GULF COAST 500: Pinching Pennies

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Take a walk through the new Pinchers Crab Shack restaurant at Gulf Coast Town Center in Fort Myers with owner Tony Phelan and you'll start to understand why he's such a successful restaurateur.

The tables with the fish designs came from an auction of the bankrupt Tampa-based Shell's Seafood Restaurant. They cost $10 each. The mounted blue marlin over the kitchen counter is worth $3,500 but Phelan bought it for $500. Phelan pulled old water skis out of a neighbor's trash, cleaned them up and nailed them to the wall. He's got a warehouse full of stuff he's collected over the years.

In fact, Phelan bought all the kitchen equipment for pennies on the dollar after the previous tenant spent $1.5 million building out the restaurant and subsequently folded. “This is somebody else's mistake,” Phelan says.

Today, Phelan pays half the rent on space at the mall in Estero he would never have considered during the boom because it was too expensive. Now, mall owners have Pinchers at the top of their list of hot prospects.

The Gulf Coast Town Center restaurant is Phelan's eighth Pinchers and he expects the chain to hit $23 million in sales this year, up 15% from a flat 2009.

Phelan doesn't take pleasure in anyone else's misery because he's been there. “That's what we went through in Texas when we all went broke,” he says. Phelan's chain of five Irish-themed restaurants in Texas closed because of the Texas oil bust of the mid-1980s.

Nearly broke, he moved his family to Bonita Springs in the late 1980s in two cars and a trailer and took a job as a waiter at the Dock at Crayton Cove, an upscale restaurant in Naples.

In his spare time, Phelan scoured the dumpsters for cast-off equipment and items to decorate a restaurant. He opened the first Pinchers in Bonita Springs, with 12 tables and six employees, spending just $17,000 to build it out.

Today, Phelan employs 400 people at eight Pinchers Crab Shacks from Sarasota to Naples and he plans to start a chain of barbecue restaurants to be called Texas Tony BBQ Shack. If the first one in Naples performs well, Phelan says he hopes to open six or seven of them in the next five years.

Phelan doesn't always have the golden touch when it comes to restaurant site locations, but he's always got a plan in case it doesn't work and is quick to pull out. For example, he closed a tavern he had opened in North Fort Myers just eight months after opening because it wasn't performing to expectations.

“We have an exit strategy on all our stores,” says Grant Phelan, Tony's son and Pinchers' director of operations.

Expense control reaches into the ocean. Two years ago, Phelan acquired 50% of Island Crab, a seafood wholesaler on Pine Island in Lee County. “It's probably the biggest advantage we have in the market,” he says.

With Island Crab, the Phelans can control the freshness of the seafood, make sure the restaurants are well supplied and take some of the volatility out of seafood prices. What's more, they can supply other restaurants for a profit.

The Gulf oil spill has had little impact on Pinchers as sales are ahead of last year. Grant Phelan says that's because many competing restaurants have closed and Pinchers has carefully targeted its audience.

For example, Pinchers doesn't carpet-bomb its market with coupons and instead targets areas based on how its stores are doing. Its “kids eat free” promotion drives families, for example. “You can die a slow death from coupons,” Grant Phelan quips.

The Phelans also have tweaked their menu, selling a pound of snow crabs for $14.99 when they used to sell a pound and a half for $24.99. They make up for the loss in margin to the growth in volume. In addition, they sell the pound of snow crab without sides for $12.99, giving waitresses an opportunity to “up-sell” the crabs as an appetizer that diners can share with each other.

And if you can't make it to one of Phelan's restaurants, he'll come to you. For example, the restaurant chain fed 40,000 people at the Ace Classic golf tournament in Naples with its 38-foot catering trailer and 30-foot barbecue smoker. Drawing staff from its existing restaurants, the catering business is successful on its own and is a good way to entice more customers into the restaurants.

With all these plans to grow, it's hard to think of the recession as anything but opportunity for skilled operators like the Phelan family. “Now's the time you make all your money,” Phelan says with a smile.