It's an old-fashioned downtown, with a few eateries crowded along with some storefronts and clapboard houses as U.S. Route 30 winds through this town of about 3,000 people. But for hungry folks in Central City, a town about 25 miles north of Grand Island, they're about to get a choice in dining few in the wider area enjoy.
That's because restaurant developer Todd Carpenter is building a new Subway/Taco Del Mar franchise here; in the process, he'll create another six to eight jobs.
"By having this new concept branded with the Subway store, by doubling our parking lot, adding a drive through, adding seating, hopefully we will increase business," Carpenter said.
Stepping up to help franchise grow
While the Taco Del Mar brand got its start a couple of decades ago in the Pacific Northwest, the franchise grew too fast and went bankrupt last year. The founders of Subway stepped in, purchased the business, and opened up a new development opportunity.
Carpenter's territory includes about 80 percent of the counties in Nebraska and South Dakota, and over the past 20 years he's led the development of 158 Subway franchises in his area. While working for his first partner shortly after graduating high school in Gehring, he noticed the growth of Subway shops in Colorado and was eager to bring the restaurants to this state. Two years later, after taking his college savings, some cash from his grandfather, and a bank loan, Carpenter and his partner opened their first franchise in late 1989.
But Carpenter does more than negotiate the franchise agreements and lease for the restaurants and hand the keys over. He offers on-going support and operational guidance to make certain the franchisee succeeds in the marketplace. That's why he's sure the new joint restaurant concept will succeed.
"Taco Del Mar stores had failed in other parts of the state," Carpenter admitted, "They lacked buying power to support the brand and cost of doing business was prohibitive. People liked the food and the customers were passionate, eating there sometimes two or three times a week, but the cost of goods were too high." That's where Subway's buying power will let the venture compete with other brands in the crowded fast food category.
Carpenter partnered with a local couple, Jake and Amy Kleeb, who will own 50 percent of the Central City restaurant, and Amy will serve as the operating partner.
But to finance the land purchase and build the new restaurant with his partners, Carpenter sat down with Dustin Meyer at Archer Cooperative Credit Union, a small lender with four rural central Nebraska locations. The credit union had never made an SBA loan before, but Meyer would turn to the 504 program to close the deal.
"We do a lot of commercial deals in Central City, mostly agriculture entities," Meyer said. "We're a $54 million credit union, and 70 to 80 percent of our business is commercial because of the farming industry."
Nebraska District Office available to help with deal
Meyer would need help navigating the process of the 504 loan guarantee, and Mike Marsh, a lender relations specialist with the Nebraska District Office, made a face-to-face visit to Archer in April. The bank offered 50 percent of the loan; the SBA, through Lincoln-based NEDCO, a Certified Development Corporation (CDC), would provide another 40 percent through the bond market; Carpenter's development company would handle 10 percent in a down payment. Most important for Archer's bottom line--the credit union would have the first lien position on the property, significantly reducing its risk.
"Mike was happy to come out and tell us how it all worked," Meyer added. "We got this big list of stuff to do, background research on all of the partners, both personally and financially. But Mike at the SBA, and Jason (Herlitzke, vice-president of lending at the CDC) were very helpful. Would the deal have happened without the SBA's help? Not nearly as quickly. It would have been a lot more legwork if he hadn't come out to talk with us--and there's a possibility we wouldn't have done the deal because we didn't know how simple it could be working with the SBA and NEDCO."
As a result, the Subway/Taco Del Mar franchise was approved for $156,000 for the portion of SBA-guaranteed funds.
"I think using the SBA is a very good starting point for growth for our credit union," Meyer said. "I want more commercial entities aware of what we offer. If we can get it out there that we use the SBA guarantee, I'm sure we will have more businesses applying for them and using this opportunity."
And the structure of the SBA's 504 financing was crucial for the developer.
"With traditional bank financing," Carpenter said, "we couldn't have come up with the 30 to 35 percent down to acquire the land and build the building. With the low interest rate, the cash flow for the business makes good economic sense."
SBA helps improve U.S. 30 corridor
Meyer added the Subway/Taco Del Mar restaurant will be a great addition to the community.
"The lot they bought was in between two existing restaurants, replacing an old house from 1910 that was falling in on itself," the lender said. "There's been some money from the city for beautification of the highway frontage. It's looking a lot better now."
And, he added, the only other places for people craving Mexican food are a long drive off in Grand Island or almost an hour away in Columbus.
"What I'm passionate about as a developer is providing great opportunities for these franchisees to build their future," Carpenter said. "Like Amy, for example. She started out as a store manager, and she borrowed money, dug into her savings and got into ownership. As I've helped Subway grow, and helped people who leveraged their savings, it's been a blessing that the government has continued to help small business people expand. SBA programs are wonderful in that sense."