It all seemed so easy and somehow exciting, running his own Capitol Hill pub at age 22. After working his way from busboy to waiter and then to manager in less than a year, the final step up to owner didn't seem such a large step.
So, in late 1969, with a $20,000 loan he arranged through his mother, 22-year-old Greg Schneiders and a friend bought Chadwick's bar at 319 Pennsylvania Ave. SE from his boss, Mike Kirby, for $62,000.
"I never intended to do it for the rest of my life," Schneiders said in a recent telephone conversation. "But no one in my family had ever run a business. I was enchanted by it."
The enchantment soon wore off, however, as the full responsibilities - and myriad problems - of ownership were felt. "We spent all our cash buying the place," Schneiders said. "We didn't have any left to put into it. We were always playing catch-up. Looking back, the biggest problem was being undercapitalized from the start."
The bar, which Schneiders renamed Whitby's, limped along under the new management for three years and the partners even made a fateful decision to expand into Georgetown in 1973. Finally in 1974, following a string of bounced checks and bad debts to creditors, Schneiders sold both operations and went on unemployment.
The story of Greg Schneiders' failure in the volatile saloon business here would not be at all unusual, except that in the next year he met Jimmy Carter and became a trusted personal aide to the President-elect.
Schneiders was expected to be named Carter's appointments secretary, a key position on the White House staff, until a routine FBI background check raised new questions about his finances. Federal prosecutors then checked whether he was drawing unemployment payments illegally during 1975 when he set up a corporation to advise others on how to succeed in the business in which he had flopped. Schneiders withdrew from consideration for the White House post, but he was cleared of criminal liability Friday and is expected to get another position.
The controversy over his money problems is instructive, however, for what it says about the risks of the seemingly attractive restaurant business in Washington. There are more than 1,000 restaurants in the city and there isn't a section of town that isn't "overpopulated" by them, according to John S. Cockrell, executive vice president of the Restaurant Association of Metropolitan Washington.
Though he did not have specific figures, Cockrell said the failure rate is high - and very high for those operations that cater to the younger bar crowd. For every success story like Clyde's of Georgetown, there are many others like Schneiders who don't make it.
"This is a tough management business. It's not a game anymore," said Tom Reed, a friend of Schneiders who is also in the saloon trade. "Clyde's is the example everyone looks to. They get ridiculed for the polygraph and their strict rules for employees. But they have 188 seats and did $3.6 million in business last year."
Reed spouts statistics like that.He and a partner own Sarsfield's, at 2524 L St. NW, just outside Georgetown, and bars in Towson and Baltimore. He's working now on a new place in Rosslyn and will tell you quickly that its prospects are good because his research tell him such things as: "52,000 cars a day pass in front of my window here."
"The bars definitely are a subculture in this town," Reed said. "They have their regulars. People who use them as a base of operations, a place to make and meet friends.
"But when people see a crowded bar around town, they think, 'this guy's a millionaire.' Well, it's not that easy. I'm over here on my hands and knees with the carpenters getting this place ready."
Mike Kirby, who sold his bar on Capitol Hill to Schneiders and another one-time employee, Jerry Siegel, agrees that the business has become more sophisticated in recent years. He runs three Georgetown bars - Chadwick's, the Third Edition, and Publick House - as well as Gatsby's in Alexandria.
"I think originally Greg (Schneiders) was thinking this was going to be fun and games," Kirby said. "I've had others come back to me after moving from waiter or manager to owner and complain, 'Why didn't you tell me about this or that?"
Schneiders got his start in the business in January, 1969, during his senior year at Georgetown University, when Kirby opened a new Chadwick's at 319 Pennsylvania Ave. SE. By that fall, Schneiders was the bar's manager and looking for a place of his own to run, Siegel recalled.
"Greg called me up in October and said he had given Kirby notice that he'd open his own business. Kirby said, 'Why not buy this place?' So Greg got the loan from his mother and we did. For awhile we did OK. Then the place started to deteriorate physically. And Jenkins Hill opened up the street and things started to get rough."
As business fell off, paychecks to employees started to bounce, and the owners of Whitby's fell behind in paying sales tax to the D.C. government and premiums on the workers' group health insurance.
One former Whitby's employee, William Polak, claims he had to pay his own hospital bill for a 1973 illness because the group health policy had lapsed. Schneiders said Polak wasn't covered because of an oversight when Whitby's changed insurance companies to get a better policy. "We may have gotten behind, but I don't believe the policy ever lapsed," Schneiders said.
Bill Shearen, the agent who wrote the policy, remembers differently. He said that two firms - American Health & Life Insurance Co. of Langley Park and Monumental Life Insurance Co. of Baltimore - cancelled Whitby's policies because the premiums were not paid.
Whitby's financial difficulties carried over into Schneiders' personal life. When time were good, he said, he paid himself up to $300 a week. When business soured, he said, he sometimes took no pay at all.
As a result, his apartment rent checks also began to bounce. He was haled into small claims court three times, by a landlord, an accountant and a supplier.
In early 1973, things brightened a bit when a new partner, Rick Berry, bought into Whitby's for $30,000, Schneiders said. A few months later they bought for $95,000 a second restaurant, at 3239 M St. NW, just across from Clyde's in Georgetown, and called it the Georgetown Beef Co.
Why buy another restaurant if the first is struggling? "That was definitely the pivotal point," Schneiders said. "Whitby's was marginally profitable so we thought it was time to expand."
The idea at the Georgetown Beef Co. was to offer beer and wine and a variety of hamburgers for family shoppers. "So much for theories," Schneiders said."It might have worked at Tyson's Corner. But we just didn't do the business in Georgetown. The restaurants began to drag each other down."
Siegel said he went along with the expansion "reluctantly" at first and then left the city to run a family trucking business in New Jersey. "We had a disagreement," he said. "I thought we should be putting money into Whitby's."
Competition from the new Capitol Hill pub, Jenkins Hill, also hurt Whitby's business, as did what Schneiders termed the "traditional looseness we had with employees."
"You're competing with all the other saloons in town for employees, so the bartenders were allowed to drink, the waiters got free food and were allowed to give away some to friends," he said. "We tried to be much stricter at Georgetown Beef. We had rules. Rick and I stayed there and ran it. We personally trained everyone."
By early 1974, however, the liabilities at Whitby's had grown to $147,500 and the partners sold out for $150,000 to Stuart Long and Michael Lange, the proprietors of the nearby Hawk & Dove and Jenkins Hill. Despite extensive remodeling and recent changes in menus, the successor, Duddington's, is struggling, too, according to local restaurateurs.
Schneiders, Berry and a third partner, lawyer Kenneth Yates, hung on at Georgetown Beef until the fall of 1974, when they sold it to Janie Gore for $115,000.At that time their liabilities were $125,000, so they came up $10,000 short of paying off all their creditors, Schneiders said.
Gore's French cafe, Le Jardin, lasted about six months at the M Street location before the "lost interest in it," he said. It was followed in rapid succession by the Tattooed Lady, a disco, and the current occupant Harper's.
Acquaintances of Schneiders give him credit for not declaring bankruptcy and simply walking away from his debts. "A lot of owners of failing restaurants have done just that," Kirby said. "But he stayed in there and paid off almost all his creditors."
Some, however, are still after their money and have been after Stuart Long, who bought the liabilities of Whitby's, to get it. Last week, for instance, Long said, U.S. marshals cleaned out the cash register at Duddington's to pay a supplier Schneiders still owed.
Schneiders made one more stab at the restaurant business while drawing unemployment benefits in 1975. Again with the help of a loan from his mother, he organized a company to sponsor restaurant management seminars, telling others, for a fee, what he'd learned the hard way. This venture failed after two such conferences and Schneiders eventually went into another risky field - presidential politics.
Schneiders said he told Carter about his financial reverses shortly after the November election. "I went into it in fairly exhaustive detail in a memo and he said the understood," he said. "Then the FBI came up with the unemployment question and I decided to step aside until it was cleared up."
Schneiders insisted throughout the recent controversy that he took no salary from the management company while drawing unemployment and thus did nothing illegal. Earl J. Silbert, the U.S. attorney for the District of Columbia, sent Schneiders' lawyer a letter Friday saying an investigation determined that "no prosecution is warranted."
The would be entrepreneur is now looking forward to another post in the new Carter administration he has no plans to try the restaurant business again anytime soon.
"I've been that route," he said with a chuckle. "Maybe someday when I retire I'll get a little place to run in Marblehead (Mass.). But that'll be many years from now."