BURGAW — A Colorado chef who scored the keys to her own restaurant from a months-long competition no longer is moving forward on bringing her plans for Burgaw.
READ MORE: Colorado chef wins the keys to new Burgaw restaurant in Own Your Own competition
Karoline Schwartz will not take over the 106-108 W. Courthouse Ave. space for her concept Outland. It was to be open for lunch and dinner and focus on locally sourced ingredients, working with farmers, and making food that is sustainable, hearty and approachable. Schwartz told Port City Daily in a text message Sunday: “The ‘winnings’ were definitely miscommunicated — or, minimally, misunderstood by many.”
The Own Your Own competition was promoted as a million-dollar startup investment and a space on West Courthouse Avenue for a burgeoning restaurateur to take over. OYO founder and investor Richard Johnson puts up the money, helps the winner build out the restaurant, and executes a “reasonable lease,” to be calculated based on the total amount spent on the project.
However, one of Schwartz’s main issues with the deal was not owning the licensing rights to the name, nor that formal documents were presented, spelling out the terms, immediately after the competition.
“I understood that the winner of the competition would own the restaurant in Burgaw — after all, the competition was named ‘Own your Own,’ and most of the promotional info referred to the winner owning and operating a restaurant in Burgaw,” she wrote to PCD Wednesday afternoon.
The deal always remained the same, Johnson clarified: The winning business plan and concept would come to life, with the chef having a hand in designing the restaurant and creating the kitchen they wanted, devising the menu, finding staff and running the business thereafter. Once up and running, Johnson will serve as a landlord, not involved the restaurant’s day-to-day operations.
Johnson — who owns Penderlea Tree Farm in the area — bought seven businesses in Burgaw in the last few years. He has turned two already into Burgaw Brewing and Fat Daddy’s Pizza, owned by Kevin and Emmaline Kozak and Jay Kranchalk respectively.
The OYO competition was founded as part of Johnson’s goal to reinvigorate Burgaw. He envisions the historic town to become a food hub in southeastern North Carolina.
As Port City Daily reported last year, the OYO winner would not pay back anything on principal, but rent would be based on a 5% return on Johnson’s investment. Johnson confirmed that still stands and broke it down as $50,000 divided by 12 months to determine the base rent.
“It gradually escalates to 7% or 8% by year 10,” he added. “The rate is far below that of any commercially available space they might find elsewhere.”
Johnson said it saves restaurateurs from having to put money down on a project, upfit a building — a historic one in this case — and invest in equipment. An option to buy the building could come further down the road, according to earlier PCD reporting.
“I was to manage the build-out of a concept and operate it, with the chance that I would leave the operation behind if either party decided to end the business relationship, and I would have no ownership of anything, including the name I chose and the business plan I created,” Schwartz told PCD Wednesday. “Also, there were non-compete covenant requirements and other previously undisclosed requirements.”
Johnson conceded perhaps he didn’t explain the licensing rights as well as he should have. The deal included OYO owning the name and licensing it to the chef, but Johnson stated it would not prevent anyone from taking the name and opening another restaurant outside of the competition area. Though he said the two parties would share in the upside of any financial windfall, should the restaurant be franchisable.
“It’s not gonna be exclusive to me and it’s not gonna be exclusive to them,” he said.
But if the restaurant failed or someone wanted to back out, he wasn’t going to spend more money rebranding.
“I want to find another entrepreneur and slide them in and have them onward,” Johnson said.
Schwartz also was concerned there were no documents or legal paperwork presented after winning the competition at the end of October. She said specifics about the winnings and the plans overall were unclear, something that raised red flags concerning a “serious business decision” such as starting a new restaurant.
Johnson admitted he worked in what Schwartz called “a handshake” agreement at first, though did present some terms in writing; however, it wasn’t a formal contract. He maintains he was clear with everyone, face-to-face throughout the competition process, what they would get upon winning, that he was taking a risk on the investment and the terms were “generous.” To PCD Wednesday, Johnson said he wasn’t doing this to make a lot of money.
“I told them, if I pick you, you could sign any contract and 11 months from now, if you’re going to change your mind and walk away, I’m not going to come after you,” Johnson explained. “I just would want an easy transition, if that happened. But, at the end of the day, I’m gonna spend up to a million dollars on this restaurant.”
His investment in Burgaw Brewing was twice that of the OYO restaurant, he said. If the new eatery took over a million to renovate, he said he would consider spending more, as long as the business plan was rationalized with the amount.
Schwartz said she was presented a “memorandum,” essentially an overview of what to expect, after the competition and that a written agreement would come further along in the process.
By that point, Schwartz said a lack of transparency left a “bad taste in her mouth.”
“The ‘deal’ said nothing of ownership,” she added. “When I challenged Richard on this point, he advised me that I would own the ‘Karoline Schwartz brand.’ I responded to him that I already did.”
The project was delayed out of the gate, according to Johnson, due to the back and forth. The team was on an aggressive timeline, with Outland slated to open by the first quarter of 2025. Johnson had secured deposits for architects and designers, in order to settle on a theme and assess the kitchen setup, with a goal to move the renovation along by this month.
Yet, feedback on designs went unanswered at the end of 2023, according to Johnson.
“I didn’t read the tea leaves,” he said. “I didn’t realize she was having hesitancy immediately after the competition.”
Schwartz had begun inquiring with business advisors and a lawyer to assess how to nail down the agreement.
“Richard wanted final say on virtually everything and he stressed the need to recoup his investment,” she stated. “I thought it was a competition he sponsored, not an investment opportunity that the winner was responsible for ensuring his return on.”
Around the new year, Johnson hired a lawyer to work up an official offer letter, with a deadline to sign within a week. He learned, while in talks with Schwartz’s lawyer, the terms weren’t being accepted.
“They were asking for things that we were unwilling to give them,” Johnson said, though he added he “sweetened the pot” by covering Schwartz’s moving expenses.
When the deadline passed, Johnson took it as Schwartz was uninterested in continuing the partnership. Schwartz clarified Wednesday she hadn’t backed out of anything formally.
After the competition, the chef left her former job in Tabernash, Colorado, where she was running an historic lodge at Rocky Mountain National Park in Grand Lake. She took another position elsewhere, with the goal to move to North Carolina to oversee Outland’s upfit.
As of Wednesday Schwartz said she had accepted a new position as the general manager of A-Frame Club in Winter Park, Colorado.
“Once I realized this might not be the plan, this new opportunity presented itself and it’s a good move for me career wise,” she said, adding she still wants to eventually own her own restaurant in the future.
She and her fiancé — who proposed to her in the middle of the OYO competition — continue assessing other potential entrepreneurial opportunities in Colorado as well.
Johnson went back to the pool of finalists from OYO to take Schwartz’s place. Now, three new restaurateurs are coming to the area to operate two new restaurants in Burgaw. Johnson wouldn’t announce who the restaurateurs are, nor the concept to take over from Outland. However, he did reveal the second restaurant coming to the town will be a deli.
OYO will make public who is operating both businesses by mid-March; all are OYO contestants.
Around 500 people nationwide applied to be a part of the competition in spring 2023, according to the OYO team. It was narrowed to 24 last April. Finalists came together in Burgaw’s town square during its Autumn Fest for a cookoff, wherein the community-at-large, as well as area judges — Christi Ferretti of Pine Valley Market, Myra and James McDuffie of Mema’s Chick’n & Ribs, Keith Rhodes of Catch, Bill Scott of Cape Fear Seafood Company and Kevin and Emmaline Kozak of Burgaw Brewing — narrowed the field to 12.
Those finalists had to present formal business proposals, and from there six were chosen to work in judges’ kitchens and do a host of challenges over multiple days to curate the top two that would move on to the final VIP dinner hosted in Burgaw’s Train Depot in October. Along with the OYO team, the judges and VIP diners weighed in to choose the restaurant winner between Schwartz and Vincent Mangual, who presented a three-course dinner.
Mangual was actually cut from the competition twice, first from the top 24 at the cookoff. But contestant Joe Friday, in the top 12, had to bow out due to a family emergency so Mangual was brought in again — but was cut from the next round. Then Penny Hayes from Myrtle Beach pulled out of the top six and Mangual took her place.
According to Johnson, there wasn’t a landslide vote among ballots cast between Mangual and Schwartz at the final dinner. He added the OYO race was close from start to finish.
The question remains: Was Mangual offered to be a replacement to Schwartz’s concept?
“Everyone loves Vinnie,” Johnson said, though mum whether the New York-based chef will be relocating to Burgaw.
“It broke my heart when she pulled out, but I wish Karoline nothing but the best,” Johnson said. “I never in a million years would have thought that what I was doing could be construed in any way other than what I still believe it is: a life-changing opportunity.”
There are no regrets on Schwartz’s part. She boasted her time in the competition as “amazing,” one that created friendships and connections “to last a lifetime.”
“I also got to spend time with the hospitable people of Burgaw and feed them good food,” she said.
As to whether the competition will continue in Burgaw, Johnson said it’s unlikely. Yet, he stands behind the idea.
“I believe three years from now people will look back and say, ‘Oh, my God, look at how these people revitalized this town,’” he said. “This is a valid model, we just need to find out how we can apply that model in a way that’s maybe scalable and maybe in another town, and figure out its right approach.”
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