Dogfish Head rejection shows rift in Rehoboth Beach

Sam Calagione's rock star status in the world of craft beer is undisputed. For the past 20 years, residents and tourists have been making year-round pilgrimages to Dogfish Head Brewings & Eats in Rehoboth to sample his latest "off-centered," award-winning beer creations.

He is considered one of the nation's most respected and influential craft brewers.

Yet, when Dogfish Head asked Rehoboth officials for permission to replace Calagione's successful, yet aging, flagship Rehoboth Avenue restaurant and distillery with a brand-new version that's about 1,500 square feet larger, the answer was something he has rarely heard in his Delaware hometown: No.

About 6 million people visit Rehoboth's resort area a year, 3 million of whom come downtown. So the idea that Rehoboth officials would suppress an effort by one of the town's most successful businesses to expand is baffling to many.

There is a long-held sentiment by many in town to keep things the way they have always been and not become another Ocean City, Maryland, or even a Dewey Beach.

Clif Hilderley, a member of the Board of Adjustment that voted down the expansion, said Dogfish Head's request made the business too big to fit in Rehoboth Beach.

"Why not go out of town? Find a place where they have no resistance and can do everything they want to? In a few years, sometime in the future, they're going to want to expand again. I wish Dogfish Head all the luck in the world in selling their beer. But Rehoboth Beach is not the place to produce more beer and enhance and expand a restaurant."

The Board of Adjustment, took less than an hour before voting 3-1 to reject the request for a variance from limits on a new or redeveloped restaurant's size.

Dogfish Head had sought a favorable interpretation of a local law passed in 1991 to ward off large, sprawling restaurants and bars – the kinds of buzzy nightlife hubs Dewey Beach and Ocean City, Maryland, are known for, but more sedate Rehoboth Beach is not.

"Restaurants don't always stay restaurants. Sometimes they become nightclubs after 10 p.m. at night," Rehoboth Beach Mayor Sam Cooper said in an interview.

While he defended the town law capping the footprints of most restaurants at 5,000 square feet, Cooper said he could not specifically comment on the Dogfish Head application, since the company is seeking a rehearing.

"They turn into bars, and the bigger they are, the more problems they cause. The drunker they get. You only have to go as far south as Dewey Beach," Cooper said of the large establishments the town's law discourages. "Folks were very aware of, and still are in Dewey, the Rusty Rudder and so on. They didn't want to see that plunked down in the middle of Rehoboth."

The denial clearly caught Dogfish Head off guard.

"We are pretty shocked and disappointed by the decision," Calagione said, adding he's aware other well-known restaurants in the beach resort area have gotten the same board's OK to expand beyond the 5,000-square-foot cap. "It's a little bit bewildering."

So why, exactly, did the board turn Dogfish Head down?

Hilderley said the company hadn't proven it faced an "exceptional practical difficulty" in remaining competitive as it is, a standard mentioned in the town's code. And he seemed to worry that granting an exception would signal that large, bulky megastores were welcome in the resort.

"There was good reason for our commissioners to limit the space, the size of restaurants that serve alcoholic beverages," Hilderley said in the hearing. "Wouldn't it be terrible if every retail operation in downtown Rehoboth wanted to expand for business purposes, just like you describe? Make it better, easier for employees, and so on? If people want to expand their operations and their business they usually go out of town."

Critics question town development goals

Chuck Donahue, a board member who voted no, critiqued the appearance of the planned space during the hearing. Rehoboth storefronts have an "eclectic" look, he said, "but this is radically different. This is a very modernistic aesthetic appearance."

Steve Fallon owns Gidget's Gadgets, a 12-year-old Rehoboth Avenue store that sells vinyl records and retro merchandise. He said the Rehoboth board, which voted against Dogfish Head, "is out of touch with what's going on in Rehoboth."

"There are a number of things that they said that are disturbing. It's like, 'Is this Rehoboth you are talking about?' This is a resort town with different colors and different ages of people. My feeling on the architecture is [Dogfish's planned] mid-century, modern building is more in mind to what this town should look like."

"Here's a business that obviously brings a good amount of tourism into our town," Fallon said. "It's a positive tourism, it's not a negative tourism. This is not a Dewey Beach mentality. That is not Dogfish."

Said Fallon: "Anyone who has walked into Dogfish Head knows it's a family business. It's not just a bunch of drunks sitting at the bar. It's families having dinner, and the dad gets to have a beer. [The board] has no clue who is sitting in the seats at Dogfish Head. I don't understand it. It would be like saying to Funland, 'Get the hell out of here.' They want to wipe out everything that exists and be a retirement community."

Fallon said diners who visit Dogfish Head Brewings & Eats help his business and others in town. The restaurant is open year-round.

"They bring in more people, quite honestly, and it helps us in the off-season months. We need as much business as we can get."

"You can read about Sam Calagione [in a magazine] on a plane, or see him on TV, and he always mentions Rehoboth Beach. Any other resort town would kill for that publicity. That's the scratch-my-head part. You can't ask for a more positive thing."

Carol Everhart, president and CEO of the Rehoboth Beach-Dewey Beach Chamber of Commerce, said she was sorry to see Dogfish Head was denied its expansion request.

"They are a wonderful business. They are community supporters and, of course, they are so well known they have become an attraction," said Everheart. She frequently sees visitors taking photos outside of the building "just like you see people do at any tourist attraction as a memory of their vacation."

Lula Brazil restaurant owner Meg Hudson said Dogfish Head's popularity helps her own nearby Rehoboth Avenue business that opened last summer.

"Everyday, someone who has been there, stops in and sees us," said Hudson, who once co-owned Wilmington's Domaine Hudson. "For me, they are a very important part of the business community."

Mark Grabowski, who owns property on Rehoboth Avenue and sold his neighboring Finbar's Pub & Grill that he owned with partner Jim Paslawski to Dogfish Head in 2013, said he understands why Calagione wants to tear down the building.

"I understand what it is like to deal with an outdated building on a daily basis. I kind of understand [Calagione's] frustration," said Grabowski, who also owns the Honey Fresh Farm restaurant in Lewes.

"These are places that have been restaurants for 40 or 50 years. It comes to a point where you can't be throwing good money after bad. Sometimes, when you have a building that's so old, the best thing is to rip it down and rebuild."

Dogfish Head CEO Nick Benz, in an interview, said the company has a plan ready to keep serving food and beer straight through the redevelopment. New construction would start first in the property's parking lot, Benz said; when that section is complete, the restaurant operation will move into the new space, and demolition would start on the old building.

"We're going to do it right," Benz said. "Rehoboth shouldn't have anything to fear. We're going to do this well."

Board members question motives

Grabowski, who attended the April 27 Board of Adjustment meeting, said he was taken aback by comments by board members about Dogfish Head, especially when he estimated the new building would be a multi-million dollar investment. Grabowski said the restaurant has always been a good neighbor.

"I was kind of insulted myself by that one guy telling them, 'Take your business and go out of town.' You know, why would you say that to a business who has been in your city for 20 years and brings tens of thousands of people in town? My niece in San Francisco knows of Rehoboth only because of Dogfish."

Clint Bunting, an investor and owner of businesses in Rehoboth Beach and Dewey Beach, said Dogfish Head's presence in the "third block," a fairly long walk away from the ocean block, helped revitalize what was once a grungy part of town.

"At one point, that third block struggled. It really struggled. Dogfish was the savior," Bunting said. "Those kinds of people, they deserve our help."

Some board members, in the hearing, seemed unconvinced by Benz's assessment that the brewpub needed to change just to stay even with the competition; instead, they said, Dogfish was simply seeking to maximize profit, and that's not enough rationale for a size exemption under the code.

"You're doing this to enhance your business and make more money," Hilderley said to Benz. "Isn't that what you're trying to do, get more people in your restaurant, in and out?"

Not so, Benz replied; the remodeling plans, he said, actually take a few seats and stools off the dining floor. "This isn't to get more people through the building. It's to provide a better experience when they're there," he said.

Grabowski agreed. "We've known Sam and [his wife] Mariah for eight years as the owner of Finbar. We watched their business grow and grow. Why so many people want to go into Rehoboth is that Dogfish is there year-round and they've been there for 20 years. I thought the city should reward this."

Ed Mulvihill, manager of Peco's Liquors in Penny Hill, also was surprised and puzzled Dogfish Head was turned down to create a new, expanded version of its restaurant.

"It sounded like a really good thing and it's not like they were asking for more seats," he said.

Mulvihill said Dogfish Head's well-regarded, national reputation is good for Delaware. Calagione's businesses are tourist destinations, he said, and he appreciates that the company remains loyal to its roots.

Calagione came to Peco's on Philadelphia Pike Thursday night to help the 80-year-old, family-run, independent liquor store celebrate a Dogfish Head happy hour.

It was the biggest event Mulvihill has held at the store, and a large crowd came to see Calagione.

Among beer-savvy, educated consumers, Calagione is "a rock star, he really is," Mulvihill said. "But he's down-to-earth. And Sam is still making time to host events like this. It says a lot about his commitment to Delaware that he takes the time out – and he's really busy —to come to our store."

"My opinion is Dogfish Head does a lot of good for the state," Mulvihill said.

Calagione said he is hoping for an amicable solution.

He said Dogfish Head has not been only a locally owned business for two decades in Rehoboth, it also has national recognition.

The Rehoboth Avenue building that houses the restaurant had once been home to a crab house, and later became "a succession of failed restaurants," Calagione said.

When he proposed creating a brewpub there in 1995, Calagione said, his plans were met "with trepidation, but we convinced everyone to give us a chance."

"What we've been doing the last 20 years should speak for itself."

In a motion asking the Board of Adjustment for a rehearing, the company says it mistakenly counted brewery, distillery and "ancillary" areas in both the existing building and its proposed structure when it tallied up square footage. Although all the company's bottled beer for distribution is brewed in and shipped from its industrial-scale Milton brewery, Dogfish makes small batches of one-off beer recipes in the downtown brewpub, as well as distilling flavored vodka, rum and gin there.

The city's law limiting restaurant size, the motion argues, only counts the parts of buildings "devoted to restaurant purposes" toward the 5,000-square-foot cap. Under that standard, the motion says, the renovation only takes the restaurant-focused areas from an existing 6,770 square feet to a proposed 6,813 square feet.

The motion also argues that in 2008, when Nicola Pizza sought an exemption from the size limit for a 15,500-square-foot restaurant, the owners gave the same rationale that Dogfish Head did, saying the size cap prevented them from "staying competitive." Since the board said yes to Nicola Pizza based on that reasoning, the motion says, it was a "mistake of law and precedent" to turn Dogfish Head down.

Calagione said he wants to create a better atmosphere for customers and improve the restaurant's look with a new structure. Finbar's Pub & Grill, which Dogfish Head bought last year, is not part of the expansion plans.

Calagione points to other restaurants in town that have been granted variances by Rehoboth's Board of Adjustment to exceed 5,000 feet. They include Nicola's, The Cultured Pearl, Grotto Pizza and The Greene Turtle.

Yet at least one restaurant had to go to court. After the Board of Adjustment in 2010 denied Stingray Sushi Bar and Asian Latino Grill on 59 Lake Ave. a variance for an outside patio, the restaurant appealed the ruling.

After a three-year battle, the state Supreme Court took Stingray's side.

Dogfish Head, too, might have to go to court to appeal the decision.

Grabowski, a Rehoboth Beach property owner, hopes it will not come to that.

"It's just going to cost a lot of money and cause a lot of bad feelings to a business that should be honored," he said. "I personally wish the city could sit down with Dogfish Head and resolve this instead of making lawyers rich."

For more than a decade, Dogfish Head's bottled beer has come from its Milton plant. The company bought property in Lewes when it decided to open a small hotel. Would it leave Rehoboth if it doesn't get approval for a new restaurant?

Benz, the company's CEO, says no.

"We would never contemplate moving it out onto Route 1. That's not where the soul is," Benz said. "We really do think of the pub as the soul of Dogfish Head. The brewery has become substantially larger than the brewpub over the years, but that's where it all began."

Contact Patricia Talorico at (302) 324-2861 or ptalorico@delawareonline.com or follow her on Twitter @pattytalorico.

Contact James Fisher at (302) 983-6772, on Twitter @JamesFisherTNJ or jfisher@delawareonline.com.