Based on the success of the Grand Rapids and East Lansing locations of the brewpub HopCat, parent company BarFly Ventures LLC thinks it has a winning concept to take to new markets across Michigan and nearby states.
The company is in the process of raising up to $2 million in equity from investors to help fund the roll out of 12 to 15 new HopCat restaurants over the next five years, owner Mark Sellers confirmed to MiBiz. As of mid-January, the company had already raised $550,000 toward the goal, according to a federal filing.
Grand Rapids-based BarFly Ventures continues to seek investors for the project.
“We’re raising money right now to expand the concept,” Sellers said. “The strategy is more focused than I can say right now.”
Although the company is still assembling a pool of local and out-of-state investors, including people Sellers worked with in his former career as a Chicago-based hedge fund manager, BarFly expects to announce a new HopCat location by the end of the year, Sellers said. He refused to speculate on where he hoped to locate the next bar-restaurant.
According to state records, Sellers set up HopCat LLCs with the cities of Ann Arbor, Detroit, Chicago and Indianapolis in their names.
“We don’t have anything to announce right now about that,” he said.
BarFly Ventures currently operates a handful of bars and restaurants in West Michigan, including Stella’s Lounge, McFadden’s and Grand Rapids Brewing Company in Grand Rapids and HopCat locations in Grand Rapids and East Lansing.
While Sellers was mum on the location of his next brewpub, he said BarFly is hiring at the manager and executive level to support the HopCat expansion plans. On Jan. 1, the company added two new employees, both of whom were recruited from Yard House Restaurants, a nationwide chain of craft beer-focused eateries that’s owned by Darden Restaurants Inc. (NYSE: DRI) of Orlando, Fla.
“We’ve hired one of (Yard House’s) managing directors and one of their project managers who were both pretty senior there,” Sellers said. “We’re also in the process of hiring a higher profile CFO, which is all part of the expansion.”
The flagship HopCat in Grand Rapids and the new HopCat East Lansing location, which opened less than a year ago, combined have annual sales of roughly $9 million, Sellers said. HopCat East Lansing is “knocking it out of the park” and doing even better than the Grand Rapids location, he added.
Based on the strong returns from the brewpubs, BarFly decided to reinvest in growth in new markets, Sellers said. Each location will have its own character, but the HopCat concept hinges on offering clientele an abundant selection of craft beer, Sellers said.
“I never expected (the businesses) to take off like this. I didn’t know anything about the restaurant business when I started,” he said. “The only thing I did right was realize what I don’t know and hired people to do that.”
The expansion will also allow BarFly to provide advancement opportunities for the company’s existing employees, Sellers said.
“I started HopCat as something sort of just for fun and when that started doing well, I opened a second bar (Stella’s Lounge) and that’s doing well, too, in terms of return on investment,” he said. “So then I bought McFadden’s, which I got at a really low price, and now GRBC is making money, although not as much as HopCat.”
In addition to the current round of fundraising, Sellers said he was also able to pay down some debt on other recent projects with the sale of property at 740 Michigan Street in Grand Rapids to 616 Development LLC last November. At the time, Sellers told MiBiz he had wanted to put a project on the Michigan Street corridor property, but the timing didn’t work out.
“I’m not really in the real estate business, I’m in the restaurant business,” he said in November. “I wasn’t going to do anything there so I thought, ‘Why hold on to it anymore?’”