Rob Sabo
Northern Nevada Business Weekly

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November 25, 2012
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Eateries find their appetite for growth

Fred Lee, manager of Peg's Glorified Ham N Eggs, says the true test of the company's business model is yet to come despite significant expansion of the restaurant's footprint in the Truckee Meadows.

Peg's, which opened its fourth location at Sparks Boulevard and Prater Way in September, is opening a fifth location in Roseville in the second quarter of 2013. Peg's is among a handful of local restaurant concepts that are bucking regional economic trends and opening additional locations. Among them are Squeeze In and Red Hut Cafe.

Lee says Peg's is taking a significant gamble in exporting the concept to California. The restaurant will serve as a beachhead to widen the company's presence in the Sacramento Valley, Lee says. Peg's owners Joanna and Fred Lee Sr. opened the first location at Sierra Street in downtown Reno in 1999 before adding targeted locations in northwest Reno, south Reno and Sparks. The success of those locations, however, hinge on the strength of a well-known local brand. The Roseville location on Douglas Boulevard, a main throughfare in Roseville, will be starting from ground zero, Lee says. His sister is moving to California to manage the operation, which will be formed as a separate legal entity, and management is grooming current staff to work at future locations in the Golden State or southern Nevada.

"It is a bit of a gamble," Lee says. "We know the Reno market and have lot of friends and family here, but this will be the first true test of this model.

"My parents have developed a great brand, and I think we figured out what works for us in the Reno-Sparks market. Now we are trying to find different markets that have the same kind of environment. If you have enough confidence in your product, it is natural to take that leap of faith to go into a new market. My competitors also are expanding, so they must be seeing what we are seeing."

One of Lee's closest competitors, the popular breakfast eatery Squeeze In, recently opened its fourth location as well just a few miles north on Sparks Boulevard and Disc Drive.

Shila Morris, who manages the day-to-day operations of the four Squeeze In eateries, says one of the biggest obstacles to overcome with expansion has been ensuring consistency in dining experiences across the company's locations.

Another challenge has been letting go of daily minutia better left in the hands of each store's general manager.

"We had to let go of duties that were under us," Morris says. "We had to learn how to trust our associates to serve our guests the same way we would. With two stores we could straddle the line, but with three stores we had to put together a training program and build a whole new structure. Now, instead of focusing on our guests we focus on our associates and let them focus on the guests."

As Squeeze In grew the company's management team created a corporate training program and code of conduct complete with a series of nine instructional videos to bring staff up to par with management's expectations. Grooming staff on service and waiting standards strengthens the brand, especially as it eyes a possible fifth location in Carson City.

Additional growth would strain the capabilities of the current management structure, Morris says.

"As we expand you will see less and less of the family members on the floor, but that is why we are focused on making sure our associates feel they are part of the family," she says. "We have 96 associates, so that is 96 family members out there spreading the love."

Kelly Gardner, owner of Red Hut Cafe and Soda Fountain, is cautious about spreading too much love as the concept expands to a fifth location at the corners of Moana Lane and Lakeside Boulevard (the space formerly housed Blue Bounty Fish Market). Red Hut, a longtime Lake Tahoe eatery founded 54 years ago, expanded with several locations in South Lake Tahoe and recently opened a fourth store in north Carson City.

Opening-day crowds overwhelmed staff for the last two locations, so Red Hut went live last weekend in Reno with a very soft and quiet grand opening.

"I was honestly scared for the weekend - that is a good problem though," Gardner says.

Gardner says the timing is right for Red Hut to add a fifth location because revenues are strong at each of the company's locations. Red Hut opened its third eatery at Ski Run Boulevard during the onset of the Great Recession, and the store carried its weight throughout the ensuing years.

Expanding the concept's geographical footprint to Carson City was a natural extension, she adds, because Lake Tahoe residents are used to "going off the hill" to tap goods and services in Carson City. The most difficult aspect of adding multiple locations, she says, is keeping up with huge amount of additional administrative work.

"We used to only have 20 people on payroll, but the last pay period we had 160, and the next we will be at 200," Gardner says. "Our greatest challenge is the human resources side of things - it is just a lot more people and a lot more of everything."

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The Nevada Appeal Updated Nov 25, 2012 12:35AM Published Nov 25, 2012 12:34AM Copyright 2012 The Nevada Appeal. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.