Young and Hungry

Back Alley Waffles Does Back Alley Business

Back Alley Waffles caused quite the stir earlier this week after owner Craig Nelsen blamed Groupon for his business going under, then declared he would sell his waffles for $450 by appointment only.

Now DCist reveals that Back Alley Waffles wasn't even a legal business. Turns out the Shaw waffle shop never received the required basic business license or Certificate of Occupancy. On top of that, the D.C. Department of Health never inspected the converted art studio and sent a cease-and-desist letter three weeks ago after receiving a complaint.

"It was a long drawn out process, and we were going through the right steps to accomplish it," Nelsen tells Y&H. "It's true, we didn't have the money or the time to just sit and wait for permits to come through."

But Nelson claims his business was operating legally because it was making a "good faith effort" to get into compliance. He says that he never received a cease-and-desist letter from the D.C. Department of Health.

The waffle shop owner adds that he's been surprised by all the national media attention his rant against Groupon has received over the last couple days and joked that he wanted to write a book called Failing Your Way to Fame.

He also says he'd like reopen the Back Alley Waffles someday. "We don't have the money at this point," he tells Y&H. "Unless you're looking for an investment."

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  • Aha

    So now this makes sense. He shut his doors because of a cease and desist letter and doesn't want the customers he stiffed to be angry so he blames Groupon for shutting him down even though the numbers don't add up that way at all.

  • DRR

    So this guy claims that Groupon bullied him into a deal that wasn't what he wanted (I guess he can't say "no") and now he just "didn't have the money or the time to just sit and wait for permits to come through." Well there's a rock solid excuse for violating the law!! If it was an "art" gallery before, did they even have a real kitchen? Did the kitchen have running hot water?

  • Dan

    But ... but ... all that reasoned discussion about the merits and ethics of Groupon in the comments section the other day!

    Hilarious.

  • Scotch

    How does one "wait for the permits to come through" if, per DCist, one doesn't actually submit any permits?

  • http://backalleywaffles.com Craig Nelsen

    To Aha...

    The Buildings Dept may have sent a cease-and-desist letter three weeks ago, but if they did, they must have sent it through Groupon, because we're still waiting for it. In other words, that's not why we shut down.

    And please describe for us how I stiffed any customers. They'll all get refunds from Groupon (they'll just have to wait til 2025 to get them).

  • steve

    @Craig,

    Just apologize to everyone and move on. You consistently say that you realize it was your fault, but that's always buried between two diatribes against everyone else on either end.

    The only mistake Groupon made was not doing better due diligence on you and your business. It'd be interesting to see your application/inquiry to them to see if they brought you on based on false numbers/information about your biz

  • Jane

    It's legal because he was trying really, really hard? What an idiot. Usually when a restaurant fails it's because of one mistake compounded over time; this may be the first time I've seen a restaurant do literally everything wrong. It's more amazing that they ever opened their doors.

  • DRR

    @ Craig: Since you're reading through these, can you answer my questions? Why didn't you just say "no" to Groupon if you didn't like the way they balked at offering the deal just for weekdays as you said? Why didn't you do the 30 seconds of reasearch it took to find this on the Groupon website "When do I get paid? Most merchants get paid in thirds—33% after 7–10 days, 33% after one month, and 34% after two months." http://www.grouponworks.com/merchant-services/FAQs

    And most importantnly; If it was an art gallery before, did you even have a real kitchen? Did the kitchen have running hot water?

  • http://backalleywaffles.com Craig Nelsen

    Scotch: In order to get a Health Department permit ($527.00 fee + $70.00 application fee + $25.00 endorsement fee + $62 technology fee) one first needs to have a C of O, a Certificate of Occupancy, which we have. However, to serve food, the one we have has to be amended ($33 initial application fee + $42 additional fee). But to do this we need to get a building permit (fee based on cost of alterations and repairs (?)) plus whichever additional supplemental permits you need, like an outdoor sign permit ($65 fee), appliances permits ($26 for first one; $16, each additional), electrical outlet permits ($8 ea). Then they sign off on the Certificate of Occupancy ($42 fee + $33 filing fee). But before you can get a building permit, you have to have a business license ($324.50 fee). With all those fees to pay, and Groupon checks to deposit, you should get a bank account, but that requires you to incorporate. There will be a $220.00 fee to file your articles of incorporation in DC. But before you incorporate you first need to search and register your name, for which there is a $55.00 fee. You will also need an EIN tax number from the feds, who give you the number for free through which you are going to be sending them money.

    When we had to close we were at the point in the process of getting a business license.

  • http://backalleywaffles.com Craig Nelsen

    I'm sure I mixed up some of the above, but the point is, it is a long, onerous costly process, but we were doing it.

  • http://backalleywaffles.com Craig Nelsen

    Apologize to everyone? For what?

  • http://backalleywaffles.com Craig Nelsen

    Jane, despite the ugliness of your tone, here is the story for you:

    I started serving waffles in my art gallery as a way to bring attention to my art and, hopefully, save my struggling gallery. The original idea was to give waffles away free every Friday night as a kind of delicious gimmick to get people there.

    That grew into Back Alley Waffles.

    So, almost by accident, I found myself trying to open a restaurant with no money. YOU try that some time.

    On the first day we were open, we had four customers. Then a popular local blog called princeofpetworth.com wrote something nice about us and, on our second day in business, we had a line out the door. You try THAT sometime.

    It was an exhausting—and frequently embarrassing—process, but as the days and weeks went by we added staff, accumulated necessary equipment, steadily made improvements to the facility, filed necessary paperwork, bought a cash register, expanded our hours, began accepting credit cards, and bought a growing percentage of our supplies wholesale.

    And, every week, business improved—including in the teeth of a brutal heat wave that had the streets deserted. We had gone from having to wait for one table to pay its check so we could take the money, run to the store and buy heavy cream to make the butter for the waffles the table next to them had ordered to, in our last week in business, adding a savory waffle to the menu and, that last Sunday, serving over 200 waffles and nearly half that number of fresh fruit smoothies each containing seven kinds of fresh fruit, plus aloe vera, honey, and vanilla yogurt.

    The customers during our very first weeks—our neighbors—were patient, forgiving, and sophisticated enough to assess the situation correctly, settle in with a section of the Sunday paper, and roll with it. I would deliver a table their waffles after some ungodly wait, apologizing, and telling them there would be no charge for the waffles. They would insist on paying. As one such table was leaving, a member of the party came up and pressed the cost of the meal into my hand. I started to object, but she pressed back firmly. "Take it," she said, "we want you to succeed." That table had already paid its check.

    Contrast that to the Groupon customer. They were the first, if their wait time grew, to start sighing and giving hard stares to the employees, who, of course, were doing their best under difficult circumstances. "We churn our own butter here," I would explain, "which is a process that seems different every time, and can be quite lengthy. But," I would promise them, "If you've never had butter that's never been chilled, you are in for a special treat."

    But many of the Grouponistas were simply indifferent to the prospect of a new sensual experience. They had their coupon and their right to cheap food, and they wanted that food delivered with the kind of uniform efficiency the McDonald's Corporation fields globally 24 hours a day, seven days a week, 365 days a year.

    When it wasn't, they would Yelp us.

    Sheri S from Washington, DC yelped, "So, we arrived around 1:00 pm, an hour before the place closes and the cook says he just served the last batch of waffles and smoothies to the previous customers. Mind you, there are only four menu items: buttermilk waffles, smoothies, chai tea and coffee. How is it possible that you run out of ingredients?

    "We waited for ONE HOUR for these amazing waffles that people keep raving about. Every time we'd get up to leave, the guy kept saying someone was coming with the ingredients from Safeway. Why was he coming from Safeway? And, it only takes 10 min to walk from Back Alley Waffles to Safeway.

    The guy arrives with the buttermilk cream to make the special "butter." By the time he makes the "butter" from scratch, we had waited for more than an hour and only a small waffle. I expected a monster size IHOP waffle. Nope. I could've made these waffles at home. The only thing they did was drop this huge scoop of butter that looked like ice cream on top of the waffle. And, you needed it because they didn't give you enough syrup.

    And, here's the kicker - for one waffle you pay $8 [$4 for Grouponistas]. It's not worth it. You can try, but you'll leave very disappointed. I should open up my kitchen and rip people off for some subpar $8 waffles I can make at home with ingredients I got from Safeway."

    Sean P from Brookline, Massachusetts yelped, "The waffles might be great, but I wouldn't know due to their overwhelming incompetence. Even if the waffles are great, we should all teach this place a lesson in customer service by avoiding it until they figure out how to run a business. I'm going to try to get my money back from Groupon."

    Yes, I would rather slam my hand in a car door than honor their Groupon coupons and then wait up to three months for the $2.00 Groupon will send me to pay for the waffle they ate.

    Despite all that, we were winning. We were actually opening a successful restaurant with NO MONEY. And this is not just empty chest-thumping. The reason I can say with some confidence that we would have succeeded is because the entire staff is still pressing me to re-open. Remember, these are people to every one of whom I owe weeks of back pay. What does it say about their belief in Back Alley Waffles that they, who were in the trenches every day, want to keep working?

    It was Groupon that broke our backs. As we waited and waited for our money (how can it take ten days to "process" a check? I can write one in twenty seconds flat.) that thousand dollars loomed larger and larger until, finally, it snuffed us out.

    Yes, we were under-capitalized. Yes, it was my fault for signing up with Groupon in the first place. But Groupon sucks.

  • Ombudsman

    I think Craig should partner with the savants who tried to open up Shaw's Tavern

  • http://backalleywaffles.com Craig Nelsen

    I didn't realize the City Paper was where all the haters hang. I think I'll go back to watching porn.

  • Sally

    Craig:

    Let's simplify your explanation:

    You had no legal permits or licenses to operate a restaurant at the location.

    You had no Health Dept inspections to certify that you were handling, storing and cooking food in a hygienic manner.

    You had no building or fire inspection certificates showing that your building met structural and fire codes.

    You had a certificate of occupancy for a gym - not a restaurant (the info is available on DCRA's website PIVS). Which means you have no idea whether a restaurant in that location met zoning codes.

    You were "just about" to start the process to get legalized when you shut the doors down.

    So, in summary, you were operating completely illegally and potentially putting your customers and neighbors in danger from a building whose structural and safety condition were ok for a gym, but not for a restaurant.

    One additional question: Were you charging sales tax and remitting it to the city on all your waffle sales?

    Or were you "just about" to do that too?

  • http://backalleywaffles.com Craig Nelsen

    We were well into the permitting process--not "just about" to... Oh heck, who am I kidding. The DCist caught me trying to pull a fast one. The house of cards is crumbling and I'm throwing in the towel.

    Let it be known:

    As evidenced by the fact I was only halfway through the permitting process, Groupon is a fantastic, benevolent corporate citizen that I would recommend to everyone, and Grouponistas are the leavening in the flat bread of our culture. Over and out.

  • Dr

    Craig, did you have running hot water in the restaurant? Not upstairs in the studio or somewhere nearby. Why didn't you just say no to Groupon when they didn't structure the deal only for weekdays like you wanted? You make it sound like they forced you into things and you were powerless, but if you're too weak to say no to something you didn't like at the time the deal was getting put together, how is it anyone's fault but your own?

  • Ombudsman

    I can't decide if the sheer ineptitude and abject denial on Craig's part is either hilarious, infuriating, or pathetic. In any event, this may be the worst self-immolation I've ever seen.

  • Jane

    I will be the first to agree that Groupon users are gross and greedy and entitled. (I've never used it and have no desire to.) But who in the world forced you to do it? It's your own fault for not doing enough research on Groupon's policies and its customers!

    I've read every post you've made and all I get is"It's Groupon's fault that I had no idea what I was doing". And if CityPaper is where the haters hang out, then so is every other website that's posted about this story. There is no one on your side here or anywhere. Take a hint.

  • Apology

    "Apologize to everyone? For what?"

    Well, I suppose for
    1) opening a business illegally
    2) ripping off your customers by refusing to honor the rest of the coupons you've sold
    3) not offering to refund the customers who weren't served due to your screwup, not even partially out of the payments you've received which apparently exceed the contracted share for the waffles you actually delivered
    4) insulting those customers claiming they're undesirables you'd rather have your hand slammed in a car door than serve while you're ripping them off
    5) lying about the fact that Groupon us not the reason you had to close but you nearly certainly would have had to close anyway for both cash and license issues
    6) continuing this charade even when the facts have come out

    I guess that about covers it.

  • “Bring That Ball, Meat!”

    Actually, I liked the waffles, and I wish that Craig could have actually pulled this off. That is what entreprenuership is all about. Heck with the haters. I started a business once while in college to earn cash, and all the DC permit b.s. was exactly that--b.s. I also had a good reason to close my business--I graduated debt free! LOL

  • Bon Ino

    As a neighbor, I'm sorry to see all this unfold. It was a good place with good, though overpriced, food. As a fellow businessman, I want everyone who takes a shot to succeed. That said, after teaching business for years I have yet to see even Wharton and Harvard graduates ever adequately put contingencies in their plans for not getting paid on time. Every business that ever starts makes the seriously flawed assumption that people pay immediately. Truth is, the bigger the company, the longer it takes to get paid --always.

    And more times than you imagine, it really is just one single vendor, customer, supplier - whatever - that makes the difference between a business being open or closed. In this case, it just happened to be Groupon. I've seen other restaurants fail because of the lag in getting paid by AMEX. It happens all the time. But the bottom line is undercapitalization. Period. The best food joints makes only 3% profit. Launching with no money is not an option.

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  • Dave

    This story has legs! I love the drip drip drip of new details each day.

    The most surprising thing I've just read (on digitaltrends) is that Craig Nelson is 52! I was assuming he was some hipster, entitled 20-something with a beard. Really shocks me.

    I love the WHOLE thing! The hip location. Art connection. "artisanal" butter. Safeway runs. Groupon rage. Extremely patient customers. Bad Yelps. Snarky blog comments. Fame for all the wrong reasons. Groupon damage control. Prince of Petworth.

    It's ALL so July 2012!

    Clearly the neighborhood is ripe for a yummy, hip, out-of the-way, customer focused waffle joint that runs frequent Groupon promotions! Somebody should swoop in.

  • Bob

    "So, almost by accident, I found myself trying to open a restaurant with no money. YOU try that some time."

    I think this is all anyone needs to know. It would be one thing if he had properly planned but unforeseen contingencies caused problems. It would be like driving a car that you knew did not have working brakes, and then complaining about how difficult it was when you didn't have to drive it in the first place.

  • SW

    @ #17 Ombudsman: Agreed. With every new comment he just makes himself look worse.

    Also, not all Groupon users are greedy deal-chasers. I like using Groupon, LS and ScoutMob to try new places at a lower risk. See, if I had to wait two hours for my waffles, and have the owner refuse to apologize for the wait and instead get all whiny and defensive about how I JUST DON'T UNDERSTAND how amazing the experience will be, my only comfort would be that I didn't pay full price for that shit.

    I work two blocks away from Back Alley Waffles and would have come back regularly if I'd had a good experience. I'm a full-price-paying regular at restaurants I never would have heard of if not for Groupon/LivingSocial/ScoutMob (hello, Nage!). Now that I'm more familiar with the owner's attitude and lack of business sense, I wouldn't touch Back Alley Waffles with a ten-foot pole if it ever reopened.

    For the record, I got my refund from Groupon the same day I asked for it.

  • maibaby523

    What an idiot to put himself out there like that when he didn't even have the requisite licensing to operate a restaurant! With each passing day, this guy just shows more and more what a dim-wit he is ...

  • maibaby523

    @Craig - You have an excuse for everything, don't you? You've cited the costs of applying for the various licenses, etc., but it's WHOSE fault you didn't have the money to go through the requisite processes??? Stop whining and go back upstairs and paint some pictures or something.

  • Jon

    I've seen quite a few small businesses get rapidly overwhelmed by groupon and livingsocial deals. Fair enough, they should have had the foresight to not bite off more than they could chew, but can you really blame them? As a business, you realize this will stretch you thin, but it gives you a new group of customers, some of whom will return. If you can pull it off, it's great visibility.

    I've also seen many good new businesses get killed by the certification process, or by neighborhood committees pulling the rug from under their feet with liquor licensing restrictions.

    Should he have gotten further along in business before opening up a groupon? Probably, but it's hard to resist. Ditto with the permit process. It's much easier to armchair QB these things than to live and do it.

  • http://capitalcitydiner.com Matt Ashburn

    From someone who's been through the process of opening a licensed restaurant, lemme break down the process. For the sake of brevity and conciseness, I'll try and simplify the steps to convert a gym to a restaurant:

    1) Review applicable regulations applicable to restaurants (you need 3-comparment sink, handwashing sink, etc- all relating to stuff necessary to safely serve food to the public)

    2) Meet with an architect/engineer and draw up plans to meet regulations of the city's health and building codes

    3) Submit plans to DCRA by filing a building permit application for a "change of use" (converting a gym to a restaurant, in this case). The permit covers construction necessary for the conversion. DCRA will review plans and provide comments/feedback- realistically, in about 30-60 days). Feedback covers various disciplines: health code, structural, plumbing/mechanical, fire/safety, etc.

    4) Review comments and feedback (usually common sense stuff- e.g.: hand sink is too far away from food prep area, show proper ventilation on plans, etc.)

    5) Resubmit plans, addressing comments received from DCRA.

    6) After a second (or third, if needed) review, you receive your permit.

    7) Construct/build as per plans, and call for inspections for each discipline (structural, plumbing, etc.). Health dept is the last inspection, as everything else must be done to be prepared to serve food.

    8) Once everything is inspected, go to DCRA and obtain a certificate of occupancy for the restaurant.

    9) Once you have certificte of occupancy, apply for (and promptly receive) a business license.

    There are a bit more details for some of the above steps, but that's the gist of it off the top of my head. Oh, at some point before your pre-operational health inspection, you must complete a food manager course and obtain a certificate; this ensures you understand basic food sanitation and preparation techniques/regulations that prevent the public from getting sick off of your back alley food.

    The whole idea is that you should be licensed for the safety of the public, especially when you're dealing with potentially hazardous foods (like waffle containing eggs, etc.).

    -Matt

  • Keren

    Here are a few things we can all agree on; Yelpers kind of suck, Groupons/ living social coupons generally suck too, opening a small business is hard and most fail.

  • Lord Balthazar

    @Dave summed it all up perfectly. Lock thread.

  • DRR

    @ Craig: Since you're reading through these, can you answer my questions? Why didn't you just say "no" to Groupon if you didn't like the way they balked at offering the deal just for weekdays as you said? Why didn't you do the 30 seconds of reasearch it took to find this on the Groupon website under FAQ's: "When do I get paid? Most merchants get paid in thirds—33% after 7–10 days, 33% after one month, and 34% after two months."

    And most importantnly; If it was an art gallery before, did you even have a real kitchen? Did the kitchen have running hot water?

  • maktoo

    You know, the D.C. government is FAMOUS for saying that they've sent letters and forms that they haven't.

    We waited for SIX MONTHS once for a COPY of a letter the city was supposed to have mailed us, alerting us to a landlady's request to raise our rent. She went ahead and did it, since she heard no complaints from us. It took nearly a year and several hearings to iron out. And all because someone from the Housing Office didn't feel like doing his job.

    Ah, D.C. government - I'm sure they INTENDED to send us the copies, just like they INTENDED to send Mr. Nelson that form...

  • Miss B

    If Craig spent as much time working on making his business (a) legal and (b) successful as he does on his nasty email responses, he would have been a lot better off. I cannot believe how he wants to blame the rest of the world for his bad decisions. Thank God I got my overpriced waffle before he closed,

  • http://www.backalleywaffles.com Sherman

    This story and all the haters who are commenting got it wrong. Back Alley Waffles wasn't blowing off getting a business license. The license was applied for as soon as we got incorporated, which we did as soon as the Trade Name was registered which we did as soon as we got the results back from the Trade Name Search which we performed as soon as we decided to try selling waffles as a way to draw attention to Craig's art and call our effort Back Alley Waffles. I can state this because I did all these myself as the former co-owner of Back Alley Waffles.

    Sherman L. Davis, former co-owner
    Back Alley Waffles

  • Noticed

    This reminds me of the Big Bear Cafe scandal a couple of years back, with the notable difference that for whatever reason, this guy doesn't have all the lical bloggers trumpeting his cause.

  • http://www.divasnrides.com Ron The Don

    Stories like these are the reason the book the E Myth was invented. This whole incident should be a reminder of how not to get into business. It's clear Mr. Nelson had a business plan. It's the execution of it that went wrong. Proper research, better planning and a better execution would have keep this business out of trouble, yet alone still running.

  • DB

    Mr. Nelson,

    If you ever try to open a business again, I suggest you take to heart what the great General Omar Bradley said:

    "Amateurs talk about strategy, professionals talk about logistics."

    You had the best waffles, and the best butter, and the best space, etc etc etc, and none of it was worth a damn without the proper logistics to get your business up and running.

    Capitalization, legal (like permits), supply chain: contrary to what the "foodies" would like you to believe, those are things that make or break a restaurant, especially in its first few months. You had none of those. Not enough money, not the right permits, no supply chain (were you really buying ingredients at Safeway?). Your restaurant was doomed, great waffles or not.

...