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Gringos Restaurant Closes Doors: What Went Wrong?

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Gringos Restaurant opened in Chelem in February of last year, with an advertising blitz and the announcement, “Finally… American food in Chelem.” The restaurant appeared to be doing everything right. They had the menu, the spectacular beachfront location, and the much-needed community events and features, including nightly movie screenings on the beach, karaoke parties, huge holiday buffets for displaced extrañeros, and an English-language book trading rack. Everything seemed to be in place to establish a gathering place in Chelem for Americans and Mexicans alike.

Behind the scenes, however, there was much more going on. Terry, the American owner of the restaurant, was experiencing challenges that most small business owners would never expect to encounter. The restaurant unceremoniously closed one week ago, a short year after opening, to the surprise of many. We sat down with Terry to try and figure out just what went wrong.

DroppedIn: How did you make the decision to open a restaurant in Chelem, and what were some of your goals for the business?

Terry: I had been soliciting people to come into town to open a restaurant, and finally decided to just do it myself. Having lived in Chelem for over 2 years, I hated the fact that there was nowhere to go for breakfast or dinner, and [when you did go out], about all you could get was fish. I had been talking to the American (meaning American and Canadian) population, and they all said they wanted someone to open a restaurant in the area. I felt like it was a staring contest, waiting for someone to make the first move. I got impatient and just did it.

DI: What was your goal for the restaurant?

T: I hated the fact that all the Americans lived in walled compounds, closed off from the community. I was not much better, by the way, but I’m not afraid to mingle…I just don’t. I hoped to have a place for everyone to get together and hang out. Really more of a community center. I figured American food, because you go with what you know.

DI: What kind of research did you do within the community?

T: I began by first asking the Americans what they wanted, if someone opened a restaurant. They said, “comfort food, a place to hang out with friends, and somewhere to go in the evenings,” because the town was dead after 5:00 P.M. I had my friends who speak Spanish help me ask the locals. What I was told was, “a place to go after work to have coffee and desserts. Something to do in the evenings, and a place the moms could bring their kids.” They wanted different food, and when I asked what kind, they said “hamburgers.”

DI: A little something for everyone, then. Choosing “Gringos,” as the name for your business was a brave choice, given the potentially negative connotations of the word. Was that something you were nervous about?

T: First off, I did not think naming the place, “Gringos” was that big a deal. The locals call me, “El Gringo.” They have never used my real name. The word means foreigner. I did ask around a bit (maybe 10 people). The Americans thought it was cute, and the locals did not have any negative associations with the name.

Once it opened, a lot of the American community was offended. To me, that was just being overly politically correct and, I feel, posturing. Someone in the world has to have a sense of humor. Besides, I am a gringo.

DI: Did you experience any kind of resistance from the community when you opened your doors?

T: God yes! The mayor owns a restaurant in town and did not want competition. He held up my permits for the entire summer season so I could not compete with him. My “temporary” alcohol license was from July 1st till August 31st. Rocky (the Mayor), held it up so I got the license on August 25st, while still expiring on the 31st. This 2 month period supports the restaurant for the rest of the year. I did not have the cash to continue without borrowing more from my investors.

DI: What unexpected obstacles did you encounter as a small business owner, as the restaurant began to develop and take shape?

T: “Obstacles” are such a cute word and such an understatement.

Let’s start with the Mayor. In July, I was open but could not sell beer, already limiting my client base. Rocky sent the police every day for the entire month, to shut me down for selling beer. Imagine how your customers feel, when 3 pickup trucks full of men in fatigues pull up out front, jump out and start running through the restaurant with Uzis drawn. I tried to diffuse the situation. The first day it threw me, the second day I announced, “The police are here, let them through,” and the third was, “Hey guys, you want a Coke?” After that, even the police could not take the searches seriously. It became more of a stop in for sodas and lunch for them. I’m sure this made the Mayor even angrier.

I was also caught between election terms here in Yucatan. My permits were negotiated with the old administration, but needed to be approved by the new one. My alcohol permit was to cost 15,000 pesos, but when we went to get the signatures for the permits, we found the old administration had shredded all paperwork having to do with my restaurant, so we needed to start over. The new administration wanted to meet with me to discuss my permits. I had my Yucatecan Mexican lawyer going to all of the meetings, because I was concerned about prices changing once I became involved. When I went in for the first meeting, I was given a once over by the administrator who said, “Because your restaurant is so beautiful you need to pay more then anyone else. Your permit price will be $100,000 pesos.” My attorney was speechless.

We fought for the next two months about permits, and finally, I got a temporary permit for the summer for $25,000 pesos. But they would not physically give it to me, because of the Mayor.

My employees, in uniform, finally staged a coup, and went and surrounded the [municipal] building, blocking the president from exiting. She hid in the building for four hours, and finally gave up, came out, and my employees explained that if she did not help me get my permits I would close, and they would all lose their jobs. I had the permits the next day, but I had to meet with her.

She would not back down on the $100,000 pesos once she saw me. After numerous meetings and three sets of attorneys, the last attorney’s brother was the former commissar for Progreso. He showed us the law for Yucatan that said, “Luxury restaurant pays 25,000 pesos for period of administration.” I had already paid this for my, “temporary” permit. Reina (the current commissar) could not close me down, but, because I refused to pay the $100,000 pesos she wanted, she would not give me the actual permit papers. This left me in limbo, not being able to utilize the beer companies, or get my final state permits to operate. I could have continued the fight to get the papers, but I was out of money.

I had also hired mostly women and locals to work in the restaurant. This was a risk on my part but over the last 2 years I had so many women knocking on the door of my home asking for work (with a kid on their hip), I figured, let’s give them jobs where they can be close to their kids. If you have been in most restaurants in Mexico, all the waiters and staff are men. I did not realize how unusual I was being. The men in the town were angry, because I had not hired them.

Then, the rumors began. First, it was that the only reason the women worked at my restaurant was to be hookers. This made for a fun evening for me, when the husbands [of the town] came and accused me of pimping their wives.

The next was spread by a women campaigning to be the sheriff. This rumor was that I was drugging my employees, and having sex with all the women. All of my employees wanted to quit at this point, and while I could understand their concerns (it is a small town), I explained that if they did quit, the town would believe the rumors and their reputations would be in question. The best thing to do was stay and prove the accusations false. My employees all stayed.

My worst problems were with the male employees. They felt entitled to more then the women, so they pocketed the tips, did not work as hard, and really split my staff. I confronted them and they quit.

Because of cultural differences, my employees would not talk to me directly. I was the patron (like in The Godfather). They would not say anything to me directly, but they would talk to Cris, who worked for me, and he would then tell me what they wanted. I could never understand this. My chef, however, understood this perfectly and used it to his advantage.

Other problems were with the towns people. They would not come into the restaurant if there were any Americans inside. They literally would stand out front and look in, and if they saw Americans they would leave. Sometimes they even came back and checked later. If none were inside, they would come in. This was the obstacle that finally did the restaurant in.

DI: In addition to the unbelievable problems you just described, it seems like trying to appeal to both Mexicans and Americans may have been part of the problem. Do you think there is a way to have a business that can appeal to these very different cultural groups? Or does the focus for a business have to be on one or the other?

T: Yes, there is a way to appeal to both groups. I just failed at it. I did not understand the people as well as I needed to.

The Yucatecan society is very limited by the social status and the social image. If you consider opening a social oriented business (restaurant, video bar, cafe bar, disco, etc.), you must think very carefully about to which social sector you will orient your business.

If the Yucatecans cannot identify the, “category” of your business, they don’t go there.

I will explain by example:

The owner of, “El Pocito,” a mid-day restaurant-bar near the Itzimná park. To attract clients, he offers free lunch with no drink minimum. For one beer, you get lunch. At first sight, it is a great plan, but…people don’t go to El Pocito! Why?

The reason:

The people can’t clearly see the category of El Pocito.

El Pocito looks very casual for people with a high income, but it also looks too fancy for people of low income. The result is that El Pocito is in a kind of “category limbo”, and for Yucatecans, the image is everything.

Another example:

A dinner for two at Trotters restaurant has a minimum cost of (more or less) $500 pesos, and on the weekend [it is so crowded], you wait for a table. Why will some people go to Trotters, and pay two or three times more than in other places for dinner?

Answer: Trotters has a very clear “category image.” The image is a luxury place to go see “nice” people.

On the flip side:

In the “Parque de las Américas,” there is a trailer called “Tortas de Carne Asada.” Each torta costs $15 pesos, and there are ALWAYS people waiting to buy tortas. Why?

Answer: The trailer shows clearly his “category image.” The people know exactly what kind of product they can find there.

It proves that the price is NOT the most important for Yucatecan consumers, the image is.

No matter if you sell $15 peso tortas or $300 peso gourmet dishes, the most important thing is to define the client, and give your business the correct image.

I wanted a casual burger joint on the beach, but being a designer, I designed a space too sophisticated for that image. I think had I been more casual, and less sleek, it would have helped a lot to define the category of the restaurant.

DI: What was the most satisfying moment you had as a restaurant owner in Chelem?

T: Honestly, there are not a lot of “satisfying moments.” This really was painful. The three best days, were my buffets for Thanksgiving and Christmas, when I had all the Americans in the area for what were really big family parties. And I did a cumpliaña (a 15 year old’s birthday party). I had 350 people from the town. They had a great time.

But with all of this, the Americans and locals did not interact at all. No locals came for Christmas or Thanksgiving. I really wanted to get them in the restaurant, so I put up signs in town, offering them to come for free and asking my employees to bring their families. No one came. I even had Santa and a bounce house for the kids.

At the cumpliaña, I was the only American in the place.

DI: At what point did you begin to sense trouble with the business?

T: From day one, when the police showed up.

DI: It must have been tempting to walk away at that very moment. What made you finally decide to close your doors?

T: It all came to a head at about the same time. My chef was stealing from me. I had not been close to breaking even while he worked for me, but once he was gone I broke even within a week.

Until the vendors started asking for their “back invoices.” Carlos (my chef) had not paid them in full in several months. He had paid roughly 30% of what had been owed, pocketing the difference.

Then, my employees got up the courage to ask me when they would be paid for October. Carlos had taken their pay, telling them I had no money. They had worked without pay for 6 weeks without saying anything, because they cannot talk to the Patron.

Then, Carlos tried to blackmail me for “back pay,” claiming he had not been paid in three months. He was going to the labor board, which is set up against the employer. I filed charges with the police, and he began spreading a new round of rumors in the town. What little support I had in the town was gone at that point.

Without the town support, there is not enough of an American community to be the only clientele.

My investors said, “enough already,” and cut off my funding.

DI: Looking back, what things do you wish you had done differently, that may have made the restaurant more successful?

T: If I were going to open a restaurant here again, I would have a Mexican business partner who fronted everything, and I would have been a silent partner in the background.

DI: Do you have plans to open a similar restaurant, or other small business in Mexico? What’s next?

T: No plans at this time. If I did open a similar restaurant it would be in Merida, where the only officials involved are the state.

I am working with an investment company with billions of dollars to invest overseas. They were talking to me about investing 500 million in Yucatan. We were going to build a green movie studio, hotel, and spa.

I will probably tell them not to bother. The government is so anti-business that I cannot in good conscience tell them to come here without full government support. This makes me very sad.

DI: Anything else you would like to add, or would like people to know?

T: Calderon is pushing for new business and to get foreign investment in Mexico. While the state of Yucatan has not been a problem, the local government is so petty and shortsighted that they are destroying all opportunities.

Gringos restaurant might have failed anyway. After all, I had no experience in running a restaurant. But we will never know, because for the entire year all I did was fight with the local government over permits, spending all my money on lawyers. I never could focus on the business I tried to open.

Yucatan has so much potential. It is a shame that a few greedy politicians can cripple the area so completely.

There Are 10 Responses So Far. »

  1. Great interview. Thanks so much for showing some of the difficulties faced by some businesses here. The Yucatan is a wonderful place, but it is not heaven on earth. Articles like this give some balance to the glowing reports that one encounters elsewhere.

  2. Congratulations on differentiating yourselves from many of the other bloggers whose posts tend to be biased towards supporting tourism and real estate. Tell the truth and let the people come to there own conclusions. Though a word of caution is warranted. A Miami blogger was just sued for $25M by a condo developer for telling the truth about the Miami real estate market and the development in question. Having lived and conducted business in Mexico and being married to a Mexican, my experience is that Mexicans do not tend to use their “legal” system as a first measure of recourse. They are more apt to take matters into their own hands. Neverless keep up the great work!

  3. “I had my friends who speak Spanish help me ask the locals.”

    In a nutshell, this looks to be the problem. I don’t fault the guy for trying, but it doesn’t look as if he understood the local business culture… or local culture.

  4. Although I am not from Yucatán my parents lived in Merida and Valladolid for 5 years. My dad tried opening a taller mecánico (gave up his job at Volkswagen for it too!) and 2 years later had to close it down. The entire experience was pretty shitty (a lot of what you describe) and he is Mexican, although he is a Chilango (from the DF) which could be considered just as bad as being a foreigner.

    It’s disgusting how corruption and pettiness can ruin what otherwise could have been a great thing for others (a fun place to hang out, jobs, advertisement for the town, etc)….

    I do however agree with Richard Grabman… Perhaps the fact that you had to rely on others to communicate in spanish played a greater role that you think (more even than the image thing?)…

    In any case, kudos for trying and for having the guts to talk about it.

    Fned.

  5. Such an interesting discussion about the category definitions! Definitely something to think about, and I found that very insightful.

    However, I can’t imagine opening a business in an area of the country with few English speakers without speaking Spanish. In my experience, Yucatecos generally find it insulting that one should attempt to live amongst them and work without speaking Spanish and a bit of Maya.

    And the first thing I thought of was why in the world would a family of Yucatecans care at all about a Thanksgiving celebration? The same goes for Xmas…the only Mexicans I know that would leave their home for Noche Buena are upper middle class. That night is reserved for being at home with extended family.

  6. I am just curious. How well does Terry speak the language?

    T-

  7. What a shame. We ate there a couple of times…no one else in the place. Good food, too. It just seemed a little out of place in that small town.

  8. Sad story, but charging 6.50us for a burger probably wasnt the best way to get the locals in

  9. I sympathize with Terry, having suffered a similar fiasco myself, but I’m astonished by his naivete. Even before moving there, I would know enough Spanish to do without English in most situations. And I certainly wouldn’t have lived in a gated community. (If crime was a problem, I wouldn’t have moved there.) Finally, I would for damn sure have developed some close relationships among the town’s business folk before attempting a new business there, and worked out a win-win with that mayor which would have brought us into a mutually supportive relationship.

  10. Cmon, the place was rubbish, Terry sat on his ass playing on his computer while untrained staff tried to run the place, years later Tacomaya, El Bull Pen & Rico’s are all Gringo owned & doing well.

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