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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowWelcome back to IBJ’s video feature “Inside Dish: The Business of Running Restaurants.”
Our subject this week is Augustino’s Italian Restaurant, the south-side eatery that earned a second lease on life in 2006 when new operators bought the struggling spot and quickly increased sales. The new owners had grand plans to expand, but the shaky economy and slumping receipts have put them in a defensive posture, hoping to simply solidify operations at the current locale.
“The plan for the next 12 months really is just staying par for the course,” said Aaron O’Mara, co-owner and executive chef. “We have kind of maxed our growth in this economy and where this economy is growing. I just want to be safe. I want to make sure that we’re taking care of every guest, maximizing every dollar, and really just keeping Augustino’s healthy.”
The restaurant was founded in 2003 by Gus Mascari Sr., whose family has deep roots in the Italian food business. His great-grandfather founded the grocery J. Bova Conti’s Italian Foods in the late 1920s at 960 S. East St., which is now part of the Eli Lilly and Co. campus. Mascari populated Augustino’s with dozens of black-and-white family photographs, depicting life in Indianapolis’ Italian neighborhoods on the south side.
Although Augustino’s was a labor of love, Mascari didn’t possess the nuts-and-bolts expertise in the restaurant business to sustain the eatery. He also was surprised by the intense demands of running a restaurant.
“It takes all your time and energy,” said Mascari, 57. “I couldn’t get it over the hump to where it was feasibly profitable enough.”
Mascari sold the restaurant to a group headed by O’Mara, the scion of a family of restaurateurs who had spent almost two decades working as a chef in kitchens across the country. He was looking for an opportunity to own a locale, and Indianapolis-based family members alerted him to Mascari’s intention to exit the business.
O’Mara and his wife, Erin, relocated from San Diego to take over Augustino’s in 2006. They partnered with O’Mara’s brother Michael, a pharmaceutical sales rep, to buy the restaurant from Mascari for about $180,000.
Although Augustino’s was ensconced at the far end of a strip mall at 8028 S. Emerson Ave., O’Mara liked its across-the-street proximity to Franciscan St. Francis Health—Indianapolis hospital that now is in the midst of a major expansion. A new 221-bed tower is slated to open in early 2012.
“That was one of the things that sold us very quickly,” O’Mara said. “On a daily basis, I would say that 50 to 60 percent of our lunch business comes directly from that hospital or the office parks associated with that neighborhood.”
In the first year of operation under the new owners, the restaurant began developing catering clients, which helped increase gross sales by an astonishing 50 percent. In turn, the catering acted as advertising for the restaurant, and sales continued to climb in the dining room.
The three owners initially hoped to open several locales, but the economic downturn scuttled those plans. Annual gross sales continued to grow through 2009 to $586,000, but then dipped about 7 percent to $547,000 in 2010.
“The holiday season is what hit us the hardest,” O’Mara said. “We were getting the same clientele, doing the same caterings and the same in-house parties, but they had less money to spend.”
In the last year, catering has slipped from about 35 percent of gross sales to about 20 percent, O’Mara said. Conspicuously cutting back are pharmaceutical sales people, who would cater lunch-and-learn events with local doctors. “That industry changed a lot; they don’t have the money to spend anymore,” O’Mara said.
He also is spooked by volatility in food costs, and how spikes in gas prices seem to scare away customers. He anticipates raising menu prices in the near future, generally in the range of 10 percent to 15 percent. Augustino’s also will introduce new menu items with better profit margins, and O'Mara will retool some existing dishes to reduce sticker shock for regular guests.
The restaurant remains profitable in the range of about 6 percent to 9 percent of sales, O’Mara said, but expansion is off the table for the time being.
“There’s no plan for growth,” O’Mara said. “And until I see stability in the gas market, in the housing market, in the food markets, I’m not comfortable moving in that direction.”
In the video at top, O'Mara discusses the surge in sales after the restaurant changed hands in 2006, and then how the economic downturn has affected the top line and changed his attitude toward expansion.
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