Restaurants are a risky business: here’s how 4 beat the odds

Risky behavior can take many forms. Some seek the thrill of climbing mountains or jumping out of an airplane. Others court danger by going all in at the poker table on a bluff.

Then there are those who open restaurants.

Like John Gelastopoulos, the owner of the Broken Yolk Cafe, the ever-expanding empire of breakfast spots that’s celebrating its 40th anniversary this year. In 1993, he was intent on buying the original Pacific Beach location, except his plan had a flaw.

“I needed $45,000 but I only had $1,000,” Gelastopoulos said. “I did have five credit cards, so you know what I did? I maxed out all the credit cards and I dove in head first.”

Restaurants are a notoriously risky business, with high start-up and operating costs, slim profit margins, long hours and owner burnout. Particularly for family-run, independent operations there’s limited access to bank financing and investor resources.

How tough is it? Conventional industry wisdom is that 90 percent of eateries shut down in the first year. Not so, said San Diego restaurant analyst John Gordon. Opening a restaurant is a perilous undertaking, but not that perilous. “They’re considered risky because they are risky,” Gordon said. “But the statistic that 90 percent of restaurants fail in the first year, that’s not true, that’s far too harsh.”

Gordon said there have been several substantial academic studies that show that the “termination” rate — from closure, name change, shift in ownership — is actually about 40 percent over the first three years.

Past the three year mark, it’s not like it gets any easier. “Independent restaurants have a much higher churn rate ... it’s often a daily struggle to stay open.”

Which makes Broken Yolk’s origin story so notable, as well as the history of several other longtime San Diego institutions marking milestone anniversaries in 2019: Sammy’s Woodfired Pizza, at 30 years, the Busalacchi family, at 35 years, and Hob Nob Hill, at a momentous 75 years.

“In order to get where they are, these are amazing life stories,” Gordon said. “ All four of these guys, they’ve been through a tremendous amount to last.”

Each of these businesses has taken a different route to persevere that long, with plenty of successes and failures along the way. And while they might be among the best-known, long-time restaurants in San Diego, there are countless others chipping away at the notion that owning a restaurant is a losing proposition.

On Thursday, Monzù Fresh Pasta celebrated its first anniversary in the volatile dining neighborhood of the East Village with a special menu and complimentary prosecco. The Patio on Goldfinch in Mission Hills is throwing a “Cheers to Five Years” party Thursday with charcuterie, hors d’oeuvres, desserts, beer wine and cocktails. Cucina Urbana is reveling in being in business for 10 years June 24 with a “Now + Then” family-style feast, and a prestigious, new Michelin Bib Gourmand designation in hand. And Primavera Ristorante, owned and operated by the mother-daughter team Jeannette and Denise Stavros, will mark its own resilience — 30 years in evolving Coronado — with a five-course dinner and prosecco toast on June 25.

Here’s a look at how four San Diego restaurant owners have beat the odds — and stayed in business.

75 Years, Hob Nob Hill, Bankers Hill
Owner: Tania Warchol
Key to success: If it ‘ain’t broke, don’t fix it
Back in 1993, Warchol and her ex-husband bought Hob Nob Hill from the original owners, Harold and Dorothy Hoersch, winning them over with a promise not to change the classic breakfast, lunch and dinner spot. “I haven’t changed anything, except for a few small tweaks to the menu,” said Warchol, a Miami native. “It’s all original recipes, everything is cooked on site, there’s nothing not homemade.” Hob Nob’s classic menu is a like an almanac of Americana: turkey croquettes, chicken and dumplings, lamb shanks, liver and onions and the corned beef and cabbage that was hailed in an episode of Guy Fieri’s “Diners, Drive-Ins and Dives.” After tasting the seven-day cured corned beef, Fieri offered this assessment: “It’s super tender. The fat just falls apart in your mouth like butter. (Pumps his hand, points his index finger.) You know what that meant? That ends it all. That guy’s No. 1,” he said. Lifelong regular customers interviewed gave their own reason for Hob Nob’s continued success: “It’s like coming home.” “This is mother’s cooking.” “It’s a historic little landmark.” And, “It never changes.” Hob Nob has changed a little; the dining room got a makeover in 2009, Mexican specialties have been
added, as have sliders, healthy breakfast options and organic ingredients. Warchol said she’s trying to appeal to a younger clientele, not by overhauling the menu, but by stressing why the restaurant is a beloved institution. “Our campaign for our 75th anniversary is come and see why these are classics,” she said. “We have meat loaf — c’mon, it’s vintage, your mom used to make that.”

40 Years, Broken Yolk Cafe, Pacific Beach, multiple franchise locations
Owner: John Gelastopoulos
Key to success: Use your Rolodex (Google it, kids)
About 26 years ago, Gelastopoulos, a native of Greece, was trying to make ends meet by working as a real estate broker during the day and at a restaurant at night. “I would never see the sun go down,” he said. Then he ran across the Broken Yolk Cafe in P.B. “Wow, it’s closing every day at 3 o’clock,” he said he noticed. “I think I should buy it.” After a year of back-and-forth with the owner, and his decision to max out his credit cards, the restaurant was his. But within the first 10 days, he realized business was much slower than he anticipated. “I had my head down and I was thinking, ‘what am I going to do?’ Right in front of me there was a Rolodex, and it was staring at me. I thought, ‘why don’t I just call a few people I know in real estate and invite them over for breakfast?’” Gelastopoulos called 40 to 50 people and over the course of six weekends, Broken Yolk’s foot traffic was unbreakable. “I did it to build momentum and the momentum never stopped,” he said. Indeed, breakfast and brunch are the hottest segment of the restaurant industry and today there are 34 Broken Yolk locations and 12 under development. Gelastopoulos started franchising them 11 years ago and owns the original location, the name and menu concept. Every change is created in the San Diego test kitchen and Gelastopoulos has a director of operations checking on standards across the country. “We want to make sure the poblano sauce is made the right way, everything is from scratch,” he said. “We break eggs, we don’t have liquid eggs.” The menu has evolved over the years, with additional Mexican dishes like the Boder Benedict and the Tiki Toast made from King’s Hawaiian bread. The one thing Gelastopoulos said he hasn’t changed is how he embraces customer service. “You’ve got to make them feel good.”

35 Years, Barbusa, Nonna, Little Italy
Owner: Busalacchi family
Key to success: The next generation can help you stay relevant
Joe Busalacchi, Sr. was a young cook on a tuna fishing boat before becoming became a restaurateur by opening Casanova’s Pizza in La Mesa 35 years ago. A few years later, he opened Busalacchi’s on Fifth in Hillcrest and like any good Sicilian, he served dishes made from his mother’s recipes. And then a friend of the family with some property in Little Italy convinced Busalacchi to make a pioneering move and launch a restaurant in the neighborhood, then a world away from the premier dining destination it is today. Success begat success. “At one point, we had six restaurants on the same street. Rent was like $1 a square foot. Now it’s $7. At that time we didn’t even have enough family to work at all the restaurants,” said Joe Busalacchi Jr., 36, who with his brother PJ, serves as the general manager of the popular India Street hotspot Barbusa, which will celebrate three years today. Joe Jr. said the appetite for traditional fine dining shifted while the family was still running the now-closed Po Pazzo. He and his brother pushed the idea of a hipper, more casual place that focused not only on food but — a millennial favorite — the social dining experience. Forget the old-school menu, with waiters speaking Italian in the dining room, they said, let’s encourage people to eat at the bar, order shared plates, people watch, maybe even meet someone. “Of course, he resisted,” Joe Jr. said. “I’ll never forget the first night, we walked into the dining room and we’re not playing traditional music, you don’t hear any Pavarotti, it’s more upbeat,” he said. His father, using an unprintable phrase, “requested” they change it to Frank Sinatra, or Italian singer Eros Ramazzotti. “My brother, he’s the stubborn one, he said, ‘Look, we’re not changing the music. Trust me, it’ll work. Listen dad, it’s loud, yes, that’s the beauty of it.’”

30 Years, Sammy’s Woodfired Pizza, multiple locations
Owner: Sami Ladeki
Key to success: Don’t be afraid to borrow someone else’s great idea.
It’s not every day that it’s “Sami Ladeki Day” in San Diego, but that’s just what Mayor Kevin Faulconer proclaimed Monday to be. And it’s not every day that someone tells mega celebrity chef Wolfgang Puck that they made a boatload of money off of Puck’s idea. Yet, that’s just what the Lebanese-born Ladeki did a few years back. Some context: Ladeki, the restaurateur who helms the Sammy’s Foodfired Pizza empire, opened his first restaurant in Houston in the 1980s. It was the era, Ladeki said, of sun-dried tomatoes and e emergence of Puck’s brand of California casual cuisine. When Ladeki landed in La Jolla in 1989, he knew his expertise in food and beverage operations would help him run a new restaurant. His limited culinary skill, however, required that he do something simple. So he landed on pizza, pasta and salads. On a trip to L.A. to buy a pizza oven, Ladeki met Ed LaDou, Puck’s first pizza chef at the celebrated Spago. Ladeki got the idea to replicate Puck’s successful concept and pay LaDou $750 a month to come to San Diego to develop his menu and train the staff how to make this newfangled style of gourmet, wood-fired pizza. Fast forward to Ladeki meeting Puck: “He’s the prophet, he’s the pope,” Ladeki said. “I told him, I tried to imitate what you did, now because of you, I have a huge restaurant chain based on pizza. You made a millionaire out of me.’” Over the decades, Ladeki has opened and closed multiple other restaurants and businesses. Looking back, as he celebrated 30 years at Sammy’s on Wednesday, he said, hard work and dedication have been essential to his success. But growing his business called for one thing: “In America, you don’t have to have a lot of money to be a millionaire or a billionaire, just an idea,” Ladeki said. “When you have an idea, people give you money to expand.” Even when it’s someone else’s idea.