Colorado Springs Restaurant Chain Closes Three Denver Locations

Southern Concepts Restaurant Group Inc., which once planned up to 40 restaurants nationwide under the Southern Hospitality, Bourbon Brothers and Carve Barbecue names, closed its last three restaurants in the Denver area Monday, effectively shutting down the Colorado Springs-based chain.

The company turned over its Colorado Springs location in April to the landlord, a limited liability company headed by Southern Concepts founder J.W. Roth, who converted the Northgate area eatery back to the Bourbon Brothers Southern Kitchen concept under which it had previously operated before switching to the Southern Hospitality Restaurant and Bar concept.

Roth said he had reduced the rent on the 8,000-square-foot restaurant in October, but Southern Concepts wasn’t able to generate enough income from its restaurant to and owed $114,000 in unpaid rent.

“I hated to do it, but I had to evict them and convert it back to Bourbon Brothers because I own all the trademarks to that name and concept. It is doing great; it started to make a profit in the first week and has been profitable ever since,” said Roth, who also is a major shareholder in Southern Concepts and its largest creditor. “It seems to me that they will just go out of business. It is too bad that it came to this. I am sick about it. But it is another day and we move on from here. At the end of the day, I ended up with a winner of a restaurant.”

Southern Concepts CEO Jim Fenlason said Thursday the company “couldn’t put together the capital and didn’t have the sales to continue” operating the Denver restaurants. An eviction notice had been posted on the company’s lower downtown Denver location alleging Southern Concepts was delinquent on $181,000 in rent, but Fenlason said the company has surrendered all of the Denver locations to the landlords. He said a lawsuit by Shamrock Foods alleging the company owed $50,000 has been withdrawn and company officials are working on a plan to deal with remaining debts.

The closings come less than a month after Southern Concepts shareholders overwhelmingly rejected plans to sell all three restaurants, two of them to a company controlled by Fenlason, in exchange for a 10 percent cut of future profits, according to documents the company filed with the Securities and Exchange Commission. Fenlason said last month that Southern Concepts hadn’t received any other offers for its two Southern Hospitality locations and that the proposed deal with his company would have required further negotiation.

Fenlason, who had been non-executive chairman of Southern Concepts, became the company’s CEO and chief financial officer in August after the resignation of Mitchell Roth, son of J.W. Roth, as CEO and Heather Atkinson as chief financial officer. He immediately launched a restructuring to save $400,000 a year in management expenses also by terminating the company’s chief operating officer, allowing the company to “allocate more resources to marketing and concept development,” according to a Southern Concepts news release issued weeks after he became CEO.

Southern Concepts was hemorrhaging cash at the time Fenlason became CEO, according to the last financial report the company filed with the SEC for the first nine months of last year. The company lost $2.77 million, or 4 cents a share, on revenue of $5.57 million, a slight improvement from losing $2.86 million, or 5 cents a share, on revenue of $4.79 million during the same period a year earlier. However, the company cash dwindled from $1.11 million to $65,822 during the same period while it owed nearly $450,000 in accounts payable and accrued expenses.

Just 2½ years earlier, company officials had opened the Colorado Springs restaurant as Bourbon Brothers near the Bass Pro Shops store in the Polaris Pointe retail development and said they were planning to develop 40 more around the nation during the next five years, including a downtown Colorado Springs location. The company merged with the operators of a Southern Hospitality locations in lower downtown Denver and later opened a location in Lone Tree and a Carve Barbecue location in Glendale but Fenlason said all three locations were losing money when his company agreed to buy them.

The first Southern Hospitality restaurant opened in New York in 2007 with backing from actor and musician Justin Timberlake and still remains open under separate ownership. The Denver location opened in 2012 with backing from Ryan Tedder, singer for Colorado band OneRepublic, and his father, Gary Tedder.

“I was asked to come in, look around and see what I could do to impact the restaurants. I looked for ways to cut costs and found something we could do,” Fenlason said last month. “The cost of real estate has made it difficult to expand and add restaurants. That certainly made a difference.”

Roth had loaned Southern Concepts $1.25 million in October, by extending and expanding a loan with a Denver company, to keep the company afloat but says he will now write off the loan rather than accept a deal that would convert the debt to stock that currently trades at less than 1 cent a share.

“Two and half years ago, I thought this was the greatest thing and made an investment. I loved the management team and the concept. I didn’t have the time to spend on the company, so I didn’t run for re-election to the board, so I have watched from the outside as an investor and largest creditor,” J.W. Roth said. “Two things hurt the company. The real estate market made it hard to lease good real estate at a rate that would allow you to make a profit. Also, the celebrities that were promoted to the face of the restaurant and help drive sales, we never saw them.”

Roth said he doesn’t blame Fenlason for Southern Concepts’ collapse, though he opposed his bid to buy the restaurants without putting all three up for bid.

“It seems like he tried to wind it down the best he could and he has been honorable in the way he handled us.”

Contact Wayne Heilman: 636-0234

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