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Elmers growth recipe defies economic odds

Restaurant chain plans to add 20 franchises in next three years

Hard times? A recession?

Don't tell it to the folks who serve up German pancakes and club sandwiches at Elmer's Restaurants.

Elmer's Restaurants Inc., which began as a single small pancake house 43 years ago, is emerging as one of the fastest-growing chains in the state at a time when many area businesses are struggling to beat the economic doldrums.

With the nine restaurants that Elmer's opened during the last 20 months serving as appetizers, the company's management is now licking its chops over a new main course: adding 20 franchises over the next three years.

The new restaurants will be located along the Interstate 5 corridor from California to Canada and also in Eastern Oregon, Southern Oregon and Washington.

More franchises are targeted for Idaho, Utah and New Mexico. This comes at a time when many restaurants are hurting.

Elmer's results are all the more remarkable considering that Oregon is such a tough environment for restaurants, with its high costs for energy and insurance, said Mike McCallum, president of the Oregon Restaurant Association. At least 168 area dining establishments closed in 2001 alone.

'A big key to Elmer's success

isn't anything new or revolutionary, but rather a combination of home-style cooking, generous portions, comfortable atmosphere and friendly, personal service,' McCallum said.

Record earnings

Elmer's, owner-operator of 10 restaurants and 22 franchises in six Western states, is on pace for its fourth consecutive year of record revenues. Last year, the 42-year-old Portland-based chain announced revenue of $31.9 million and a net income exceeding $1.5 million Ñ both company records.

Elmer's now employs 1,700 people, including the employees in its five Mitzel's American Kitchen restaurants in Puget Sound, Wash.

Restaurant consultant Brian Proksch says the company is close to acquiring the critical mass that will take it to a whole new level of business.

'Elmer's is getting their name out in Idaho, Utah, California, Montana, up in Alaska and all over the West,' he said. 'Through franchising, they are constantly increasing brand recognition in new territories.'

Expanding through franchising minimizes risk, is cost-effective and increases the chain's market penetration dramatically, but it doesn't always work out, Proksch said.

Overall, franchises 'don't have the same rate of success as the corporate-owned stores, but they do better than the independents,' he said. 'They're somewhere in between.'

Elmer's restaurants strive for a nostalgic theme, with fireplaces and lots of natural wood. Each restaurant is decorated with antiques and quaint knickknacks such as china plates featuring the 50 states.

'Our guests feel like they're coming home, not sitting in a coffee shop,' said Elmer's President Bruce Davis.

Stop at an Elmer's on any Sunday, and you'll have to wait awhile for breakfast. Despite serving lunch and dinner, breakfasts such as Tillamook cheddar scrambled eggs, pancakes and other down-home food draw the largest crowds.

Elmer's 'fills an important niche because it's one of the few home-style restaurants left,' said Mac MacTarnahan, majority owner of MacTarnahan's Brewing Co.

MacTarnahan started going to Elmer's 40 years ago and still eats there two or three times a week.

Pancake paradise

Walter and Dorothy Elmer opened their first restaurant, Elmer's Colonial Pancake & Steak House, on Southeast 82nd Avenue near Halsey Street in 1960. The menu was devoted almost entirely to pancakes.

Six years later, the couple granted the first franchise and expanded the lunch and dinner menus. Over the next decade, they added 13 restaurants.

In 1984, the family sold Elmer's franchise rights to Herman Goldberg, who became president and chief executive officer the following year.

Goldberg took the company public in 1985 and led the company on an aggressive expansion of 12 restaurants. After he died in 1996, his wife, Anita, continued to run the business. In 1998, Bruce Davis and William Service bought a majority interest in Elmer's. Davis took the helm as president and Service as CEO.

Childhood buddies who grew up in Eugene, Davis and Service formed their first partnership selling sodas at junior high school dances.

'One of us would run across the street to get more ice and pop, and the other would man the booth,' Davis recalled. 'We went home at night with our pockets stuffed full of quarters.'

After working in the deli business in Portland, the two men decided that Elmer's would be a solid investment. Both earn $174,000 a year.

'It was a strong brand, and we knew it could do much better,' said Davis, 42.

New energy

Jerry Danna, owner of five franchises in the metro area including the flagship restaurant, said Elmer's management had grown complacent.

'We paid our franchise fees like a tenant paying their rent and that was about the extent of the relationship,' he said. 'There wasn't much going on at all.'

A 1999 customer survey prompted the new management team to roll out a more extensive and upscale menu, upgrade its distribution and embark on an ambitious plan to double the number of Elmer's restaurants.

The company changed its signage from 'Elmer's Pancake & Steak House' to 'Elmer's: Breakfast, Lunch and Dinner' after many of the diners indicated they were not aware that Elmer's was open for dinner. Upward of one-half of its subsequent sales increase has been in lunch and dinner.

Davis and Service hit the road, visiting all of the Elmer's outlets and sharing their vision of expansion.

'Bruce and Bill brought a new infusion of energy and excitement; they breathed new life into Elmer's,' Danna said.

Walter and Dorothy Elmer are gone but not forgotten. A portrait of Walt, who died in 1997, hangs in the lobby of every restaurant along with the Elmer's mission and values statement. Dorothy died in December 2002 at the age of 92.