Owning the building is an increasingly wise move for D.C. restaurants, analysts say


WASHINGTON,DC- JAN.24, 2012: Shannon Boyle at her new shop, Uncle Chips on North Capital Street. ( Photo by Jeffrey MacMillan ) (Jeffrey MacMillan/JEFFREY MACMILLAN FOR WASHINGTON POST)
January 29, 2012

Shannon Boyle spends only a few hours whipping up a batch of her chocolate chip cookies, but it took her more than five years to start her bakery, Uncle Chip’s.

And when she finally unveiled the bright little cafe on North Capitol Street NW in early January, Boyle did so as an owner, not a renter — which some analysts say is an increasingly wise move for D.C. restaurateurs.

“I wanted do this slowly and to do it right,” Boyle said, “Failure rates are so high for restaurants, so I took a lot of time getting the real estate aspect figured out.”

Boyle spent years refining her recipe before starting Uncle Chip’s in 2007 as a mail-order business.

She was soon ready to open a storefront, but she would settle for nothing less than perfection in her lease.

“I walked away from about five leases when I thought people weren’t being fair,” she said.

In the tight D.C. rental market, she couldn’t find a contract that fit. The idea of a pricey K-Street lease petrified her because, while it would attract plenty of passersby, she said she would never be able to afford the rent if there was a slump. Because a shorter lease might come with rent hikes, she also wanted a term of 15 or 20 years — which few landlords could accommodate.

“The real estate in this market is so hot right now,” said Keith Sellars, senior vice president of the Washington D.C. Economic Partnership. “We do hear stories from time to time where people can’t keep up with the rent, so they have to close up shop.”

Boyle rented space in a bakery in Northwest Washington while she continued her search for a permanent location. One otherwise-promising building had no indoor plumbing, she said. One H Street landlord, she said, gave her the runaround for a year, then sold the property — to someone else.

While she was shopping for a spot, Boyle met with dozens of other business owners for advice. “Every business owner told me the biggest regret was not buying the building,” she said.

According to Sellars, buying has been catching on with restaurateurs as property values have risen.

But it’s not an easy feat to pull off.

“If you want a busy location, most of the retail isn’t for sale,” said Bob Miller, a senior vice president with Transwestern. “That said, every independent restaurateur should consider purchasing. The long-term value is undeniable.”

When she decided on the buying route, Boyle approached Mauricio Gaitan, an adviser at the D.C. Small Business Development Center. He helped her write a business plan and navigate the process of getting a Small Business Administration loan. She used much of it to buy and renovate 1514 North Capitol St. NW.

On Jan. 3, Boyle opened her storefront next to a barbershop and a hair salon. What the neighborhood lacks in foot traffic, Boyle makes up for in wholesale and mail-order sales.

Owning the building does have downsides, such as bearing full responsibility for repairs, Sellars said. Buying also costs more at the outset, which means buyers can’t open as many locations at once as renters sometimes can.

Miller says her investment might be a way to take care of not only her business, but herself, in the long run.

“After you are done running your restaurant, you can sell or lease it for far more money,” he said. “Either way, you can fund your retirement that way.”

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