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A tale of two grocers. And restaurants

And the surprising benefits of operating a business with both

Hello, how are you?
asks an employee behind the counter, as regulars walk into Lakeview Storehouse, a communal pantry of sorts that opened in March in Toronto’s Dundas Street West neighbourhood. That’s the kind of personalized service one would expect from an old-fashioned grocery environment; and that’s expressly what the Storehouse is trying to recreate in the heart of a modern, bustling city.

With its wooden shelves made from old coffee crates, chalkboard shelf signs and modular produce baskets stocked, for the most part, with local fruit and vegetables, a lot of thought has gone into this small grocery store.

What makes this old concept new, however, is that it’s owned by the same people who run the restaurant right next door: Lakeview Restaurant, a local institution. Originally called the Lakeview Lunch, the restaurant opened, back in 1932, during the Depression. It still serves classic menu items such as Cornflake Chicken, the Lakeview burger and pulled pork, and it’s open for business around the clock.

With a successful diner, why open a grocery store? Coowner Alex SenGupta says it takes his company “beyond the restaurant [and] into homes” by allowing them to buy many of the popular sauces, dips and specialities served next door in the restaurant. Among the Storehouse’s most popular sauces: baconnaise (bacon-flavoured mayonnaise), coriander walnut pesto and sweet-chili mayo. “When you can enjoy those same elements both at home and dining out, it unifies the experience,” SenGupta says.

Queen’s University marketing professor Ken Wong agrees, noting that the trend of grocery-restaurants is really an extension of ready-to-eat food departments showing up more often in grocery stores. Furthermore, having one successful food business supports the other.

Lakeview Restaurant
Lakeview Restaurant’s owners in Toronto added a grocery shop and found customers like going to both.

“In our case, the neighbourhood likes to see an institution that is growing, not through franchising, but by offering something new. And if they trust you from the restaurant, they trust your other brand,” says SenGupta’s business partner, Fadi Hakim.

Since opening the grocery store, Hakim and SenGupta have found ways to link it with their restaurant. For one, customers ordering take-out from the restaurant can do some shopping next door while they wait. And the two men say that the restaurant leads to sales at the grocery store and vice versa. “We have an automatic barometer. If we have guests in the restaurant who rave about our chili mayo, we can test it out next door at the Storehouse,” SenGupta says.

On top of restaurant menu favourites, customers also find a treasure trove of products sourced from around the world, reflective of SunGupta and Hakim’s diverse cultural backgrounds: from German tube mustard Senf, to Parle-G Indian baby biscuits to Cambridge and Thames Cherry Drops.

Lakeview Dining
In Vancouver, artistan retailer Edible Canada enjoys getting restaurant-style margins

While it’s tough managing both sides of the business, general manager John Vetere, whose resumé includes working at well-known retail/restaurant combo the Hard Rock Cafe, says the trick is to make the two businesses work together seamlessly. “You don’t want them to be two different businesses,” he says. “We’re offering added value to the customer base that we already have.”

While Lakeview is one example of a restaurant entering the grocery market, on the West Coast, gourmet-food specialist Edible Canada has done the opposite. This past July, it opened a restaurant and retail business within one space at the Granville Island Public Market in Vancouver. “People must think I’m crazy,” Edible Canada founder Eric Pateman says, trying to explain why he added a 200-seat bistro restaurant to the food store. But Pateman, a trained chef who also happens to have a business degree, was up for the challenge.

About six years ago he opened up his small food store that now sells some 900 artisan and local foods from 275 different suppliers. When customers began asking how to use specialty items such as Okanagan Valley hot sauce at home, Pateman added the restaurant to let people try the ingredients in prepared dishes. Retail-to-restaurant turned out to be a natural extension. “We use a lot of the retail products in our restaurant cooking,” he says.

Lakeview Products
“We use a lot of the retail products we sell in our dine-in cooking”

In Pateman’s new 1,000-square-foot space, some 600 square feet is devoted to the store itself and the rest to an 86-seat bistro, plus outdoor patio with space for 102 diners. Amid the open-concept space, which features natural reclaimed furniture as well as herb gardens on the patio next to an electric vehicle plug-in station, the restaurant/retail business has three additional revenue streams: a take-out window; a private kitchen that is used for cooking demonstrations and can be rented out; and a cocktail bar.

Pateman says it was a necessity to offer other services to compete with grocery retailers in the area, all of whom have jumped on the gourmet-food-market explosion over the last few years. “The margins on retail are tight and getting tighter,” he says. “Retail is still a profitable entity and does well for us. But it certainly wouldn’t get us to the sales values that I would be looking for. And the cross-promotion opportunities are fantastic.”

Lakeview Grocery Shop
Lakeview’s Alex SenGupta, John Vetere, and Fadi Hakim sell restaurant favourites at their grocery shop next door. Edible Canada (photos at left) found that a restaurant increased foot traffic into its grocery store

Having a restaurant also gives people another reason to drop by the grocery store, says Wong, the marketing professor. “There’s the opportunity if they integrate the restaurant with their grocery operations to use it as a test kitchen where you can demonstrate product use and showcase recipe ideas.” Pateman says the restaurant side has brought more foot traffic into his food shop. Someone will order birch-syrup marinated sablefish in the restaurant, then walk over to the retail side to buy the syrup in a bottle. (Birch syrup is one of the hottest trends in kitchens today because it is less sweet than maple syrup and more like molasses in flavour.)

While Pateman admits it’s easier to go from a restaurant environment into retail, there are issues regardless of which business you’re coming from since they both require different sets of expertise. “Retail is more creative in terms of merchandising and marketing. The restaurant business is more operationally sensitive, and has much more business focus to it.” But, he quickly adds that “coming from both worlds, it works for me.”

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