He’s gonna need a bigger boat.
Slapfish Chief Executive Andrew Gruel wants to expand his “modern seafood shack” along the Eastern Seaboard and overseas in an effort to get the fast-casual to 100 locations within five to seven years.
He so far sells seafood by the seashore at sites along Southern California’s coast—from Huntington Beach to San Clemente, with five San Diego restaurants in the works—and is moving inland from Irvine and Brea to Tulsa, Okla., and Lehi, Utah.
Arizona, Nevada, Colorado, Idaho and Texas are signed, and New Mexico is next up—Gruel wants the first of three locations in the state to open in Albuquerque before the city’s International Balloon Fiesta in October.
Slapfish launched in 2012, joining a fish farm of OC-based favorites, including King’s Seafood Co. in Costa Mesa, Taps Fish House & Brewery in Brea, and Wahoo’s Fish Taco in Santa Ana—a fertile ground as the waters cover the sea, from fruits de mer to Banzai Bowls.
Slapfish had seven sites by 2016 and plans to double that this year.
Much of the company’s tale to date is well-told, from its fabled food truck foundations to a fast-casual fusion of a dish oft-served bland, now offered with foodie flavoring from sharp and spicy sauces and herbs.
Less said are per-unit sales that filings show pushing $1.5 million, a well-timed failure that produced greater growth, OC ties that go well beyond a Fountain Valley headquarters, and an enterprise that almost never happened.
Surf Report
Gruel wants stores to drop about 20% of average sales to EBITDA before the parent company gets its 6% royalty and 2% marketing fees.
“Stores run about 1,600 to 1,800 square feet so we’re aiming for north of $1,000 per square foot” in annual sales.
It costs about $500,000 to $800,000 to open a Slapfish.
Gruel seeks area developers in Florida, Georgia, the Carolinas and parts north. Two Virginia franchisees are already aboard and committed to eight units.
In a different sort of Eastern initiative, “Japan and China are targets” and an area developer is “finalizing real estate” for the first of 10 units in South Korea.
He was in England last week with Ruislip-based SME Group PLC, which plans 25 locations in the United Kingdom and Ireland.
Slapfish has done pop-up sites in Chicago and Brooklyn, and a local news report from the latter in October 2015 said it envisioned 50 locations in New York, New Jersey and Connecticut, but Gruel now says no to more urban areas.
“They’re overbuilt,” he said, citing “labor costs and real estate” as unattractive in large metro markets, including the Bay Area and Chicago.
Fisher Man
The inaptly surnamed Gruel didn’t eat seafood until he was 18.
He grew up in New Jersey. His mom is part of an urban planning firm, Heyer, Gruel & Associates in Red Bank, and his father is president emeritus and former chief executive of AAA New Jersey. Gruel’s sister teaches school in the state.
Not notable as OC-focused startups go but Andrew’s wife, Slapfish Marketing Manager Lauren Gruel, grew up in Huntington Beach—the couple has two kids—and then there’s this:
In 2009 Gruel was a program manager at Aquarium of the Pacific in Long Beach, crafting “a chef-oriented seafood awareness” initiative backed by Pacific Life Foundation in Newport Beach, the charitable arm of the finance giant that’s OC’s largest private company by revenue.
Gruel said the effort to show “the virtues and values of eating sustainable seafood” involved assessing fish farms’ sustainability and meeting globally with distributors and chefs.
“Ninety percent of seafood is eaten out,” said Gruel, so targeting chefs would have the greatest influence on eating habits.
He learned people like seafood, but commonly limit their purchases to high-end restaurants.
“My Eureka moment was to combine fine-dining quality with the cost of fast casual.” (see “Fish Food” this page)
He left the Aquarium in April 2011 and fired up the food truck.
Perfect Storm
Gruel’s venture wouldn’t have gotten off the ground but for the two that got away.
The first came as a philosophy and piano performance major at Bates College in Lewiston, Maine. Gruel discovered “that hobby you don’t realize is your passion” while working 60 hours a week in a lobster house.
He dropped out of school and focused on food.
Hospitality management and food marketing degrees from Johnson & Wales University in Providence, R.I. followed, along with service as a chef for Ritz-Carlton and various restaurants.
He came west to take the aquarium role, launched his food trucks in 2011 and 2012, landed his first two bricks-and-mortar locations within two years, and began to franchise.
Then came a big wave.
Gruel calls it a “debacle.” It involved a Middle East franchisee who planned 75 units but didn’t mention the plan included franchising 300 units of five different brands, many to be flipped first to other operators.
That deal fell through—the Middle East is still open to an area developer—and both the above exclude a startup arc Gruel also traveled:
• a break-even equation on the food trucks,
• 80-hour work weeks that followed the first store’s debut in April 2012, and
• early-on thinking the company could divvy its attention between restaurants and acting as its own distributor.
“We thought [distribution] could be our secret sauce, but our expertise ended up somewhere else,” Gruel said.
Slapfish still sources all product that flows through stores, and franchisees buy from distributors it finds, but the company doesn’t take a cut on the deals.
Out of the Boat
The collapse of the desert adventure brought a dead calm.
“We’d been counting on those development fees,” Gruel said.
Instead, his franchise broker, Fransmart—based in Alexandria, Va., with an Irvine office—invested.
“I bought every share he was selling,” said Chief Executive Dan Rowe.
Rowe cited the new angling Gruel brought to the table—high-quality plus fast-casual—and the lessons learned and relationships formed by the chef’s seafaring.
Gruel hired operations staff and increased public relations and social media efforts with the proceeds.
Rowe invested twice in Slapfish Restaurant Group LLC, owns about 20% of it, and sits on the board.
Fransmart invests in restaurants via Kitchen Fund in New York, which has $25 million in commitments.
Big Fish
Brokers get one-third to half of a chain’s initial franchisee fee.
A Slapfish franchise is $30,000 upfront, but multiunit deals—initial fee plus half the fees for the rest—are common.
“We build big brands,” Rowe said.
Clients have included Pasadena-based Pie Hole and Five Guys Burgers & Fries in Lorton, Va.
A former Five Guys area developer is the Slapfish operator for Texas, Colorado, Arizona, Utah, Idaho and Nevada.
The first two Slapfish—in Huntington Beach and Laguna Beach—are company-owned. The next six to open were franchised, and Gruel wants to maintain that split of 75% franchised/25% corporate.
He’ll seek more funding when Slapfish gets to 50 sites, he said, and do more corporate stores to keep the ratio right.
Gruel opened two independent restaurants in May at Trade Food Hall in Irvine: vegetarian Butterleaf and chicken concept Two Birds.
He plans to franchise both.
