Scott Jennings is capitalizing on two industries Denver knows best.
His marijuana-themed, fast casual chain Cheba Hut is leasing retail spots in some of Denver’s busiest neighborhoods and pushing into the mountains.
After opening new stores on Colfax and Colorado Boulevard in the last year, Jennings said he has a letter of intent for a third spot on South Broadway near Punch Bowl Social. And he said he is seeking another location near DU; all while nosing around the Tech Center and RiNo.
“Broadway has just a different feel from there to Colfax to Champa Street to (Colorado) Boulevard,” he said. “We feel like we can slide in over there, and we’re also sniffing around in the RiNo area.”
Cheba Hut is a cannabis-centered sandwich shop with a menu packed full of pot puns, including the Kush BLT and the Sticky Icky PB&J.
Locations offer delivery and takeout, as well as a bar at almost every store. Cheba Hut also delivers – as the brand proudly proclaims on its website “if you’re high, they’ll fly.”
Jennings opened his first Cheba Hut in Arizona in 1998. He moved the headquarters to Fort Collins in 2014, and the business now has 17 stores in six states.
Cheba Hut’s first Denver shop opened at 1531 Champa St. in 2009. That’s a franchised location, and Jennings didn’t add another Cheba Hut in town for five years. At the time, Jennings said he was focused on franchising Cheba Huts and launched another venture in The Still Whiskey Steaks in Fort Collins.
The Still is still running, but Jennings said his venture into the whiskey-themed restaurant taught him something about the weed-themed, quick-service brand that was still puffing along.
“Through doing the side projects, I realized how sweet a thing we had going at Cheba Hut.”
Jennings ramped up a Denver expansion plan starting last year.
In addition to the three Cheba Huts open and two or four more on the drawing board in Denver, the first mountain town Cheba Hut will open in Dillion this fall.
Jennings said the bulk of the funding for the new stores comes from cash flow from the others. That’s the same funding plan he’s used Cheba Hut’s inception. But now Cheba Hut is looking at adding debt into the financing equation.
“We are growing slowly because it has been self-funded, and we were using our cash flow,” he said. “Now we’re getting smaller SBA loans in addition to our cash flow.”
Cheba Hut is working on two different models for its new stores. The smaller ones, which Jennings called “flippers,” cost between $250,000 and $300,000 to open. Cheba Hut “flipped” its new Colorado Boulevard location from a shuttered frozen yogurt shop, for example.
Mendel and Company Construction handles the renovations.
Jennings’ “big boys,” like the major rehab it took to turn a beat up Colfax convenience store into a Cheba Hut last year, can cost up to $450,000.
“Nice little flippers are great, because you can do them for less and get them open more quickly,” he said. “But the one on Colfax has its own parking, and it’s hard to find parking over there. It’s really taken off.”
And there’s a limit to how big the big boys can get.
“Anything over $500,000 would make me cringe,” Jennings said.
Then sometimes, you have to take what you can find.
For example, Jennings had plans drawn for a shop near DU before running into a zoning issue that would have forced him to close at 11 p.m.
He’s hoping to cash in on the late night crowd – the East Colfax location does that well – so 11 p.m. wouldn’t do, and Cheba Hut was back on the prowl near campus.
Looking forward, Jennings said he’s focusing on getting more corporate stores up and running in Colorado. He could see up to a half-dozen in Denver. If he gets to that number, he thinks he’ll eventually cut out that drive down from Fort Collins.
“Eventually we’ll probably be headquartering down in Denver,” he said. “We’ll have five or six stores down there and it will just be a matter of when.”
All told, he could be looking at up to 50 or 60 company-run Cheba Huts five years from now, with around 12 more in Colorado. From Dillion, he said he can see just about clear to the Utah line.
“The next exit up is Frisco, so we’ll probably look there,” he said. “We don’t need 50 of these things in the mountains, but Frisco and maybe Grand Junction and another farther west.”
While the corporate side keeps aiming towards five or six new restaurants a year, Jennings acknowledged expanding on his franchising concept could be the way for Cheba Huts to plume out nationally.
He said he’s sketched out what a bigger franchise expansion would look like, but isn’t ready to fire it up. For now, Cheba Hut is allowing current franchisees to add new stores, but isn’t seeking out new franchisees.
“I would want to bring in someone who has done it before,” he said. “It needs to be the right fit, because I don’t to lose our soul while we grow.”
“But if that kicks, we could be looking in the area of 200 or 300 new stores.”