A Taste of Phillyin Colorado?

Published in CSP Daily News

Exxon dealer ready to take proprietary food concept on the road

PHILADELPHIA -- A Philadelphia Exxon dealer has taken his proprietary in-store cheesesteak concept to the next level by opening a standalone restaurant in a strip mall. And if its tenacious owner has anything to say about it, the conceptknown as Grilladelphiais likely to soon sprout legs and step outside of the Philly box.

It's a home run, Grilladelphia owner Barry Appelbaum told CSP Daily News. Being cobranded in the Philly market is a tough sell; people think of you as gas station food, no matter what. You could have a Morton's of Chicago in your store [image-nocss] and it still would be difficult. But when you drive by a Wawa Food Market or a Sheetz, you think of food because that's the culture they've created. [Look for more on the Grilladelphia concept and other diversification strategies by small operators in the inaugural issue of CSP Independent magazine, coming next month.]

Appelbaum, who entered the gas station business in the early 1980s as one of the first Arco dealers on the East Coast, opened his standalone Grilladelphia in August 2005 after its previous tenanta beat-up hoagie shopturned in consistently underwhelming volumes. Since he opened the restaurant, Appelbaum has seen a 20% increase in sales and is moving about 300 sandwiches a day; menu items range in price from $1.99 for a breakfast sandwich to $5.95 for a hot veggie sandwich. He expects the restaurant to produce annual sales of $500,000 by the end of 2006.

When I first created Grilladelphia [in 1998], I wanted it to be a place I would go out of my way to visita destination point vs. an impulse place, he said. It's very tough going head-to-head with Lee's and Slack's, not to mention the local favorites like Pat's, Geno's and Steve's Steaks. But we're holding our own.

Appelbaum's expansion may benefit from good timing. Quick-service restaurants are projected to hit sales of $142.4 billion in 2006, a gain of 5% over 2005, according to the National Restaurant Association, Washington, D.C. The restaurant industry is expected to see its most significant growth in Nevada, according to a recent NRA forecast, followed by Arizona, Florida, Colorado and Texas.

Such projections aren't lost on Appelbaum. With all the pretenders to the cheesesteak throne doing business throughout the country, Appelbaum believes his serious steakery will thrive just about anywhere. So he's taking steps to test the waters. In the first half of 2006, he intends to open a Grilladelphia in Boulder, Colo., with a business partner. He's also investigating opportunities in Arizona and Nevada, but his target location lies much closer to home: the Big Apple.

Meanwhile, Appelbaum continues to operate one gas station, which houses the original Grilladelphia, in Philly's gritty Port Richmond neighborhood. He had built his store count to three throughout the years, but the realities of competition and the resulting decline in fuel volumes pressed him to shed his other stores.

In 2005, his Port Richmond store pumped one-third of the gallon volume it did in the previous year, but Appelbaum made 50% more in profit by not matching the competition on street price. Surprisingly, the store's inside sales for 2005 remained at about the same level. Despite market conditions, Appelbaum has not ruled out future growth in the fuel-marketing business. In fact, he has entered into talks with oil companies regarding a possible expansion.

For the moment, however, Appelbaum's Grilladelphia concept is the apple of his eye. We're in [the prepared-foods business] for the long haul, he said. Even with all the challenges I'm facing, I've never had so much fun in my life.