Tourism officials hope a hot new restaurant chain serving ribeye steaks and burgers dressed with arugula can breathe new life into state parks, but the deal has cost Oklahoma millions of dollars.
Since 2020, the state has paid Swadley’s Foggy Bottom Kitchen, operated by Oklahoma City-based Swadley’s BAR-B-Q, more than $13.6 million. The restaurants have run millions of dollars over the original agreement on renovations at state parks. The state has also had to pay Swadley’s management fees and cover its sizable financial losses to operate. Funding for the restaurant project has come from gross production taxes and revenue — other than parking and day pass fees — generated by the Oklahoma Tourism and Recreation Department.
The first four Foggy Bottom restaurants opened at Beavers Bend, Roman Nose, Lake Murray and Sequoyah state parks over the past two years to disappointing financial results. Despite already spending millions, the Tourism Department decided to open two more, paying Swadley’s additional management fees and covering more of its losses during the coronavirus pandemic. Foggy Bottom opened a location at Quartz Mountain in October and at Robbers Cave State Park in early March. A plan to open a restaurant at Little Sahara State Park was eventually suspended due to “increased costs.”
When Swadley’s Foggy Bottom Kitchen signed a contract with the Tourism Department in March 2020, restaurant facilities at state parks were run-down after years of neglect, providing for a sub-par dining experience, the department said.
The Tourism Department sought a commercial operator with “brand power” to update the image of food service at state parks, according to a request for proposals the agency put out in early 2020.
When Foggy Bottom owner Brent Swadley toured the aging state park restaurants in late January of 2020 as part of the bidding process, he was met with dilapidated restaurants and realized just how much work would have to go into them.
Swadley’s was one of about five operators initially interested in bidding on the state contract, Swadley said, but most dropped out after seeing the condition of the restaurants and the potential challenges.
Swadley’s won the contract after it was the only restaurant operator to eventually submit a bid. In exchange for Swadley’s years of experience in the restaurant business and well-known brand, the state took on most of the financial risk for the Foggy Bottom venture.
In its first contract with Swadley’s, the Tourism Department agreed to pay for the cost of renovations, as well reimburse the company for up to $1 million a year for its financial losses to operate the restaurants.
The state initially agreed to pay Foggy Bottom $47,590 a month in management fees to run restaurants at state parks, but eventually agreed to increase that amount to $77,000 each month to open two additional restaurants. The fees cover Swadley’s administrative and other costs as it seeks to grow the Foggy Bottom business. The Tourism Department has paid Swadley’s more than $1.3 million in management fees over the past two years.
In the contract, the department said the ultimate goal is to eliminate the management fees once the restaurants become profitable.
The contract also requires Swadley’s to pay the state royalties if it makes a profit, which hasn’t happened yet.
“It was a deal that really became the state’s risk for most of the financials of it,” Swadley said. “… We weren’t willing to take the risk nor would anybody take the risk and go open a restaurant in these towns, because they’re unsurvivable under the current circumstances.”
Former Deputy Tourism Director Gino DeMarco, who assisted in negotiating the Swadley’s deal, said he believed nobody would be willing to take on the contract if “they thought there was some chance they were going to lose money.”
DeMarco admitted that the state doesn’t typically go to such lengths to protect a contractor from losing money, but the Tourism Department needed a company that would keep the restaurants open, even in lean times.
“My guess would be that the state had been losing money on restaurants for so long, that they figured that there was some possibility it would never be able to be profitable,” he said. “What typically happens is they run it and then they shut it down.”
Renovations to open the Foggy Bottom restaurants were originally estimated to cost $2.2 million according to the initial contract, but the Tourism Department has so far reimbursed Swadley’s about $11.9 million for capital improvements, according to numbers provided by the agency.
Costs ballooned as construction began on the aging restaurants, said David White, a spokesman for the Tourism Department.
“We were faced with the result of decades of deferred maintenance and neglect of the restaurant facilities and equipment — increasing the overall cost of opening the new restaurants,” White said.
The first four Foggy Bottom locations opened as the coronavirus pandemic peaked in Oklahoma and have been closed on Sundays except for special occasions like spring break. One change from when the state ran food service — Foggy Bottom doesn’t serve mixed drink beverages, which can be a big moneymaker for many restaurants. Swadley said he serves beer and wine, but didn’t want to take on the liability of serving liquor and mixed drinks. He also said the restaurants will expand their hours to Sundays in the summer months.
Swadley said turning a profit has been a “real challenge,” as most of the parks are busiest on the weekends and throughout the week they have to try and “survive between the weekend.”
Providing food service to state parks has long been a losing venture for the Tourism Department, but the agency has lost even more money after switching to a private restaurant company. When the state operated restaurants at Roman Nose, Lake Murray and Sequoyah State Parks, they had a combined loss of more than $1.2 million in the 2019 fiscal year — an average loss of $404,992 per restaurant.
But In the first year of the contract with Swadley’s the three restaurants, plus one at Beavers Bend State Park, had a combined net loss of more than $2.1 million — an average loss of $529,230 per restaurant, according to the Tourism Department.
In August 2021, the Tourism Department amended the Foggy Bottom contract, agreeing to pay the company a one-time $2.1 million to cover the company’s financial losses for the 2021 fiscal year. The amended deal acknowledges that the coronavirus pandemic had caused the cost of materials, goods and labor to increase “significantly.”
The Tourism Department also agreed to increase the amount it would pay Foggy Bottom to cover losses in future years to $1.2 million. In addition, the state agreed to pay significantly more in construction costs to complete renovations at six total state park restaurants — up to $13.2 million.
While the restaurants remain unprofitable today, business has improved as the number of COVID-19 cases in the state declines, Swadley said.
Swadley told The Frontier that Foggy Bottom’s plan is to become “survivable and sustainable.”
While the state has taken on most of the financial risk, Swadley views it as his name on the line. He’s committed to making the Foggy restaurants successful and serving good food, he said.
“We're the ones who have everything to lose because our name is on it. So we took that risk from a personal perspective,” Swadley said.
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