Dave Magrogan

This is how Dave Magrogan plans to grow his restaurant empire

By Marjorie Preston / Photography by Mitro Hood and courtesy of Dave Magrogan Group

Dave Magrogan is a dissatisfied man.

After more than a dozen years in hospitality, the founder and CEO of the Dave Magrogan Group owns 16 restaurants under five brands in two states, with revenues that could top $50 million this year. His near-term plan includes an inventory of stores that will fan out across Pennsylvania and New Jersey, head south along I-95 to Florida, crowd the DC Beltway area, and then radiate westward. In the next few years, Magrogran expects to position his pet brand, Harvest Seasonal Grill & Wine Bar, in up to 50 upscale shopping centers (or “lifestyle centers,” in the parlance) across the U.S.

But he feels he should have achieved more.

“By the time I hit 40, I thought I’d have 40 [restaurants] and a $20 million payday from going public or selling to an equity group,” says the self-described serial entrepreneur, now 43. “I guess I’m hard on myself. But I don’t have an expiration date, and I’m never going to stop working.” Despite his impatience, Magrogran is confident that his version of success — “private-jet wealth” — is on order, and will be served up soon.

In fact, this guy is confident, period, about everything. “If you believe in your dreams and your vision,” he says, “and get up every time you’re knocked down, you’ll reach your goal.”

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Dreams, visions and passion figure prominently in any conversation with Magrogan, at least when it comes to business. This is the man who wrote the 2009 self-help guide, Do It Rhino Style: Magrogan’s Method to Rapid Goal Achievement, which basically separates humanity into two categories: hard-charging rhinos and cud-chewing cows. His pitch is reminiscent of Napoleon Hill, Norman Vincent Peale, The Secret and even the Old Testament: You are what you think. As you sow, you will reap. If you believe, you will achieve.

Or, as Rhino Style puts it: “Positive, big ideas will result in a big, fun, positive life! Nothing can stop you once you determine what you want! This is why you need to think BIG! RHINO BIG!”

Hey, it worked for Magrogan.

He grew up poor, with a single mom who struggled to pay the rent. The family moved eight times before Magrogan reached high school, several times due to eviction. Despite that, “I went through life thinking I was the smartest, best-looking kid in America,” he says. Magrogan believed it because his mother told him so. She also set a stellar example, earning her RN while working and raising three children.

“She would say, ‘You don’t want to struggle like this,’” Magrogan recalls. “She would say, ‘Remember, you can be anything you want.’”

At first, what he wanted to be was a chiropractor.

HOW TO SUCCEED IN BUSINESS

In 1996, chiropractic was still a novelty, dismissed by most insurers, who declined to cover the holistic treatments. Magrogan saw it as the wave of the future. He bankrolled his first business, Discover Chiropractic, with credit cards, a loan from his Aunt Mary Anne, and $3,000 from the sale of his car. Then he bet on a risky strategy to grow the practice.

An early mentor, chiropractor Joe D’Onofrio, believed in a reciprocal universe that rewards service and responds to positive expectations. “He had a very simple life philosophy: Take care of people,” says Magrogan. He took the philosophy as his own, and eliminated fee schedules for his patients. In fact, he informed them, they could pay whatever they wanted, as long as they attended an introductory seminar, came for regular adjustments, and referred their friends.

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“It was pay what you can afford, because I had to keep my doors open,” says Magrogan.

The counterintuitive approach worked, and soon 200 people a day were showing up to get their spines aligned and their backs cracked. At the peak of his practice, Magrogan says, he personally saw up to 825 patients a week. Because insurance coverage was a rarity, most of them paid cash. Magrogan opened a second office, launched his own cable television show, and developed an enviable real estate portfolio. On the street, he was “Doctor Dave,” TV star. The money just kept rolling in. Then the unthinkable happened.

Call it the seven-year itch.

In 2003, “I was sitting in my office when I realized I’d started to daydream,” says Magrogan. “I loved chiropractic, but I was bored. And I knew I was never going to ring a bell on Wall Street because I had 100 chiropractic offices.”

There were compelling reasons to keep going. But Magrogan wasn’t even tempted. “If I’d put it on autopilot, I’d probably have a lot more money today and be working 25 hours a week,” he says. “But I’ve always been a goal-setter. If you climb Kilimanjaro, you don’t stay there.”

It was time to find another mountain.

WHY RESTAURANTS?

According to the National Restaurant Association, 60 percent of new restaurants fail within the first three years. Banks are notoriously skittish about lending to startup restaurateurs. But after medicine, food and beverage was the business Magrogan knew best. He’d toiled in one restaurant after another — as a dishwasher, server, bartender, shift manager — from the age of 12 until he graduated chiropractic school. Those years of experience, in both mom-and-pops and chain restaurants, gave him an up-close look at the two business models.

“The chain world offers consistency, both for the guest and for the team that’s working there,” he says.

“But so many chains are missing the heartbeat — the passion for great food and beverage, the passion for great service. I wanted to create something that had consistency, but also had passion and heart.”

Inspired by his Celtic heritage, he decided to open an Irish pub he dubbed Kildare’s. Though he looked at locations in the city, he realized, “All the money was in the wealthy ’burbs, out in Chester County. At that point, too, Philadelphia was a city on the decline. I didn’t want to deal with city taxes and all the other issues.”

The first Kildare’s Irish Pub opened in downtown West Chester in 2003. Again, Magrogan’s timing was impeccable: “Irish was hot, U2 was hot. It fit. The business just took off.”

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LUCK OF THE IRISH

Kildare’s was the cornerstone of Magrogan’s second empire. “At that stage, my objective was to put a pub in every shopping center that had a Maggiano’s or a P.F. Chang’s. We started signing leases right and left. It seemed like it would work.”

And it did — for a couple of years. By 2007, there were five Kildare’s, with a total annual gross of more than $21 million. Magrogan broadcast a plan to open 25 pubs by 2010. But there were chinks in the rhino hide. Among the first to recognize them was dollar-store magnate Bernie Spain, one of Magrogan’s first big investors.

“I looked at all Dave’s paperwork and thought, this is insane — there was no way he could make money,” says Spain. “He had too much overhead and way too many executive-level people.” And he was growing too fast. Even so, Spain liked Magrogran’s energy, enthusiasm and workhorse mentality. And he could afford to risk a little money: Spain and his brother Murray had recently sold their Dollar Express chain to rival Dollar Tree for $307 million.

“I invested,” he says with amusement, “thinking I didn’t have a prayer.”

Though Kildare’s was popular, two big challenges faced the brand, Magrogan realized.

One: “A consumer in the suburbs who has to drive home will only have two beers. So you’re only going to make a couple bucks there.”

Two: “People don’t like eating Irish food. They order burgers, and that makes the check average too low.”

The best-performing stores, he realized, were located on college campuses, where patrons could drink until they were pie-eyed and stumble home; the most unsuccessful were in shopping centers where customers had to drive in and out.

STIFFED

Magrogan hit another switchback on the road to success: the Great Recession. “When the economy crumbled in 2007 and 2008, we were lucky we didn’t go bankrupt,” he says. “Our company was too fat and had too much debt.” Revenues shrunk from $25 million to $18 million over 10 months.

He battened down the hatches, closed a few units, and went a year without a paycheck. He adjusted his growth strategy, but refused to completely curtail it.

“Satisfying debt was not going to be achieved by scaling down,” he says. “We had to open more units. We consulted on other restaurants, and the management fees allowed us to support our debt load. We were cautious while still being optimistic.”

The net result: “It was the best thing to go through. It made me more debt-averse. It made us run a leaner, more efficient company that was aggressive about watching labor and food and beverage costs on a daily basis, rather than a weekly or monthly basis. And because we chose to grow out of possible failure, we got to scoop up some pretty great deals” — on other restaurants that went belly-up during the crunch.

REAPING THE HARVEST

With the hit-and-miss results from Kildare’s, Magrogan started researching new restaurant brands, “something that fit us and fit what the country was looking for.”

His portfolio now includes a seafood restaurant, Doc’s Oyster House; there are now five stores, but he never saw the brand going national, due to regional tastes and the cost of goods. He also developed an Italian brand, Barra Rossa. While it’s doing well, he says, “It’s red-sauce Italian. There’s red-sauce Italian everywhere.” Next was Red Star Craft House, with 100-plus brews and a menu that ranges from tuna tartare to chicken and waffles. Though Red Star has growth potential, he says, “Our real focus is Harvest.”

The Harvest brand debuted in 2010 in Glen Mills. Magrogan has since added locations in Philadelphia, North Wales, Moorestown, New Jersey and Susquehanna. A Radnor location is opening in May.

Harvest reflects the CEO’s longstanding commitment to healthy living, with a farm-to-table menu that changes with the seasons.

From the boss’s point of view, the rationale is simple: “I see a landscape of tired casual-dining concepts that are achieving sales volume through discounting — promotional two-for-ones, unlimited apps, buy dinner tonight and take it home for tomorrow night. They’re doing anything to drive top-line sales” — anything, he says, but serve up better, healthier, locally sourced food.

“Consumers have evolved and are buying healthier foods for their own homes. Meanwhile, restaurants are still trying to figure out how cheaply they can get chicken to put on a plate so they can make money. But people will pay for a high-quality experience. People will pay for organic salmon, organic chicken and farm-raised products if it’s legitimate.”

The flagship Harvest anchors Glen Eagle Square, which also includes a Whole Foods, an Ann Taylor apparel store, a Starbucks and a Gap store. The location explains the demographic. “If you shop at Whole Foods and Trader Joe’s,” says Magrogan, “Harvest is your restaurant brand.”

On a recent weekday morning, the parking lot outside Harvest was almost empty. By 11:45 a.m., the lunch crowd had begun to gather. By noon, the joint was jumping, populated with well-dressed young mothers, professionals and older adults.

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THE WINNING RECIPE

This is the brand Magrogan is taking nationwide.

“We’re focusing on Maryland, Virginia and Florida, and also looking at the Northeast. We have a store under construction in Del Ray Beach in Florida, and at the same time we’re looking to fill in our Philadelphia, Pennsylvania, New Jersey demographic. Our first store in New Jersey in Moorestown is doing very well, and we’re also looking in Princeton and Northern Jersey. We have a store opening in Newtown, Bucks County at the end of the year, and we’re also looking at Lancaster and Pittsburgh.

“We really feel if we go up and down the I-95 corridor and west to Ohio, we can grow 40 to 50 Harvests pretty easily.”

Spain approves. “The way to succeed in the restaurant business is to grow big enough to sell to a larger chain or have an IPO of your own,” he says.

Recently, Radnor-based private equity firm Larsen MacColl Partners stepped in with a promise of big capital, enough to open 10 more Harvest restaurants. “We’re really excited to partner with Dave on some capital to stretch that brand’s legs,” says managing partner Jeff Larsen. “We work with lots of small companies, and to find a leader that has the total package is rare. Dave understands the deep operational fundamentals of a restaurant. He’s a brilliant brand guy and concept creator. And if you talk to his team, he’s obviously a good manager. We think he’s in a position to do something spectacular.”

Magrogan’s best friend, Philly rock radio legend John DeBella, agrees. “It really comes down to one thing: Dave is the singlehandedly most positive person I know. I’ve never seen a guy relish failure the way he does — he doesn’t beat himself up, he learns and moves on. When I’m down, I’ll call Dave, and in 15 or 20 minutes he’ll completely turn me around. He’s so much cheaper than my therapist.”

“There are two kinds of people: the worker bees who come in, do their job, and go home, and the killer bees who want more, are gonna do more and gonna get more,” he adds. “Call them alphas. Call them rhinos. They’re the ones who are driving the bus.”

Marjorie Preston is a freelance writer based in Media, PA.

THE MBA OF FAILURE

Dave Magrogan has been uncommonly lucky in business — twice

Following a highly successful chiropractic practice, Magrogan launched a restaurant empire that was even more successful. Today, the Dave Magrogan Group is a multimillion-dollar, full-service hospitality management firm with 16 restaurants under five brands, and more in the pipeline. The company has an ambitious plan to go national, expanding its premier brand, Harvest Seasonal Grill & Wine Bar, across the U.S.

But Magrogan is the first to admit he hasn’t always bet on the right horse. In fact, he says, he earned “an MBA in failure” when he grew his first restaurant brand too fast and too far.

The first Kildare’s Irish Pub was a hit from the first pint of Guinness, generating $3 million a year in sales in a 4,500-square-foot space. “In my crazy mind, I thought If I opened one twice or three times as big, I’d make that much more money,” says Magrogan. “So we built this 11,000-square-foot beast in King of Prussia, and budgeted it to do $7 million a year.”

Hardly. The King of Prussia Kildare’s did $4 million its first year, and spiraled downward each year after that. In 2010, Magrogran waved the white flag. “The year we closed, the place did $2.6 million in sales,” he says, with a shake of the head. “That’s a lot, but we still couldn’t make money. And I pay off some of that debt to this day.”

He had a similar problem at his first Harvest store in Glen Mills. “We were doing well — about $50,000, $60,000 a week, which is a $3 million restaurant. But we had set a target of $4 million, and we weren’t getting there.”

According to Magrogan, then-general manager David Steiger said the restaurant had maxed out. It was the wrong thing to say to the “Rhino Style” guy. Magrogan says he told Steiger, “You just set the barrier. You set the wall. If you believe it’s a $60,000 restaurant, then it is, and you’re the wrong guy for this job.”

Today, he laughs at the memory. “Then all of a sudden, we were doing $70,000 a week, then 80, 90, 100 … What happened was that the business was always busy Friday and Saturday. Then Friday got so booked up, Thursday started getting booked up. Then Thursday was so packed, Wednesday started getting booked up too.

“It was about belief,” he says. Steiger “opened up to the possibility, internally grew, and internally removed the obstacles that were getting in his way.”

Now Harvest’s director of operations, Steiger says staffing up and replacing a chef also contributed to the boost. But his chief takeaway is in line with his boss’s believe-to-achieve philosophy: “You’ve got to break through barriers. When things aren’t going right, set a goal, keep the pace, and keep the pressure on until you get there. Once Dave takes the risk, he’ll push and push until it works.”

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