In the Know: Overtures to take over family-run SW Florida institution rejected; and 'scariest, saddest day of my entire life'
Phil Fernandez
Real estate appraiser and broker Matt Simmons really put it succinctly to me the other day in talking about "how much is floating out there to be invested.
"There is far more money chasing deals than deals to be chased," said Simmons, managing partner at Maxwell, Hendry & Simmons based in Fort Myers.
Private equity firms and other big-time investors are scouring the Southwest Florida landscape for options that they might have not made in the past, and in many cases, showing up unannounced at people's doors or electronically via e-mail or social media. Heck, maybe a cold call.
Just to name a tiny few, there's the $44.3 million paid for the Tropicana mobile home park in south Lee County, the $27 million for the old Neptune Inn on Fort Myers Beach and a whopper: $362 million for the Naples Beach Hotel property.
So with restaurants also in the crosshairs, it would make sense for wheelers and dealers to covet a rapidly expanding locally based outfit, which is just shy of 20 addresses.
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"We get approached," said CEO Grant Phelan, who still has three of his six original employees from the first Pinchers that launched in Bonita Springs a quarter of a century ago. "Phelan Holdings and Phelan Family Brands is just me, my mom and my dad. That's it. We'll always keep it that way. I've given a commitment to all my team members that I'll never sell. Never. I'll never sell."
So how do you really feel?
"We have some of the greatest, most committed team members out there, and (for) a lot of them, it's the only thing they know. This is all that I know. I would never do that to somebody. They invest their life into it. It's not going to go to somebody else," Phelan said. "We are not a chain. We're a local family that just happens to have multiple locations, but we are the furthest thing from a chain that you can find."
He has a point about what selling out could mean for workers. In research this month, the NBC News Investigative Unit found that working for companies owned by these well-heeled private-equity firms often means lower wages as compared to other entities.
Phelan's too proud of his largely seafood-oriented vessel and his crew of 1,400 to let it all get hooked away. It took a lot for the Pine Ridge Middle, Barron Collier High and Cornell University graduate and his parents, who had run Texas restaurants until last century's oil bust, to land this baby and grow it right.
The 1997 origin, for one, as his father, Tony, fought "advanced prostate cancer" and had been given two months to two years to live. The ambitious head of the household had something else on his mind, too: A new enterprise.
"I said, 'Let me think about this. We don't have any money. Mom's a school teacher. I'm in college. You're about to die, and don't forget, we don't have any money.' And he said, 'Well, I already signed the lease on this little 1,500-square foot spot'," Phelan recalled. "My uncle sent my dad $7,000 to use for cancer treatment because he didn't have any insurance. He took the money and put it into the restaurant. Crazy. And that's how we started."
Caught SWFL at the right time
Dad recovered, and the operation blossomed.
"We've just been very fortunate and lucky and caught Naples and Fort Myers at the right time, and we worked with some great people from all aspects of the community," Phelan said. "We feel extremely blessed. To say that, we ever thought we would be where we are today, there is no way to think that. We have the best team, best group of people we're fortunate to work with."
Not that it's been smooth sailing all the way but nothing tops March 2020.
"It was the scariest, saddest day of my entire life when I had to write a furlough letter to 1,300 people. It was so sad. Some of these people I've worked with for 24 years," Phelan said. "You've worked your whole life for something and it all stops and without your control, right? It's not like you have insurance for it. Hurricane comes, you're like, 'Oh well, this stinks' but I have some protection out there."
The pandemic's timing made it all the more startling for the region and its industries.
"That's your busiest time of year," Phelan said. "You have debt on all this stuff. You have bank notes. You have electric bills. You have all these things, and it just completely stops the cash flow. That's what restaurants are. They're just one big cash flow machine. It's in one door and out the other. That's it. There's really no assets in restaurants. To have to be shut down, that was very scary."
And then the quickest and perhaps greatest economic recovery in the nation's history commenced as the months of 2021 moved on, and last year's debacle was in the rear-view mirror.
"Fortunately, we were able to get back open, and everybody came back, and then everybody real-l-l-l-ly came back. We got crazy busy," Phelan said of a record summer for his company, which like many, struggled to find staff to keep up. "Labor's challenging. Finding great team members, in our industry, it's always been a challenge. I thank the Lord every day that we have the size that we do, the ability to transfer if we have to."
A favorite talking point in a few usual circles has largely lower wage laborers sitting the sidelines due to stimulus money and similar programs, and they're somehow to blame for the worker shortage. But those who follow this the closest, the ones who actually do the research or manage employment programs, say that it's not. We've spelled out the factors in detail in the past.
As we reported this past week, local businesses, many of them bypassed last year, received critical COVID-19 relief from the Restaurant Revitalization Fund that was approved in March. But who got hefty government handouts, courtesy of taxpayers like you? At least $5 billion from a bailout money program initiated by the Trump administration went to companies backed by large and well-capitalized private-equity firms, according to a study from Americans for Financial Reform.
And last year, the Federal Reserve Board launched an unprecedented $750 billion program to prop up the corporate bond market, where many of these firms raise money for their buyouts.
If you thought, as a consumer, that the summer was a struggle with lines, wait times and other inconveniences, just wait until we get joined by our fellow snowbirds.
"I hope people bring patience, understanding. Because the folks that are serving are busting their rear ends. They're doing everything they possibly can to provide great service for folks. And now there's this onslaught of people that we have had in the past but even more than we've ever had before. It's going to be challenging. It's going to be a lot of hard work," Phelan said. "We have a great culture I feel."
But the choppy waters don't subside there.
"Big time supply chain issues. Huge. One of the biggest challenges that we have right now," Phelan said. "That goes from everything to this glass to this bottled water to the chips in that phone to the chips that are in these computers. It's a real nightmare. (You) run out of silly things. It's challenging."
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A new concept 'that's different for us'
He does have an upper hand in one major regard "that is as local as it gets.
"The fresh seafood is still coming in every day, just like it always has. Right out in the Gulf," Phelan said. "It's all Pine Island. It's still coming in from Pine Island."
Phelan's also moving forward with expansion.
"We have 19 restaurants. We have two under construction, and a third that is in the initial drawing stages," he said, the latter being a "Deep Lagoon in Bimini Basin in Cape Coral that's a couple of years out" and similar to one he's slated to open in Casey Key in May.
But by New Year's Day in Naples, Phelan's hoping to unveil a new concept "that's different for us" at 10395 Tamiami Trail N. It's the former home of Randy’s Fishmarket Restaurant & Tap Room and then later his Deep Lagoon Seafood, which subsequently moved to the Pelican Bay area.
"That's going to be called Two Filets, seafood and steak. We've always had seafood. Now we're going to add steak to it. And so that restaurant used to have just a seafood market in it, and now it's going to have steak and seafood," he said. "This is the logo. A cleaver with a hook in it. That's basically a pun. Two filets. A fish filet and a steak filet. I'm excited about that one. We're going to have like, different cuts of meat."
Phelan and his colleagues in the business that are pushing forward like this can expect to keep hearing from potential buyers looking for their own prime pieces, according to publications and groups that closely follow his industry and investors.
QSR and Pitchbook say a boom is on the way, and similar to what Simmons told me, "billions and billions" just waiting to be invested.
“Where there’s disruption, there’s always opportunity,” said Andrew Smith, managing director of private-equity firm Savory Fund. “They called them the ‘Roaring ’20s’ after the Spanish Flu. This is going to be the Roaring ’20s for restaurants, absolutely.”
Based at the Naples Daily News, Columnist Phil Fernandez (pfernandez@gannett.com) writes In the Know as part of the USA TODAY NETWORK. Support Democracy and subscribe to a newspaper.