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Project Feasibility Analysis

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Project Premise – The establishment of a full service food and beverage dining house near the terminus of San Pablo Avenue, fronting the 1.5 acre Frank Ogawa City Hall Plaza, an open space and terraced amphitheater at the revitalized core of downtown Oakland, California.

Site Abstract –

• Current Status of Project: Shell under construction with interior architectural plans complete.

• Projected Date of Business Opening: Spring, 2001.

• Total Interior Space: Per existing plans, 2,636 square feet, plus a lower basement level of lesser square footage, which includes storage, office and prep kitchen.

• Total First Floor Non-Dining Area: Per existing plans, 1,469 square feet, including kitchen and restrooms.

• Total First Floor Dining Area: Per existing plans, 1,115 square feet.

• Total Interior Capacity: Per existing plans, 56 patrons.

Location Features – The site is situated literally at the geographic core of the Greater Bay Area, in an active downtown financial district.  Overlooking an expansive public plaza, with southerly and easterly exposures, the location provides for a high level of aesthetic appeal.

It can be assumed that the vast majority of patrons would be drawn from the major office buildings in and around the plaza.  Rather than being concealed at the base of a corridor of buildings, the site is in clear view of adjacent high-rises.  Thousands of office workers will literally look directly across, and down, to the site throughout their workday.

Design – The host building is of vintage design, unique and appealing.  Completely restored with the major portion of the original exterior intact, the structure stands out from office buildings in the area.  Inside, rather than the simple vanilla shell typical of office building restaurants, the space’s interior benefits from an attractive structural design.  High ceilings and ground floor reinforcements (crossed I-beams) have been incorporated into the space for dramatic effect.

Clear lines of sight and an expansive window line allow sunlight to infuse the space, providing both practical and aesthetic appeal.  Besides the obvious draw of an open feel and views to an attractive, public space, exposure to the sun much of the day will reduce reliance on electric light and heating.  In warmer months it is expected that two, or all three, of the premises’ double doors could be opened for cross ventilation, largely eliminating the need for air conditioning

Of a total area of 2,636 feet, current plans now spec 1,155 of that space for dining.  This is perhaps the most substantial negative of the profitability equation and will be addressed below.

Recommendation – Further Optimize Basement and Demonstration Kitchen – Use of the lower level could perhaps be better optimized beyond current plan.  Besides storage, office area and current allocation of prep station, additional prep capacity may be added to accommodate higher volumes of business.  Emphasis should be placed on operating the upper level demonstration kitchen to the cleanest, highest level of efficiency possible.

The activity and productivity of the demonstration kitchen will set the tone for the entire restaurant.  Ideally, qualified personnel below would do the vast majority of prep, enabling line personnel to concentrate on the final firing of food, showmanship and professional service to wait staff.

If practical, pivotal upper and lower level food personnel may be equipped with radio headsets for expeditious communication.  Naturally, the dumbwaiter is integral to the food delivery process.

If exterior food service is established (see below), and business volume warrants, the use of 2-3 food runners might also be practical to eliminate congestion and confusion at the line, a relatively confined area.

Recommendation – Expand Bar Area – For added capacity, the bar structure could be lengthened from current beverage station to parallel the entire span of contiguous wall.

Contingent upon code compliance, a traditional linear configuration may allow for a narrower lane between bar and wall-mounted reach-in refrigerators.   This may also open and add floor space for use as lounge and dining area.

Additional bar service, possibly up to 15 stools, would not only provide a waiting area and seating for parties of one during lunch, but also greatly enhance the ambient appeal of the operation as a cocktail hour and evening establishment.   Not to be ignored is the potential for higher-profit revenue from responsible beverage sales, while building image as a social and business meeting place.  It is the conclusion of this report that to accomplish goals of enhanced atmosphere and capacity, the bar area must be expanded.

Recommendation – Create Exterior Service Bar – Contingent upon structural code compliance and implementation of exterior plan, the overall operation of the entire establishment would benefit from the creation of a service portal at the east end of the bar abutting the window line.  A service bar opening to the exterior would allow for more efficient, non-disruptive service to outside staff.  Also worth consideration is the installation of espresso equipment at or near this opening to allow for coffee bar operation throughout the day.

The operation of a clean, simple and high-profit coffee business may prove most important in the morning hours, when the facility might otherwise not be in operation.

Recommendation – Leverage Exterior and Expand Capacity – The greatest asset attached to the project is a location fronting a truly dramatic public space.  This functional and esthetic feature offers a highly viable venue for exterior dining and entertainment.   Contingent upon obtaining governmental permits and variances, additional public seating may be configured surrounding the perimeter of premises. 

The area fronting the easterly most window line, more than 60 feet corner-to-corner and spanning two entries, could be demised to a linear boundary up to 25 feet from the building.  On the other side, at the southerly most window line, more than 40 feet corner to corner, an area could be demised out to approximately 14 feet from building perimeter.

Under this plan the combined exterior area would comprise approximately 2,000 square feet.  This added space could conceivably accommodate up to 100 persons.  Thus, the total service capacity of interior and exterior areas could approximate 150 patrons.

It is estimated the exterior operations, if not sheltered, could be effective approximately 75%, about nine months, of the year.  If the demised exterior seating had benefit of canopy enclosure and energy efficient heaters, operations could take place each day of the year, except in case of severe weather.

Optimally, tables and chairs would be fixed and of an essentially impervious stone or steel material.  Fixed furnishings would not only alleviate the logistical concerns of labor and storage, but also enable a rapid deployment capacity.  That is: If weather and business volume permits and service staff is on hand, the exterior area, or a portion thereof, could be outfitted for business in short order.

The conclusion of this report is that added capacity is requisite to the project turning a profit.  Given the limitations of interior seating, the ability to serve patrons outside is an imperative.  Not only food, but also the ambient enhancement and potentially high profit center of cocktail service should be fully exploited.

The added draw of entertainment is obvious to this formula.

Recommendation – Entertainment – Quality, low volume music resonating across the urban plaza in the late afternoon could prove to be the most valuable of promotional measures.  Oakland boasts a tradition rich in music, especially jazz, and an abundance of available performers. The exterior venue is a natural for showcasing local talent and benefiting not only customers, but also the passing public. 

An option worth considering is the practical and inexpensive staffing of a talented soloist for limited hours on Monday, Tuesday and Wednesday.  On Thursday, Friday and possibly Saturday, a qualified jazz trio, as example, would likely prove a substantial draw from cocktail hour into the evening.  (It should be noted, however, that successful operation on Saturday evenings would likely depend heavily upon a fair level of promotion.)

Competition – Within 0.2 miles of the subject site, mid to upscale dining options are limited, and only two Italian-style restaurants are currently in operation in the immediate vicinity: Pasta Cuisine, 0.1 miles at 500 12th Street, suite #500, and Da Vinci's Pasta & Pizza, 0.2 miles at 1814 Franklin Street.  Da Vinci’s is casual dining not meeting comparable criteria, and Pasta Cuisine does not posses a liquor license, nor does the location have the appeal of the subject site.

Perhaps the most comparable operation within 0.2 miles is Max’s Diner. At 0.1 miles from the subject location, with a full bar, Max’s is casual with a level of interior improvements mid to upscale in value.  During weekday lunch hours, 11:30 a.m. to 1:30 p.m., the operation runs at full capacity, with a 15 to 30 minute wait being the norm.

According to interviewed staff and management, during lunch Max’s generates an average of 2.5 turns.  That is: the dining room seats to full capacity approximately 2.5 times.  The restaurant additionally does a fair level of business during cocktail hour, with lesser dinner activity during the limited hours of 4:00 to 7:00 p.m.   For both lunch and dinner, menu prices run about $7.00 to $15.00 per entrée.

(For a complete listing of food operations in the immediate vicinity, see Exhibit E.)

Comparison to Max’s – It is expected that the subject restaurant will exceed the quality level of Max’s cuisine at comparable prices during lunch.  The subject restaurant, however, will benefit from a far more open and attractive location.  It can be assumed that dinner hours would be more extensive at a higher per-patron check average.  Cocktail operations could be well exploited given the appeal of exterior environment.

Recommended Hours of Operation –

Monday through Friday –

Morning – 7:00 to 11:00, service limited to coffee bar and simple pastries.  (Note: Reconfiguration of bar to adjunct exterior at easterly perimeter of premises may allow for incorporation of a take-way service window if the premises were otherwise closed.)

Lunch – 11:30 to 3:00, full lunch service with operation of bar as additional service area.

Cocktail Hour – 4:30 to 7:30 to include complimentary light appetizers.

Dinner – 5:00 to 8:00, with later hours on an as needed basis.

Saturday – 6:00 p.m. to 11:00 p.m., depending upon level of promotion and resulting business levels.

Special Events – To include private parties, corporate functions and operation during public events on the plaza.

Recommended Menu Pricing – Suggest a price point conducive with predominant demographics of workers in market vicinity.  Standard lunch items would range in price from about $6.95 to $12.95; and dinner would range from about $8.95 to $15.95.  A limited presentation of higher-price seasonal feature items could be included on both lunch and dinner menus.

Recommended Staffing Levels – At 120-150 seats, during max capacity lunch shift, 8-10 servers, 4-5 bus staff, 1-2 bartender/servers, comparative number of kitchen staff.

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Market Abstract – Of the more than 80,000 people employed in the immediate area, many occupy the 3-million square foot City Center complex, of which Frank Ogawa Plaza is a part.  This includes the headquarters of Clorox, Merrill Lynch, Deloitte & Touche, Nextel Communications, APL, Ltd. (American President Lines) and numerous financial institutions.   Also nearby is the Oakland Convention Center, Oakland City Hall, the California State Building, Marriott Hotel, the U.S. Federal Building, 140 units of market-rate housing and varying city offices employing more than 6,000 workers.

Average Daily Traffic Counts – At 14^th Street and Broadway: 40,000 pedestrians; 30,000 arrive and depart public transit; 33,040 vehicles.

Access – Six freeway exits can access the site from I-880, I-980, and I-580.   Also nearby are stops and stations for BART, AC Transit, Amtrak, and the San Francisco Ferry.

Developments in Market Vicinity:

• Rotunda Building, the $42 million redevelopment of a historic landmark comprising more than 300,000 square feet of retail and office space.

• City Administration Center with 1,000 employees and 40,000 square feet devoted to retail.

• University of California Office of the President Building, 225,000 square feet of space and 900 employees.

• Elihu Harris State Building, 750,000 square feet with 2,000 employees.

• City Administration Complex housing more than 900 employees

• Old Town Square, 100 units of market-rate housing.

• Key Stone Hotel at 12th and Broadway

• The Tribune Building, in redevelopment to headquarter the Oakland Tribune.

Example Area Retail and Restaurants:

• Take Out Food – Noah’s Bagels, Starbucks, Jamba Juice, Ratto’s Deli, La Salsa

• Retail – Sears, Warriors on Broadway, Hit or Miss, Payless Shoe Source, Smart and Final, Rite Aid, Walgreen’s, Radio Shack, Kinko’s, Waldenbooks

• Restaurants – Café Center, Le Cheval, Le Cheneville, Max’s Diner, Battambang, Café 817, Pacific Coast Brewing Company.

• Other – Paramount Theater, U.S. Ice Center, Club One fitness center.

• Additional – See Exhibit E.

Conclusion – It is the collective opinion of the contributing consultants that the project would likely obtain profitability, and prove a public asset to the immediate market and downtown community, if the following conditions are met:

1)      Landlord or other party bears the costs of development (see Exhibits A, B & C –Estimated Development Costs).

2)      Patron capacity is maximized through implementation of an exterior seating plan.

3)      The bar is configured to maximize capacity and create optimal ambient conditions for evening and nighttime business.

4)      During evening hours, entertainment, in the form of moderate-volume quality music, is included in the format no less than three days per week.

5)       The business runs at a high level of operational efficiency.

6)       Food and beverage operations produce quality cuisine and deliver a good value to the consumer.

Alternative Concept – A reduction of overhead and a correlating increase in profit potential could be achieved by downscaling to a more casual format with primarily counter and bar service.  The expense of development, décor, furnishings, equipment, food and, most importantly, ongoing personnel costs would dramatically decrease with the establishment of, for instance, a high-quality, innovative delicatessen-style restaurant. 

Because a deli-style operation typically generates income primarily during lunch hours, the incorporation of a morning coffee house format would remain a recommendation under this plan.  Additionally, the inclusion of evening cocktail service, augmented by non-labor intensive menu offerings, remains an important consideration.

To obtain substantive profitability, it is estimated that this plan, too, would require an offset of development costs (see Exhibit C – Estimated Development Costs).

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