Owning a business has never been easy — and that’s especially true when retail space is at a premium. In the past month, two local coffee shop owners, Nicholas Altman of Fractals Coffee Shop and Cafe and Christian Watts of 10th Muse Coffee, have learned that lesson the hard way. After finding themselves unexpectedly priced out of their retail spaces, their business ventures simultaneously dried up, backflipped and recently formed a brand new partnership that they hope will caffeinate the community in an exciting new way.
“There’s been so many weird coincidences,” says Altman. “As stoics, we both tend to believe in a kind of a fate of the world, so maybe it’s just the fate of the world pushing us together.”
That’s not to say it’s been a pretty situation. Before losing his lease, Altman says he poured more than $60,000 into build-outs and renovations at Fractal’s West Asheville location on Haywood Road, a place he says initially looked like a “decrepit office building.” His vision for the science fiction-themed coffee shop, which housed everything from a homemade virtual-reality-equipped TARDIS to a Van de Graaff generator, was to show customers “amazing things you didn’t know existed,” he says.
“I did all of this work, got it up and running, and we struggled at first,” recalls Altman, who used inheritance money from his late grandmother to fund his venture and also put his construction background to good use throughout the renovation process. “After a year, we got it to a place where we were up 32%, seeing growth and a huge stream of regulars. Since we were kitschy in a certain way, and we were doing weird nerd culture, you’d expect more tourists, but we got a big stream of locals.”
Unsurprisingly, Altman and property owner Kevin Franks have differing takes on the situation — but they have both confirmed the following with Xpress. The original lease granted Fractals a monthly rate significantly lower than market value. However, Altman made more than one payment past the due date. That lateness triggered a clause in the lease that allowed Franks to terminate the contract, which he did in September.
Franks proposed a new lease that, according to a written statement he provided, “admittedly would have been more stringent and would have included specific terms to protect other tenants and our family investment.”
Both parties corroborate that the proposed lease withdrew Fractals’ choice of three-, five- and 10-year options and replaced it with a year-to-year agreement. It would also increase the rental rate by at least $1,000 per month. “That was going to erase all the profit I had. So I would either break even or become unprofitable,” explains Altman, who after failing to reach an agreement with property owners was required to vacate the building by Oct. 1.
The Franks family maintained that while terminating the lease was a difficult decision, it was necessary due to recurring late rent payments and Fractals’ failure to adhere to “other terms and conditions of the lease, such as repeatedly altering the property without our consent.”
“We are disappointed Fractals has been unable to keep its commitments and does not want to enter into a new lease agreement, but it is certainly not due to our greed nor lack of support for a strong and vital Asheville,” says Franks’ statement.
Altman says he’d like to focus on what is within his control rather than dwell on the situation — but he is disappointed. “Two years of looking for a building, one year of planning and two years of operation. It’s all taken away in the span of five weeks,” he reflects. “One of the hardest things about closing is it’s been like losing a bunch of friends. I would see some of our customers every day.”
In a cosmic sort of coincidence, Watts found himself in a near identical situation when he suddenly lost claim to 10th Muse Coffee’s decorated warehouse space in South Asheville. The shop had been whipping up pop culture-themed lattes and serving homemade doughnuts for around a year and a half when it closed at the end of September.
According to both Watts and property owner Hedy Fischer, for the majority of its tenure, 10th Muse subleased a section of the warehouse from the now-defunct Eight London Furniture Store. When the furniture shop went out of business, thereby ending its lease early, that also effectively terminated the leases of its sublessors, 10th Muse, American Vinyl Co. and London District Studios.
Fischer says that in an effort to be helpful and fair, she and her husband, Randy, allowed Watts to stay in the space after this termination despite there being no legal agreement between them and 10th Muse.
“We said [to him], we want to give you time to find a place. He didn’t need the whole building, and we also didn’t want to subdivide. We verbally said, ‘If you want to, you can stay for two more months, but know a new tenant is moving in,’” explains Fisher. “4,000 square feet seems to be a size that’s doable for a certain size of business, and we just wanted to rent it all to one tenant.”
When a business named WorldChanging Films offered to lease the entire warehouse, Watts says he had the option to continue renting the whole warehouse for $4,500 a month — up $2,000 from his original rate — but ultimately decided to vacate the space. The last day of business for 10th Muse was Sept. 30, just five days after Fractals shuttered.
“Since I didn’t push to sign a lease with them, I had nothing. I had no leverage,” Watts says. “It’s their building and their money to make. It makes sense to make the money. It’s also pretty painful to displace people’s business.”
Watts describes 10th Muse as being a fun and creative space where folks could enjoy the “pop-culture-y” things in life. “We had tables that were painted with chalkboard paint so you could draw on them, a place for journal entries, a TV that would show a whole program about animals doing cute things or people who are awesome.”
He adds, “[Rather than return on investment], what I work on is return on community. We hosted events at the shop, like our Coffee with a Cop program, which gave free coffee to cops. We did a coat drive and a food drive, all the things you would do to try to contribute to the community that takes care of you.”
Ask a realtor
In a market with more available rental options, it’s possible that Altman and Watts would not have agreed to retail leases that, in retrospect, lacked protection and security. But in the current market, opportunities for viable retail spaces are sparse, especially on the more pedestrian-friendly streets.
“I looked at six leases, and by the time I had gone to sign them, they had already been taken,” says Altman, who waited two years before finding his former location in West Asheville. “I felt if I didn’t do it then, it was never going to happen. I had a paralegal friend vet it. I should’ve had a lawyer. I was afraid if I had too many exclusions [in the contract] I wouldn’t be able to sign, and it would get scooped up by someone else.“
According to Stephanie West, a commercial broker for Whitney Commercial Real Estate Services, the desirability of Asheville combined with its low available inventory is a large factor in why small-business owners such as Altman and Watts have struggled to find affordable retail spaces. In Asheville, the current vacancy rate for retail space sits at 1.7%, one of the lowest vacancy rates in the state, according to Reis, a commercial real estate data firm. Charlotte and Raleigh’s vacancy rates are 4.2% and 3%, respectively.
“This [kind of demand] creates challenges for local businesses who are having to compete for space with larger companies with stronger credit and deeper pockets,” she explains. She adds that “usually the argument we hear from the other side is that an increase in property value should also be an increase in revenue for businesses, which can justify the higher rent.”
West’s advice to small-business owners who rent retail space: Consult with a commercial broker and real estate attorney before signing a lease. She emphasizes that “it’s critical to have a team of professionals to advocate for you during the leasing process.”
Despite these obstacles, Altman and Watts are committed to making the best of their situation. The pair, who knew each other through Asheville’s jiu jitsu community, were inspired to partner because of their shared predicaments and appreciation for the stoic philosophy.
By the end of October, the two plan to launch a joint food truck venture, Fabled Brew Coffee Co. The truck will operate on Haywood Road, not far from Fractals’ previous location. Fabled Brew’s menu will include PennyCup coffee and avocado toast, as well as 10th Muse’s popular Nutella and cookie butter latte and made-to-order doughnuts.
“It seemed like a natural opportunity for both of us to merge forces and resources,” says Watts. “I think it will only add to both of our businesses, to be honest.”
“We have some disagreements, but for the most part I feel like it’s working out well. Worst case scenario, we’ll go to the mats and choke on each other until one of us wins and then we’ll decide it, right?” adds Altman, with a laugh.
And the TARDIS? Currently, it’s in pieces. But the two hope to find a home for it in the future, along with the rest of Altman’s museumlike collection of gadgets, gizmos, puzzles and books. Meanwhile, the partners plan on creating more mobile-friendly puzzles and riddles for their customers at their new food truck location, such as lock-picking contests and chess challenges.
“We’ll start with a pull-through service and hopefully we’ll grow and find an actual space. We’re actively looking for spaces, and if something opens up, we’ll be ready to go. We have three storage units full of equipment. We can set up tomorrow,” says Altman, with a pause. “However, we can’t wait another two years.”
Editor’s note: This story was updated at 1:25 p.m. on Oct. 24 to clarify the details of the business dealings on which Altman and Franks concur.