This week’s Green Scene column in Crain’s Chicago Business: Green sandwich shop Hannah’s Bretzel eyes new location, city honor

Florian Pfahler of Hannah’s Bretzel

With the prolonged recession forcing some eateries to scale back or close, Hannah’s Bretzel LLC, an organic-sandwich shop with two Loop locations, is moving forward with plans to open its third spot next month at 131 S. Dearborn, just a few blocks from its other storefronts.

The fast-casual restaurant is known for its “uber” sandwiches, piled with organic and local veggies, cheeses and meats. These  ingredients are stacked between a  house-made “bretzel” (the German word for pretzel) or multigrain bread. 

This week, Hannah’s Bretzel made the list of finalists in Mayor Richard M. Daley’s GreenWorks Awards for 2010, sponsored by the city of Chicago’s Department of the Environment. Florian Pfahler, the German-born entrepreneur who launched Hannah’s in 2005, was one of nine finalists in the Innovations in Green Business category. In a Fast Pitch competition Tuesday night at the Merchandise Mart, Mr. Pfahler had three minutes to convince a panel of judges and audience members that his company should take the top prize. The winners will be announced sometime in November.

Mr. Pfahler, 46, left his advertising job at Leo Burnett to open the first Hannah’s Bretzel at a time when he believed people were searching for nutritious fast food as part of a healthier lifestyle. 

He lets his customers know where their food comes from and posts calorie counts. For example, the organic turkey and farmhouse cheddar sandwich has fresh apple crisps, organic field greens and roasted red pepper aioli; comes on an organic bretzel baguette; has 460 calories, and is 71.8% organic. In addition, about 95% of his packaging materials are compostable and biodegradable — what Mr. Pfahler believes is essential for any food business that dares call itself green. 

Hannah’s Bretzel at 180 W. Washington (photo from the Serious Eats blog)

Revenue is up 30% this year over 2009. The catering portion of his business currently represents about 25% of that total and is expected to keep growing. Mr. Pfahler has plans to continue expanding in the Loop and beyond in the next couple of years.

Crain’s met with Mr. Pfahler recently to discuss the challenges of running a green business in a food sector that produces lots of waste and finding the same organic produce for his signature sandwiches week after week.

Crain’s: How is it possible for you to expand your business in a tough economic environment when other eateries are cutting back or trying to hold onto the customers they’ve got?

Mr. Pfahler: When I started this business, I saw a consumer trend that people were pursuing a healthier lifestyle, and some marketing studies showed they’d eat healthier if the food was tasty. We focus on organics and whole-grain nutrition. I never say we make the tastiest sandwich in Chicago. We let our customers say that. I’m expanding because we show solid growth in customers, in average check and in revenue.

Crain’s: You emphasize that sourcing organic foods and using eco-friendly products are as important to you as earning a profit. How do you balance those multiple goals?

Mr. Pfahler: We look at the cost of doing something a conventional way and then doing it the green way. Our food, packaging and beverage costs are between 30% and 40% higher than conventional products, so we come up with a number for our prices that represents the difference. But if we do this, we need to be transparent about our commitment to organics, nutritional information and the biodegradable products we use. That creates an environment that allows us to charge a premium, and the customers that we attract are ready to help us finance all that.

Crain’s: Customers who come into a sandwich shop expect the same ingredients in something they’re used to ordering week after week. How do you provide that kind of consistency when sourcing organic and local products is sometimes less reliable than buying conventional foods?

Mr. Pfahler: If you eat at a restaurant like Blackbird, you go back two months later and you don’t want to have the same thing again. You want seasonal stuff, and that affords them to be more flexible. In my business, it’s all about consistency — people want that same sandwich day in, day out. If I tell them I don’t have tomatoes today because my local producer didn’t bring me any, they’ll look at you like you’re from the moon. The expectation is that we will have it.

Our choice is organic first, local second; third would be just available non-sprayed, and fourth is conventional. When we started five years ago, it was much harder to get consistency in organic products. Today, the market is much broader and we can source organic ingredients from five or six vendors. We work with local farms, including Genesis Growers (St. Anne), Kinnikinnick Farm (Caledonia) and the Green City Market. It’s been more challenging in the winter, so we go with Testa (Produce, a Chicago-based distributor).

We want Testa to create a cooperative for produce because it makes no sense for me to establish relationships with many little farmers. If a farmer tells me it’s raining today and they have no tomatoes, I might have to hop in my Mini Cooper and go to Whole Foods to get tomatoes. But we’re in a much more reliable place of sourcing today than when we started.

Crain’s: What’s the biggest challenge in trying to be a green business in the fast-food sector of the restaurant business?

Mr. Pfahler: We don’t generate a lot of food waste, most of it is in packaging — napkins, bags. Our bags used to be made from paper in Germany that was printed in China, shipped to California and then driven across the country. A customer in our store says, “Give me that sandwich,” we put it in a bag, they go sit at the counter, eat the sandwich and then they dump the bag into the trash. What a waste of energy — it irked me every time. Now the paper is printed and made in Illinois by a company that recycles 99% of its own waste. That paper is also compostable and biodegradable.

A lot of food companies that say they’re green really shy away from the core, which for me in the fast-casual food business is the waste generated in packaging. Lots of people in the food business are green in many areas, but they still have plastic, non-recycled napkins and styrofoam. That’s not a green restaurant to me, I don’t care what kind of labels they have in their window.

Crain’s: Did you have similar packaging issues on the catering side of your business?

Mr. Pfahler: Yes. In the very beginning, we bought wooden and porcelain plates from Crate & Barrel and used those for catering. We brought them to our customer, and when we went to pick them up, they were gone. Lots of people took them home because they thought it was lovely stuff. It happened a few times, but then we stopped.

So we switched to those big plastic trays, but they’re made from oil, and they probably came from countries we find questionable. The tray and a plastic dome was sent three blocks from here, they opened it up, they ate the food, then they dumped the tray. I hated that.

Now our catering packaging is biodegradable. It’s not pretty, but there’s only one style right now. It’s not up to my standards of design that I’d like to see, but I think it’s more important that it’s biodegradable.

Crain’s: So far, you’ve concentrated your sandwich shops in the downtown business district. Do you have plans to expand beyond the Loop?

Mr. Pfahler: We can easily open up seven or eight locations in the Loop before we split into neighborhoods, which we plan on doing. As long as the numbers are there and we don’t sacrifice the contract we have with our customers to provide fresh, organic food every day in a transparent way, we will be able to grow the business. I’d like to open three locations next year, and in 2012, I plan to open in New York, then Washington, D.C.

Of course, then there’s economic events that are out of my hands. It’s great to have plans, but talk to me in two years and I’ll tell you where I am.


In other green news this week:

Steel manufacturer ArcelorMittal and the U.S. Department of Energy are breaking ground Thursday on a $63.2-million boiler construction project in Indiana Harbor that is expected to result in substantial energy savings and economic benefits. ArcelorMittal received half of those funds in a matching grant of $31.6 million from the Energy Department as part of the American Recovery and Reinvestment Act a year ago. When completed, the new boiler facility will enable the steel manufacturer to generate 38 megawatts of its own electricity, reducing the need to purchase energy from external sources. The energy efficiencies achieved are estimated to reduce greenhouse gas emissions by 340,000 tons a year. The project also is expected to create more than 500 jobs during the design and construction phases.

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This week’s Green Scene column in Crain’s Chicago Business: Scaling up local efforts to make older buildings more green

A new program aimed at encouraging Chicago and Rockford-area building owners to do energy-efficiency retrofits is one step closer to kickoff after the non-profit CNT Energy was named coordinator of the effort this week.

The retrofit program is being funded by a $25-million federal grant from the American Recovery and Reinvestment Act awarded last spring to the Chicago Metropolitan Agency for Planning, a regional planning organization for Northeastern Illinois.

In a partnership with the city of Chicago and the city of Rockford, CMAP intends to jump-start energy-efficiency projects on a much larger scale, according to Anne Evens, executive director of CNT Energy, a division of the Center for Neighborhood Technology, which is a Chicago-based think tank dedicated to solving urban environmental problems.

Anne Evens

The program will establish a network of local information about retrofitting, financing options and listings of companies capable of performing those tasks.

Making buildings more energy-efficient is considered critical in the battle against climate change. Studies have shown carbon dioxide emissions from buildings in Chicago are responsible for about 70% of the city’s total emissions, Ms. Evens says. What’s more, Chicago’s buildings — residential and commercial combined — use about twice as much energy as those in other Midwestern cities, she says.

Ms. Evens, 47, is one of the key players assembling the network of organizations and experts that will create the program. She ran the Chicago marathon earlier this month (her sixth) and is used to taking on big challenges. She was instrumental in establishing the Energy Savers program in 2007, which has helped retrofit about 2,800 housing units in the Chicago area at an average energy savings of about 30%. She also played a strategic role in working with multiple organizations and the city of Chicago to develop the Chicago Climate Action Plan several years ago.

Crain’s talked with Ms. Evens this week to discuss the goals of the new program and the challenges of pulling all the pieces together.

Crain’s: What experience does CNT Energy bring to the table that demonstrates your organization is up to the task of coordinating this massive grant program? 

Ms. Evens: We were selected because we’re experts in energy efficiency and we understand energy consumption and how buildings in the region use energy. We run the nation’s largest and most effective multifamily energy-efficiency program (called Energy Savers), so we know how to do it. We have been working on coordinating and planning energy efficiency with the city of Chicago and CMAP and communities around the region for many years.

Crain’s: Can you briefly describe the scope of this grant and the goals of the program it will help launch?

Ms. Evens: The goal is to transform the retrofit market in the Chicago metropolitan region and in Rockford and dramatically increase energy efficiency. It’s looking to try to reduce the transaction costs for getting a retrofit.

For example, we should all be making investments in retrofitting our homes and buildings. It pays back, it’s good for the environment, and it’s good for the local economy because it generates jobs. All of us want to do that, but we don’t for several reasons: It’s too hard and it takes too much time. We’re creating a process that changes that.

We’re going to give building owners the right kind of information when they need it, we’re connecting them with contractors who know how to do the work, and we’re connecting them with financial products to help them pay for it.

Crain’s: How will this program help boost the local economy?

Ms. Evens: We’ll be generating demand for retrofits and connecting building owners with the resources they need to make a decision to invest. Then we’ll connect them with the right financing vehicles, rebate or incentive, and connect them with the right contractor to do the work. On the supply side we’re reducing the cost of acquiring a job and coordinating the contractors and assuring they can do high-quality work.

We’re expecting to create about 2,000 local jobs with this program. Some of that will come from displaced workers in the construction industry. There will also be efforts to employ disadvantaged workers.

Crain’s: How has the grant money been earmarked for use?  

Ms. Evens: Some of the funds will be used to create an information system to push out information to building owners that’s specifically customized for particular sectors of the building market. The most substantial piece of the funding will go to develop financial products for each building sector. some of the money will be used for loan-loss reserves and guarantees in other ways to leverage more private capital investment.

The third pot of money is to help build the workforce piece. We’re going to create a one-stop shop for the contractors and workers to get information about how to be part of the program. We’re working closely with the training partners in the region.

Energy retrofit jobs tend to be pretty small, and if we can reduce the contractors’ cost of finding the job with this coordination function, we can dramatically increase the supply of contractors who will get involved in energy efficiency. There will be a Chicago retrofit ramp-up list of these contractors.

Crain’s: What do you see as the biggest challenges to implementing this retrofit program?

Ms. Evens: I’m sure we’ll be successful in implementing this program because we have good models for how this works already. I think the short-term challenge will be bringing the financial institutions to the table with substantial financial investment. We all know they’ve been skittish about lending. However, in our Energy Savers program, we have $2.5 million out on the street, zero defaults and no problems with repayment at all.

Once we present that loan performance data to financial institutions, we know they’ll see a positive experience in energy-efficiency lending and will continue to invest.

Crain’s: When are all the pieces expected to be in place for the program to be ready for its official launch?

Ms. Evens: We’re anticipating it will be ready to begin in the summer of 2011. We’re busy right now pulling together all the partners to coordinate the program. That will include creating a marketing and awareness campaign, building the information system in the next several months and bringing the financial institutions together to figure out what the market can offer in energy-efficiency financing.

The three-year program (tapping the federal funding) is really just a startup. CNT has been working on energy efficiency for 30 years, so this is a chance to scale up and transform the market. We’re not just a three-year grant administrator for this program, we’re building systems that will last.

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This week’s Green Scene column in Crain’s Chicago Business: Electric-car charging firm sparks Midwest market

A Tesla recharging at one of the Carbon Day stations inside the Parc Huron garage

Carbon Day Automotive LLC is betting its business on the expectation that electric vehicles will soon share the Midwest’s roads in significant numbers with their gas-guzzling and hybrid counterparts.

The Chicago-based startup is selling charging stations for electric vehicles to parking garages, apartment building owners, municipalities and others throughout the Midwest in anticipation that many of today’s drivers will opt for plug-in cars when dealerships begin selling them locally, says Brian Levin, one of Carbon Day’s four private owners. The two-year-old company is the sole Midwest distributor for Coulomb Technologies, a California-based electric battery charging station manufacturer considered a leader in its sector.

You can find Carbon Day’s charging stations scattered throughout Chicago, including: the garage at Millennium Park, many of InterPark’s public parking garages and the dazzling new Aqua apartment building near the lakefront. The city of Chicago has one solar-powered station as a demonstration project at Northerly Island. And Exelon just inked a deal to purchase 36 of them for its Commonwealth Edison electric car fleet.

There currently are about 200 zero-emission vehicles already on Chicago’s roads that need charging stations to plug in and juice up, Mr. Levin estimates. Depending on the car you own, EV batteries need to be recharged every 40 to 100 miles of use.

The highly anticipated Nissan Leaf and Chevrolet Volt electric vehicles are rolling off the assembly lines and will be available soon in the U.S. However, neither automaker has included Illinois or most other Midwest states as part of their initial launch. Tesla Motors, a high-end electric car manufacturer, opened a dealership last year in Chicago. There’s about 65 of them on the road, but don’t expect to see them everywhere just yet: The Roadster model will set you back about $100,000 before you can drive one off the lot.

Despite the limited number of EV drivers cruising around locally today, Carbon Day’s owners are optimistic sales will take off as soon as those cars are widely available in Illinois and the surrounding states.

The early signs are promising. Carbon Day has sold and installed close to 60 charging stations in Chicago and will be up to 100 in the next few months. An additional 70 have been installed throughout its 10-state territory in the last year. Mr. Levin, an exuberant 28-year-old, expects to sign deals for about 500 installations in the Chicago area and 1,500 more scattered throughout its territory by the end of next year. They just signed a deal to sell 24 stations to Madison, Wis.-based Gas & Electric Co., and Carbon Day is the official vendor to the state of Minnesota.

Crain’s met up with Mr. Levin recently. He showed off one of the company’s charging stations at the Parc Huron LEED-certified apartment building near its River North headquarters and talked about how the product’s sophisticated network will appeal to both buyers and EV drivers.

Crain’s: How challenging is it to sell charging stations in the Midwest when there aren’t many electric cars on the roads yet?

Mr. Levin: It’s the chicken before the egg. We’re trying to build the infrastructure and wave our hands to the rest of the country to say, “Bring your electric vehicles here and put them in our dealerships.” The cars will never come if there aren’t public places to plug them in. But I’m optimistic because we’re an energetic company and we’re finding progressive companies and municipalities to work with.

Brian Levin

The more the public sees these charging stations, the more it will become ingrained that this is something to consider. Right now, our efforts are about demonstration as much as they are about an amenity for EV owners.

Many companies are buying them now for marketing purposes. The charging stations get prime parking spots in most garages where they’re being installed. If they do an $800,000 retrofit of their lighting or install solar panels on the roof — no one sees that. This is something that slaps everyone right in the face when they walk onto a lot. It tells everyone, “We’re green,” and it’s a much cheaper way of demonstrating that to the public.

Crain’s: What are some of the benefits that inspire corporations and municipalities to invest in charging stations?

Mr. Levin: A building owner or retailer can log in and see which charging stations are in use, how much revenue they’re generating and how much energy they’re using. The owner of the lot collects money from people parked there recharging their batteries, and they pay the utility company for the energy supplied to their customer. Some owners of the stations are giving away the energy for free as an amenity, some might charge per hour, or per session fee. The amount of money they make is automatically deposited into their account at the end of the month.

For municipalities and EV fleets owned by corporations, they can track how much greenhouse-gas emissions they’re saving by using these cars. Many of them have to report this data, so they can look at how much gas they’re saving by using electric cars instead. They might also want to share this information with their customers.

Crain’s: You have some cool applications that link EV owners to a sophisticated network. Can you explain how it works?

Mr. Levin: Every driver can go on their BlackBerry, iPhone or Android and hit an app that locates the nearest charging station to wherever they are that isn’t currently in use. If you hit the next button, it will give you the quickest route to get there, using navigational technology. The app will also tell you the price differences of the charging stations that are near you. It’s a very cool real-time application that Coulomb designed.

When you get to the charging station, you can use your ChargePass account, like an I-Pass account, that will debit your account and automatically replenish it when it gets low. You can also use your credit card, and you can start charging your battery from your phone, or stop charging it from any place you might be. The minute the charging station detects that the car is fully charged, it shuts off, sends an e-mail or text to the vehicle owner telling them their charging session is complete.

Crain’s: What kind of competition are you finding in the local market?

Mr. Levin: As of right now, we know of no other products being installed in Chicago. We have a two-year head start on other companies, but we expect some competition down the road. There’s about seven or eight other companies nationally coming out with charging stations, but we’ve got a proven track record and some of these companies are still in prototype stages. Coulomb has thousands of them installed throughout the world.

Crain’s: What kind of car do you drive?

Mr. Levin: I don’t own a car right now, but our company has two electric vehicles that I can use. We have a ZAP electric car and a converted Prius. It used to get 40 miles to the gallon and we added some features so now it gets 100 miles to the gallon when it’s in the blended mode. I also use I-GO Car Sharing, which has lots of hybrids and will soon have electric cars too.

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This week’s Green Scene column in Crain’s Chicago Business: Clean Energy Trust aims to make Illinois a clean-tech contender

Imagine Chicago and Illinois as the Midwest’s center of clean-technology innovation and investment and you can begin to understand why the Clean Energy Trust was created.

The idea for the non-profit was hatched by a powerhouse group of Chicago business leaders engaged in the green economy (think Nick Pritzker, Michael Polsky) and Jerry Roper, president of the Chicagoland Chamber of Commerce. The organization was launched last spring and aims to identify promising young companies and scientists working on ideas with commercial potential in a variety of clean-tech industries. The sector includes renewable energy, next generation transportation, smart grid, and energy efficiency.

The trust will help some of these contenders get financing to propel them into the marketplace. In addition, the group will provide entrepreneurs with mentoring and access to free consulting services from advisers with clean-tech expertise.

It didn’t take long for the trust to attract attention — and funding. The U.S. Department of Energy last month awarded it a $1-million grant to be used, in part, as seed money for startups and university-based projects that need a boost. The state of Illinois kicked in $25,000 from the Department of Commerce and Economic Opportunity, and an additional $1.5 million worth of in-kind services and cash was contributed by partner organizations and the board.

For starters, the trust will put that federal grant to use by launching a business competition this week that will award $100,000 to an entrepreneur. Entry details are available on the trust’s website. Finalists chosen will present their business ideas to a panel of judges and a small audience on March 2 at the Midwest Alternative Energy Venture Forum conference in Chicago. The winner will be announced that day.

Another portion of the federal grant dollars is earmarked for a boot-camp program next summer to get entrepreneurs in shape for the challenges of starting new companies in the clean-tech sector.

Amy Francetic, executive director, is at the helm of the organization. A self-described serial entrepreneur and science junkie, Ms. Francetic, 43, honed her business start-up skills in Silicon Valley with information-technology companies. The Midwest native returned to Illinois in 2005 and is now putting her entrepreneurial and mentoring talents to good use in the emerging clean tech sector.

Amy Francetic

Crain’s recently spoke with Ms. Francetic to learn more about the trust’s goals and how larger corporations in the region can help nurture the right kind of clean energy innovation.

Crain’s: How did the Clean Energy Trust’s founders define a need for this organization, and why was it structured as a non-profit?

Ms. Francetic: There’s a lot of activity in clean energy but no one organization focused on innovation in this sector, so we’re trying to stimulate increased activity at that end of the spectrum. We applied for a 501c3 (not-for-profit) status with the IRS because part of our mission has an economic development component to it. We’re trying to create new businesses and jobs, and foster wealth creation in clean tech initially in Illinois and then in the greater Midwest region.

We also knew that in order to be successful in clean energy we had to bring together public and private sources of funding. When we studied similar organizations around the country — such as NextEnergy in Michigan and the New England Clean Energy Council in Boston — we could see there was a clear role for the federal and state governments to play in development of this sector. We want to marry that and leverage that with private capital.

Crain’s: What types of companies and scientists is the trust looking to assist, and what kinds of financing and services will be available to them through your staff, board members and outside advisers?

Ms. Francetic: We’ll work with an entrepreneur or scientist with a good idea right up to a start-up company that’s trying to grow. We did not put a hard stop on the upper end of the spectrum, so we’d consider a young high-growth company that’s been around for a few years with no revenue yet or a company that has under $10-to-$20 million that wants to grow more aggressively.

They might need cash, larger customer introductions, or they might need federal funding. A company that has a heavy manufacturing component may be eligible for some of the federal loan guarantees and other big chunks of money. But knowing how to navigate that system and win that money is really hard to do. We’re here to give them that guidance.

If they’re at a pre-customer stage, we’ll help them refine their customer pitches and business model. They might need management leadership or specific facilities support. We can help them get into the right lab or facility to develop and grow their business. Companies have a variety of needs, so we’ll try to fill in as many holes as we can.

Crain’s: What’s your opinion of the startups and university research projects already under way locally?

Ms. Francetic: We’ve seen so many cool companies, and we haven’t even really marketed ourselves yet. We see activity in smart grid, energy efficiency, solar technologies, IT companies focused on supply chain in renewables and next generation battery technology.

We also have all this amazing scientific leadership at universities in this region. Supporting these scientists and bringing their ideas to market is a long and difficult process and requires really specific kinds of support. That’s partly why this organization is needed.

Crain’s: Is there a role for larger corporations to play in guiding these young entrepreneurs that your organization identifies as potential success stories?

Ms. Francetic: We have some incredible Fortune 500 companies right here, and we’d love for them to become partners with us to help us make sure we’re looking for technologies and innovation that supports business needs they have. We’re really seeking corporate leadership that can tell entrepreneurs what large energy companies and manufacturers want and need from clean tech startups. Researchers in the labs also want to be relevant, and the federal funding has a requirement that you have a commercialization plan.

Crain’s: How will you determine whether the Clean Energy Trust is a success? 

Ms. Francetic: We’re going to try to measure our success on outcome-driven metrics. We’ll look at how many companies and jobs we helped create. We’ll look at how much capital has been attracted to the region by those companies. That could be investment capital or revenues they’re generating.

The federal grant we won runs for three years. Our hope is to leverage that $1-million grant into additional sponsorship of the trust. It’ll be a good validation of what we’re doing.


In other local green news:

Biowish Technologies gets cash infusion: Biowish Technologies has received $11.5 million in venture-capital funding to buy the manufacturing assets and customer base in Thailand owned by one of the biotech company’s three founding partners, according to Rod Vautier, president and a founding shareholder. The cash infusion came from two private investment firms that already have ownership stakes in Biowish, which recently moved its global headquarters to Naperville from Australia.

One investor is a specialty environmental and medical investment firm based in Boston, and the other is an Australian firm. Mr. Vautier declined to name them, but added that Biowish will have access to an additional $2.5 million from the combined firms in the near future.

The privately held biotech company manufactures a line of about 20 consumer, animal agricultural and industrial waste-water products derived from a novel biodegradable technology. The products are manufactured in Thailand and are sold in the U.S., the United Kingdom, Australia, Turkey, Malaysia, Thailand, Colombia, Ecuador and Mexico. The cash payment was made to Wisuit Chantawichayasuit, a scientist from Thailand and the partner who developed the technology.

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