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The Gyro Shack expands to franchising

The Gyro Shack started with two converted drive-thru coffee kiosks on Overland Road and State Street (pictured). Photo by Patrick Sweeney.

The Gyro Shack started with two converted drive-thru coffee kiosks on Overland Road and State Street (pictured). Photo by Patrick Sweeney.

Garden City-based The Gyro Shack will open its first franchise store in April in Everett, Wash., eight years after the company’s first Greek sandwich shop opened (and still operates) in a 150-square-foot former drive-thru coffee kiosk on Overland Road.

The three-store chain (soon to be five stores) has franchise agreements in place for 25 Gyro Shack stores in Coeur d’Alene, Everett, Tacoma and the Vancouver, Wash., area – along with replacing the original Overland drive-thru with the company’s first sit-down flagship restaurant in the same center.

Doug Miller and Seth Brink bought the existing two Gyro Shark stores from company founder Gus Zaharioudakis in April 2015 with no intention to dive right into multi-state franchising. Two months later, they fast-tracked toward franchising.

“Once we got on the inside, we saw the simplicity of the operation,” said Miller, the company CEO said. “We got in and realized it’s simple on the back side as well. That coupled with the fact that the Mediterranean sector is not cluttered (with restaurants) and it’s hot, we felt it was time to make it happen now.”

At the same time, The Gyro Shack is bolstering its corporate-owned store presence in the Treasure Valley. A Fairview store in Meridian – the fourth Gyro Shack – is expected to open in April, and by Aug. 1 Miller and Brink want to move the Overland store into the vacant Pizza Hut building in the same center.

The Gyro Shack owners Seth Brink (left) and Doug Miller wait for lunch inside their first store-front location in the Clearwater Building in downtown Boise. Photo by Patrick Sweeney.

The Gyro Shack owners Seth Brink (left) and Doug Miller wait for lunch inside their first store-front location in the Clearwater Building in downtown Boise. Photo by Patrick Sweeney.

The new Overland store will become the company’s flagship location and its first full sit-down eatery. The 1,800-square-foot space will have a double kitchen, giving the company its first dedicated space for catering and food preparation for its food truck.

“A lot of our catering equipment is stored in the break room here (at corporate headquarters),” said Brink, the company’s vice president of operations and development. “It takes a bit of running around.”

The owners predict there will be 10 Treasure Valley stores in three years. The first 25 franchise stores should be open in about five years. The partners sold 14 franchise stores to one ownership group covering Tacoma and south Seattle; five to a franchisee in the Vancouver, Wash., area; three in Everett and three in Coeur d’Alene.

Four franchise stores are expected to open this year with six to 10 franchise stores opening expected in 2018, Brink said.

The Gyro Shack at the Clearwater Building has indoor seating but just stools with most of them facing the wall. The Gyro Shack will move into a former Pizza Hut on Overland in August. Photo by Patrick Sweeney.

The Gyro Shack at the Clearwater Building has indoor seating but just stools with most of them facing the wall. The Gyro Shack will move into a former Pizza Hut on Overland in August. Photo by Patrick Sweeney.

All four franchise holders are Papa Murphy’s franchise holders. Miller owns six Papa Murphy’s in the Treasure Valley. Brink also worked for Papa Murphy’s off and on from 1994 to 2013.

Miller is good friends with the Tacoma franchisee, who has family in Boise. Miller ate frequently at The Gyro Shack in the years before buying the company.

“Let’s get a gyro,” he said to his visiting Tacoma friend in the months he was thinking about buying The Gyro Shack. “He said, ‘My God, that’s good. If you buy it, I’ll franchise it.’ The other three (franchisees) are really good friends with the Tacoma guy. He sold the brand.”

Miller and Brink stress they want to be “franchisee-focused” owners, growing only as they have the support staff in place to train new franchisees. The Gyro Shack has 40 employees with four at the corporate office. To have 100 franchise stores would require about 20 corporate staff, Brink estimated.

The Gyro Shack scales its franchise fees instead of charging the same fee for each store. A franchise holder’s first store costs $25,000, the second store $20,000, the third store $15,000 and the fourth and each subsequent store $10,000, Miller said.

Miller and Brink only want multiple-store franchisees.

“We bring the franchise group to Boise,” Brink said. “They are required to be here for two weeks training. When they open, we go there for three weeks of on-site support.”

The franchise fee decreases because the corporate training also decreases with subsequent stores as franchisees will be familiar with The Gyro Shack formula, Miller said.

The Gyro Shack annual revenue was $1.6 million in 2016 and Miller predicts it will reach $7 million in three years.

For the first seven years, The Gyro Shack only operated out of drive-thru kiosks on Overland Road and State Street. Photo by Patrick Sweeney.

For the first seven years, The Gyro Shack only operated out of drive-thru kiosks on Overland Road and State Street. Photo by Patrick Sweeney.

The owners anticipate adding another franchise-holder this year.

“The Papa Murphy franchise world knows about us,” Miller said. “We could sell a ton of franchises. We are only going to grow to the capacity we can support. We want to diversify (beyond Papa Murphy franchisees).”

Miller himself diversified beyond Papa Murphy’s. As recently as 2013, he had 22 Papa Murphy’s stores, eight in the Treasure Valley and 14 in Austin, Texas. By early 2014, he sold all his Austin stores and had five in Idaho, adding one more since then.

Brink started at Papa Murphy’s in Idaho Falls and, after a stint in the Air Force, returned to Papa Murphy’s  in an oversight capacity in Cedar Rapids, Iowa and Nashville before joining Papa Murphy’s international team in Dubai, in the United Arab Emirates.  His position was eliminated in 2013 and Brink returned to Idaho.

Miller and Brink had known each other for years and got to talking. Miller saw that Brink had been exposed to Mediterranean food while in Dubai.

With Miller the majority owner, the duo bought the two existing The Gyro Shacks. The Overland store had opened in July 2009, followed by the State Street store, also a drive-thru kiosk, in September 2010. They impressed Gardner Company Chief Operating Officer Tommy Ahlquist enough that he signed up The Gyro Shack for the downtown Boise, nine-story Clearwater Building that opened in August 2016. The Gyro Shack that opened there in November was the first store-front location.

The Gyro Shack is investing an estimated $300,000 to convert a Pizza Hut, built in 1976, into the flagship The Gyro Shack. Both Gyro Shack’s original store and the Pizza Hut building are located in the same center at Cole and Overland Roads.

This will be a transition from a 250-foot former drive-thru coffee kiosk. Miller and Brink had added 100 square feet to the 150 original square feet.

“There’s not even a walkup window at Overland,” Miller said. “People stand between cars.”

The Pizza Hut building offers 1,800 square feet and, so far, will be the only Gyro Shack in the Treasure Valley with dedicated table seating. It will also have a patio and a double drive-through with 30 seats indoors and 20 seats outdoors.

“You will be able to sit down with four of your office mates,” Miller noted. “The Overland location will be very accommodating for large groups.”

The catering kitchen at Overland will likely lead to The Gyro Shack doubling its catering business, which has skyrocketed since the downtown Boise store opened in November.

“We’re getting lots of clients calling us on a monthly basis,” Brink said.

“Right now we turn down a lot of catering,” Miller said.

Miller and Brink are facing the unknown with the expansion into franchising and the larger restaurant.  So far, they have stayed out of Portland and Seattle proper.

“We’re very focused on ensuring what we have in Boise is scalable,” Brink said. “I know we can sell in Boise and make money in Boise. In Seattle, I could sell gyros but I don’t know that.”

They didn’t buy The Gyro Shack with the intention of upgrading from near-literal shacks to a full restaurant.

“That was chance meets opportunity,” Brink said about the Pizza Hut vacancy occurring just feet from their drive-thru.

With the Overland sit-down in the works, Miller and Brink wonder how the larger format will work.

“With the sit-downs, we don’t know. That’s why we’re doing this,” Miller said.

 

About Teya Vitu

Teya Vitu is an Idaho Business Review reporter, covering commercial real estate, construction, transportation and whatever else may intrigue him in the moment. Join me on Twitter at @IBR_TeyaVitu.