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Sharky’s Has the Right Ingredients for Success

For the health-conscious consumer, menu items such as locally grown organic kale, wild-caught fresh salmon or marinated organic tofu may be enough to attract them to lunch at a fast-casual restaurant. But combine that with ceramic plates, real silverware and prices not much higher than competitors and you have the makings of much broader appeal. That’s a big reason why Sharky’s Woodfired Mexican Grill in Westlake Village is one of the San Fernando Valley’s fastest growing businesses. Coming in at No. 35 on the Business Journal’s list of fastest growing companies, the Mexican food chain reported revenue growth of 38 percent to $29.9 million over the last two years. The chain doesn’t expect that to slow down, given its plans to more than triple the number of locations in the largely franchised chain over the next five years. “We bring a more full-service type experience at a fast-food price,” said Steve Paperno, chief executive and founder of Sharky’s. “When the model works, you have business partners who want to grow.” Sharky’s considers itself a “premium fast-casual” restaurant. For example, its counters are made of marble; its ceiling lights are custom-made chandeliers – touches you won’t find at competitors such as Baja Fresh Mexican Grill or La Salsa Fresh Mexican Grill. Meals range from about $7 to $16 and feature plates such as a big shrimp burrito, three quarters of a pound of organic protein such as chicken or wild salmon with grilled veggies and brown rice, and a chipotle barbecue chicken pizza on a tortilla crust. Drink options include craft beer or handmade sangria at some locations. The company just opened its 21st location – a franchise in Chatsworth – and is under construction on its first ground-up location, a store in Northridge that will be corporate owned. Early next year, it plans to open its first outlet outside of California in Portland, Ore. In all, Sharky’s expects to add at least two corporate-owned restaurants and eight franchises each year for the next five years. That would grow the chain to 71 restaurants by 2020. The expansion is logical to franchisee Bob Rasp, a former pool company executive who is opening his fifth franchised location of Sharky’s in Thousand Oaks next year. He opened his first franchise in 2010 in Ventura and operates locations in Camarillo, Newbury Park and Simi Valley. “There’s a little something for everyone but the menu is not so expansive that it becomes overwhelming for the customer,” he said. “My family is proud of the brand. We are happy with our sales growth of our restaurants. We experience growth of about 15 to 30 percent.” Expansion Paperno opened the first Sharky’s in 1992 in Sherman Oaks, across Burbank Boulevard from Los Angeles Valley College in a spot that had struggled to retain an operating business. After two successful years there, Paperno was approached by a landlord in Northridge to open another Sharky’s location. Locations soon followed in Tarzana, Westlake Village, and other areas, and suddenly entrepreneurs began inquiring about franchise opportunities from Paperno. Today, Sharky’s has five corporate-owned stores and 16 franchises. Franchisees must have a minimum net worth of at least $1 million for a single restaurant – twice as much as Baja Fresh or La Salsa – while area developers must have a net worth of at least $2 million. The first location requires a fee of $40,000 and each additional location comes with a fee of about $10,000. Royalty fees are about 5 percent of net sales and marketing fees are about 1.5 percent of net sales. Most franchisees have area development agreements, which require them to build several locations within a given region over a number of years. Jerry Prendergast, principal at Culver City restaurant consultancy Prendergast & Associates, said that the quick expansion could be a risk for the company. “Sharky’s is based on how good the product is,” he said. “Once you start going large with franchises, it’s much harder to control your quality.” Unlike other franchises such as McDonald’s, which requires franchisees to buy ingredients and kitchen equipment directly from the corporation, Sharky’s has a small list of approved vendors from which franchisees can outfit their locations and purchase ingredients. David Goldstein, chief operating officer of Sharky’s, said he’s aware of the risks but his company is selective in choosing franchisees and won’t be backing away from quality control. “Our franchisees have exactly what we perceive as our core values,” he said. “My experience on the franchise side is the minute you lose sight of what got you where you are in the first place you will no longer be able to sustain it.”

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