Belly Up

...to the bar. Although fans of the scene at Claddagh might think that their favorite watering hole is going belly up.

Kevin Blair, once an operations manager for Supermac's in Galway, had a dream of bringing the Irish pub to America. That's what the Irish do best, after all, travel to the four corners of the globe and build pubs there. Mr. Blair got the backing of his boss, Pat McDonagh, who no doubt thought it was grand to start up a new restaurant chain that was not fast food. He'd be a fool to bring Supermac's to America and try to outdo McDonald's. And so, Claddagh was born.

Like so many entrepreneurs who taste success, Mr. Blair expanded his restaurant into a seventeen unit chain, but he burned through Mr. McDonagh's initial $20 million seed capital in about four years. There was no American investor willing to buy into the expansion plan, and Mr. McDonagh was not going to drop another bundle of cash into the scheme either. By that point, Blair must have been feeling slighted, with his restaurants doing well but his urgent need of cash going unmet by the man he thought was his financial partner.

A judge in a Dayton, Ohio bankruptcy court appointed a trustee to oversee management of the Claddagh restaurant chain, and then he told Mr. Blair that he owed Mr. McDonagh two million dollars. Apparently the judge agreed with McDonagh, that the Supermac king was not an investor in Claddagh, but a lender, and Blair owed him interest on the loan. Oh, and Blair has to pay back the $20 million as well.

Chances are, the Claddagh restaurants are doing fine, bringing in customers and all that jazz. Expanding too quickly, where rational thought is suffocated by greed, has led many a businessman to bankruptcy court. Who can say if Kevin Blair was on the pig's back, as Mr. McDonagh claimed, or scraping by on a pittance, as Mr. Blair asserted. Anyone familiar with the elaborate stone cottage look of Claddagh could guess that the restaurant cost a fortune to build. Financing that sort of construction would take a lot of money, and it's hard to imagine that a new enterprise could have the kind of cash flow needed to pay for that many new buildings in such a short period of time.

Sure there's economies of scale that lower operating costs, but in this case, the financial strain of achieving the critical mass of restaurants caused the company to implode. Too much too soon, but isn't that the way with the hard-driving entrepreneur? Many are called, but few make it to the ranks of Pat McDonagh and Ray Kroc.