The Way Things Work: Opening a small business in Hyde Park

From documents like Chicago's "3 Simple Steps to Obtain a Business License" (which actually lists 10 not-so-simple steps) to maneuvering through eight different city, state, and federal agencies, Grey City traces the paths of several successful small businesses in Hyde Park. .

By Colin Bradley

Camille van Horne / The Chicago Maroon

GREY CITY

  /  

November 29, 2011

You can’t take the Hyde Park out of a U of C student, but a U of C student will beg you to take her out of Hyde Park. At least on the weekends. Or when out-of-towners are visiting. Or for a date, some good Chinese food, shoe shopping, or just a good stroll down a populated street after 9:00 p.m.

Retail in Hyde Park is notoriously hit-or-miss. There are no less than four places where you can order pad-see-eu (eight if you include student-run cafes), but nowhere to grab a decent hot dog or a pair of socks. If it weren’t for campus dominating much of the area, it would be difficult to see Hyde Park as a bustling college neighborhood at all. Take a drive down any of the main streets, and you’ll see mostly residences and family restaurants, not bars and boutiques.

It wasn’t always like this, though. In the early part of the 20th century, Hyde Park was home to over 600 businesses covering a full spectrum of retail and commercial options. Today? Well, look around—there’s only a fraction of that number still flipping their sign from “Closed” to “Open” every morning.

The post-war decades saw the majority of the decline in Hyde Park’s commercial activity. A $400 million endeavor spearheaded by the University of Chicago known as Urban Renewal is widely recognized to be responsible for this phenomenon, which left Hyde Park resembling something closer to a suburb rather an urban neighborhood in the middle of Chicago.

That’s not to say Hyde Park is a wasteland. In addition to the plentiful bookstores and coffee shops that serve as the perennial haunts for U of C students, there are a growing number of restaurants and specialty shops—most of which are small, independent businesses.

Yet few are satisfied with the way things stand now. The prevailing sentiment is that Hyde Park needs a new business boom. Many are saying it, and a handful are making it happen.

One such person is Steven Lucy (A.B. ’06), a Hyde Park native. After graduating with a double major in Mathematics and HIPS, Lucy decided he wanted to let his roots grow right here in Hyde Park. In 2008, Lucy and friend Andrew Cone (A.B. ’06) opened Open Produce, a specialty grocer and produce market on East 55th Street—a process he says is “no less intellectually engaging” than time spent in Eckhart Hall.

Can obtaining an Employer Identification Number (formerly known as a Federal Tax Identification Number), an Illinois Department of Revenue Account ID Number (once called the Illinois Business Tax Number), and figuring out which licenses your business will require possibly be more difficult than understanding the proof for the fundamental theorem for finitely-generated abelian groups?

Maybe. Opening a business in Hyde Park requires working with no less than eight different city, state, and federal agencies. And when you’re learning on the fly—“trial by fire” as Lucy puts it—it can be a challenging experience for anyone.

But first you need an idea before you begin cutting through the red tape of endless bureaucratic nightmares. In a tight-knit neighborhood like Hyde Park, you really need to know your market. The difference between a successful venture and a flop can come down to how well you can gauge the needs of such a diverse and continuously changing community.

Lucy has spent almost his entire life in Hyde Park, and so it was his intimate knowledge of the neighborhood that made him realize there was a need for a place to buy fresh fruits and vegetables east of the Metra tracks. Knowing the needs of his neighbors transformed what seemed like a niche market into a successful business venture.

But you don’t have to be a long-time Hyde Park resident to know what the neighborhood could use. A native of Thailand and graduate of the Illinois Institute of Technology, Pattie Kidwell certainly did not have the insider knowledge of Lucy. She did however notice a salient fact about the demographics of Hyde Park: There are clearly a lot of college students. And what do students like? Noodle shops. And so she decided to open the reliable Friday night dinner spot Noodles Etc., which was recently named by the Hyde Park Chamber of Commerce as the neighborhood’s Best Business of 2011. Apparently Kidwell guessed right.

Tim Zaleski had been running Istria Café successfully for 10 years before teaming up with Sam Darrigrand, owner of Shane’s Deli in Wheaton, IL in 2008 to open the first Zaleski and Horvath Market Café (known intimately to Hyde Parkers as Z&H) on East 47th Street. Both realized that separately their businesses were “two-legged stools,” but if combined, could fill what Zaleski noticed was a noticeable gap in the Kenwood/Hyde Park area. The need for good coffee and gourmet sandwiches has proven so large that the pair recently opened a second Z&H on East 57th Street.

While the original Noodles Etc. was launched in 1995, both Open Produce and the first Z&H opened for business in 2008—at the height of the financial crisis and ensuing nationwide squeeze on small business loans. Which brings us to the next step in opening a small, independent business in Hyde Park: financing the operation.

Between the collected experience of both Zaleski and Derrigrand, they realized that even during the best of times, “banks aren’t interested in loaning money to small businesses.” Fortunately, these formerly successful small-business owners were in a position to provide their own financial backing. Others have to get more creative.

Lucy and Cone faced similar rejections from banks when applying for start-up loans. So they used the grassroots approach and were able to successfully raise the requisite money from friends and family.

But for two U of C alumni, not grounded in the practical know-how required for a task like this, knowing exactly the “requisite” amount of capital to open a business was another challenge. Lucy and Cone ended up $20,000 over budget before ever opening their doors to customers. And as Lucy explains it, the hole continues to grow during the first two to three years of operation. While Open Produce has finally reached the point where the original loans can be paid off, he doesn’t expect significant profits until year six.

But even after begging and haggling and finally scraping together the money to start your own small business, there is one more hoop to jump through. And this one is on fire.

Posted on the website for the City of Chicago Department of Business Affairs and Consumer Protection is a rather tame-looking document titled “3 Simple Steps to Obtain a Business License.” A closer look reveals that it actually specifies at least 10 not-so-simple steps, as well as providing additional instruction for obtaining more obscure licenses and inspections for particular subcategories of businesses. It doesn’t even mention the letter you must receive from your alderman acknowledging that a new business is opening in his or her ward.

For someone like Lucy, who had absolutely no prior business experience, the process can be daunting. As an example, he points to a mop sink located in the middle of the storage room in Open Produce. He found out the hard way that, first, he needed a mop sink, and second, the sink had to be located so that it was not too close to an electrical panel and did not block any exits. The result? A mop sink literally in the middle of the room.

And it took only a few conversations with city officials to kill his idea of erecting an awning over the sidewalk. To do so he would need to insure the awning, hire a licensed and insured contractor to put it up, and then pay an extra fee, on top of the insurance, to keep the awning over a public sidewalk.

In short, he says, it takes “a lot of paperwork and a lot of bureaucracy” to fulfill all your goals and ideas for a new business.

Zaleski agrees that “Chicago is that city…in the city of Chicago, there are no shortcuts.” But when opening the new location, Zaleski had an advantage that neither Lucy nor Kidwell ever had: being buddies with the University of Chicago. Although even the U of C cannot make the red tape disappear altogether, Zaleski admits that “when the University of Chicago is your landlord—that carries some weight.”

When University administrators noticed that students and faculty were flocking in droves to the Z&H on East 47th Street, they invited Zaleski and Darrigrand to open up shop in a University-owned space on East 57th Street and helped them through the process. (The same thing happened when the old grocer on East 55th Street and South Lake Park Avenue was closing—the University reached out to Treasure Island to fill the gap.) The University even has a special department for Hyde Park real estate called Commercial Real Estate Operations (CREO). Formally, CREO’s primary goal was to “strategically manage [property] acquisitions and holdings in a way that adheres to the University’s long-term academic and research mission while supporting the needs of students, faculty, staff, and community.”

However, CREO and the University’s current role as landlord exists primarily for recruitment. According to Director of the University News Office Jeremy Manier, “to form a community of scholars…one of the things you absolutely need is a community that is vibrant and someplace where people want to live.” The University can’t be a premier academic and research institution if nobody wants to live anywhere near it.

As Z&H and Treasure Island prove, sometimes the University’s involvement in determining which businesses will come into the neighborhood is quite transparent.

The University also has a hand in larger, more long-term development plans in the neighborhood, such as the redevelopment of Harper Court to increase retail options in the neighborhood and traffic to the area. Concerning this considerably more complicated decision-making process, Manier says “Our community will need to consider: What are going to be the necessary elements of a successful business corridor? What are the important components of a thriving community on the South Side?”

On the surface it seems to be the ideal coalescence of interests: The neighborhood is looking for an increase in commercial and retail activity, and the University is looking for a vibrant neighborhood where top-notch students and faculty will want to live.

So while small-business owners like Lucy, Kidwell, and Zaleski are doing their part to increase the economic viability of Hyde Park as a neighborhood, the University has put its considerable weight in the game as well.

But how will these small businesses fare in a largely University-driven economic boom?

It seems to be a win-win. Most people agree that, as Zaleski puts it, “a rising tide raises all ships…the more quality retail—food and otherwise—the better Hyde Park is going to be.” Lucy agrees. He says, “There are plenty of opportunities for plenty of small businesses to thrive. It doesn’t have to be a zero-sum game. The more small businesses there are, the more active and lively this street will be.”

And it certainly seems to be a compelling point: The more businesses that open up in Hyde Park, the more foot traffic there will be, ideally for all businesses to enjoy. More Hyde Park residents will stay in the neighborhood when going out for the night, and more Chicagoans will make the trek to the South Side as Hyde Park becomes more and more a retail and dining destination.

However, such needs often lead to a perceived tension between what the University and what the community want.

Some people think there is more than a little reason to be skeptical about this alignment of interests. There is a worry over how small business will fit into this “long-term picture” that the University would like to paint on the lake shore. The thought is that while the University fosters in a new wave of commercial prosperity in Hyde Park, this prosperity will be driven by chains like Five Guys, Whole Foods, and Hyatt, while the “mom-and-pop shops,” like Open Produce, will be slowly strangled out.

But the University recognizes that there are many layers to economic development in a neighborhood like this. And as Manier says, “Small businesses are an incredibly important aspect of [those layers].” Each type of business has its place. We will always have a need for niche and neighborhood-based businesses, but “Treasure Island and Five Guys fit in there as well.”

For his part, Lucy stresses that “the University is definitely an aspect of the community—but it’s only a piece.” The question is how that piece and its adjacent slew of big businesses fit into the whole puzzle.