted a great experience, they were really discerning and weren't going to spend that money on a big chain restaurant.”

This is also the reason why one week before opening the first restaurant, Nedelman and his business partner and co-founder of Eureka!, Paul Frederick, decided to make the switch from fast casual to full service.

Hail Mary Beginnings

Nedelman and Frederick actually met in West Los Angeles at a real estate conference. Nedelman was doing structured finance at the time and Frederick was doing fee development. A few years later, they ended up forming a development company together which led them to eventually develop shopping centers halfway between L.A. and Palm Springs.

As developers, they built many restaurants and the tenants who owned the centers did not own the restaurants. As a result, they saw many restaurants come and go out of business. They actually stopped signing new deals in 2008 because of the recession. One year later, the duo had a vacancy that they could not find a way to lease.

Photo courtesy of Eureka!

Photo courtesy of Eureka!

It was a shopping center in Redlands, off Eureka Street. “It was a middle market and instead of just accepting the fact that no one wanted to be there, we had a bank loan to debt service,” said Nedelman. “We threw the Hail Mary.”

The business partners opened Eureka! two hours away from where they lived to keep their shopping center solvent. They named the concept after the street it resided on thinking the name would be transferable to other markets if the venture was successful and centered their menu around craft beer and artisan burger offerings.  

Surviving the Recession

What helped Eureka survive the recession? It was a combination of many things. For one, they were not afraid to get scrappy when it came to their marketing efforts. Nedelman’s philosophy? Get it for free.

Photo courtesy of Eureka!

Photo courtesy of Eureka!

“The most authentic way to communicate locally in a market that none of us lived in was to get local. I was flyering cars after week one, in my real estate suit, out in 100 degree weather, in the summer of 2009, literally, because sales were... we did like 18 grand the first week, and we needed to do 30, I think, to be really successful there,” confessed Nedelman.

Also they were able to use the same investors they had as real estate developers to invest in their restaurant group. “We had a great reputation with them, so there's definitely a lesson there. If you're treating your investors right, they'll take care of you when money is scarce,” said Nedelman.

Full Service Instead of Fast Casual

Initially, Eureka was going to be an over-the-counter concept. A week before opening, Nedelman and Frederick changed their minds.

Photo courtesy of Eureka!

Photo courtesy of Eureka!

They decided to resist the trend since, as California-based developers, they were hyper aware of the landscape around the fast casual craze at the time. Instead they went for a memorable experience at a reasonable price point.

By the time they opened their second concept, they not only offered craft beer, but they also incorporated an all-American brown bar, featuring whiskey, which helped them become a little more profitable.

“If we talk bar program, which represents almost 38% of our sales, you cannot repeat multiple cocktails or drinks in a fast casual setting like you can in a full-service bar concept,” explained Nedelman. “That was a smart move... there's a lot of burger guys that are out there, but a lot of them are fast casual.”

Photo courtesy of Eureka!

Photo courtesy of Eureka!

Although, Eureka! started out as a burger-centric concept, the menu has evolved to include sharable dishes, salads, tacos, steak and fish entrees, and even brunch at some of their locations.

According to Nedelman, because the food is prepared 100% from scratch and offered at modest prices, Eureka! was able to appeal to a wide range of demographics, pulling in customers from all income ranges. “You would see doctors in scrubs, next to hardcore beer geeks and your local everyday guy next to the guy who pulls up in an expensive car.”

Differentiators

To narrow it down, there are some key differentiators that make Eureka a unique concept, according to Nedelman:

Photo courtesy of Eureka!

Photo courtesy of Eureka!

  • The all-American brown bar component (with the exception of Tequila) allowed them to simplify and stand for something early on. “There are some great products that we just can't carry, because they are not American. Our bitters are American, our cherries are American, everything we do in the bar is American.”
  •  Approachable food at a modest price-point. “You blend those two and you're getting a good alcohol to food ratio mix, it allows families to feel comfortable because the price points are good, but allows single folks, or folks with more influence, the ability to try a Pappy Van Winkle whisky, early on.”
  • How spaced out each location is from the next where each Eureka! seems like an independent restaurant.

Secret Sauce

The Eureka! brand is centered around passion.

“Anybody can teach someone to make a mojito, or a whiskey sour or whatnot, but no one can teach passion,” said Nedelman about why he prefers to hire for personality and not for experience.

Photo courtesy of Eureka!

Photo courtesy of Eureka!

Part of the reason for this approach is because early on in the company’s history every restaurant was picking out their own craft beers. So, it was necessary for those people in charge to be naturally passionate about the craft beer industry and have a lot of drive to find the right answers. Especially, when introducing a new product to a guest.

To identify employees and managers with passion Nedelman and Frederick narrowed it down to three fundamentals:

Photo courtesy of Eureka!

Photo courtesy of Eureka!

  • They have to be givers of Energy

  • They must be into Discovery; and

  • They must be able to create a sense of Community

They call it— EDC.

“That's more critical than ever as we grow. To be more clearly defined with what are the key elements of being a Eureka! manager or employee. It's been distilled down to EDC. I think that's the secret sauce at this point. Slowly rolled this out over the last year, but informally we've talked about these words for eight years," said Nedelman.

Brand Growth

At the ground level, much of Eureka!’s brand growth falls on its location managers. They are hired for their ability to connect at the community level through social media, to connect with the restaurant team, with the restaurant's regular guests, and finally for their willingness to go out into the community and do grassroots marketing.

Photo courtesy of Eureka!

Photo courtesy of Eureka!

“We actually bonus our managers for doing things in their community and telling us about it,” said Nedelman, who reads every single write-up submitted. “There's never a bad idea. If someone wants to give a gift card to everybody that adopts a dog in a city that we have a restaurant and you go to an adoption shelter... we'll do that!”

Even though Nedelman admits this is a little difficult to scale, the leadership team encourages this practice because being involved in the community, like; sponsoring charities, offering percentages back to schools, getting involved in little leagues and doing professional networking events, is what makes each Eureka! location unique and keeps it locally connected without having to spend actual money on media advertisement.

Eureka! is expected to have about 45 restaurants by 2021, give or take five, according to Nedelman, who opts for opening new restaurants inside architecturally distinct buildings in markets around colleges and tech industries where there’s a high labor pool.

20160423_eureka_mountain_view_3231_AuroraHDR_HDR-Edit.jpg

“I don't want to know what is available. I want to know where the best real estate is, and then how do we get in there at a reasonable cost... We have a high discipline on the rate of occupancy cost. From our background in real estate and also our experience in the recession. Our goal is to continue to be really disciplined from an occupancy cost standpoint, so there's not as much risk in our portfolio in another down,” said Nedelman.

Photo courtesy of Eureka!

Photo courtesy of Eureka!

If you were wondering about franchising… Eureka! restaurants are all privately owned and Nedelman and Frederick have turned down many opportunities to open this option up.

“We don't, because the brand, has so many nuances to it. It's so special! No matter how much money is out there to franchise, you cannot scale 'cool' fast enough. You have to be delicate, and you have to be thoughtful on when you open, and where you open, and who's running it... As of now, we've turned down that.”

To learn more about Eureka’s marketing efforts, watch today’s On Foodable Weekly with our host Paul Barron as he interviews Eureka’s Public Relations and Marketing Manager Alexia Penna at the HUB Hospitality Conference 2017!