LAKE IN THE HILLS – A Chicago company plans to roll out a series of small cafés featuring video gambling in McHenry County and other suburbs.
Supporters say the cafés offer a classy entertainment venue for adults. Critics say they are little more than gambling halls designed for strip malls.
Because state law only allows video gambling in establishments that serve liquor, some local towns want to limit an influx of similar businesses by tightly controlling the liquor licenses they need to operate.
Laredo Hospitality Ventures wants to open its Stella’s Place cafés in McHenry, Lake in the Hills and Fox Lake. It also has approval to open cafés in Bartlett, Oak Brook Terrace, Oak Lawn and Wheeling, company officials said.
Lake in the Hills may create a special class of liquor license for such businesses. Fox Lake revised its ordinances earlier this year to curtail liquor licenses for businesses that intend to make video gambling the center of their business plan. The changes came after a liquor license had been approved for Stella’s Place.
The upscale café concept includes bar and lounge areas with highly-stylized decor and a video gambling area in the back. It would cater to patrons age 35 to 75 who enjoy gambling for entertainment. About 60 percent of the guests are expected to be women. The cafés will serve wine and beer. The menu features items such as flatbread sandwiches and mini beef sliders.
The food would be pre-cooked and brought in because there wouldn’t be an on-site kitchen, according to a memo from Lake in the Hills village staff.
Laredo Hospitality hasn’t opened any of the cafés yet. The Stella’s Place in Hoffman Estates has been completed, but it won’t open until it gets the required gaming license from the state, said Gary Leff, CEO and founder of Laredo Hospitality.
Earlier this month, the McHenry City Council voted 5-2 to approve a liquor license for Stella’s Place at 1720 N. Richmond Road, in the McHenry Plaza shopping center that includes Sears and Target. Aldermen Robert Peterson and Andy Glab opposed it.
Glab, who opposed video gambling in the city, said Stella’s Place wasn’t a café.
“I wouldn’t call it a café,” he said. “I call it a gambling place.”
Mayor Sue Low disagreed. Low and other city officials met with representatives from Laredo Hospitality and were impressed with their plans, she said, calling it a “classy operation.”
“We’ve been approached by others that I didn’t feel comfortable with,” the mayor said. “They were going to put out a basket for snacks and ask for a liquor license. That’s not what this is. [Stella’s Place] will be a nice addition to town.”
Peterson said he voted against it because of the location, not the nature of the business. He said doesn’t want to see restaurants and bars take up space in the city’s shopping malls, unless they are located in outlots.
Laredo Hospitality executives pitched Stella’s Place to the Lake in the Hills Village Board last week, but the company hasn’t formally applied for a liquor license there. It wants to open a Stella’s Place in a strip mall at 319 N. Randall Road, in the space formerly occupied by WineStyles.
In a presentation to the board, Leff said the business could generate $40,000 a year in gambling tax revenue for the village.
He said the five video gambling machines at Stella’s Place would likely generate three to four times as much money as the same machines at local bars and restaurants.
“In a bar you’re not getting a typical crowd that likes to game,” Leff said. “You’re getting a patron who is maybe wasting a little time.”
Stella’s patrons are more serious about gambling and would perhaps prefer the café’s personal service and environment to the Grand Victoria Casino in Elgin, he said. The business also would generate sales tax revenue for the village, but Leff said it was too early to estimate how much.
By comparison, Moretti’s Ristorante & Pizzeria generated $7,524.69 in video gambling taxes from its five gambling terminals for the village of Lake in the Hills in the first six months of 2013. Moretti’s is located at 220 N. Randall Road, across Randall Road from the proposed location of Stella’s Place. During its best month this year, patrons played $380,582 on Moretti’s terminals, generating $1,742 in gambling taxes for the village, according to figures from the Illinois Gaming Board. Stella’s Place would generate almost twice as much gambling tax revenue each month, according Leff’s estimates.
Village Board members raised concerns about parking at the proposed location. Leff said he would need to further study the parking requirements.
After the meeting, Lake in the Hills Village President Paul Mulcahy said he had some reservations about the business.
“When we approved video gaming in the first place, I expected we’d see some things we hadn’t anticipated,” he said. “Video gaming should be secondary to the business. Here the gaming is the strongest component.”
Mulcahy wants the village to create a special class of liquor license for establishments such Stella’s Place that rely on video gambling as a main source of revenue. Such a license would allow the village to keep close tabs on gambling-centered businesses, he said.
While video gambling is central to Stella’s Place, the gambling machines would remain largely out of sight in an area screened from view from the front of the business by a book case.
So far, Laredo Hospitality has eight Stella’s Place locations approved and under construction throughout the suburbs. The company doesn’t have a target for how many stores it wants to open. Executives are picking locations “one store at a time,” Leff said.
“There are others out there that are doing similar types of concepts that are more focused on gaming, we’re really focused on the restaurant and café portion and believe that’s a significant part of the overall experience,” he said.
He declined to say how much of the establishment’s revenue would come from video gambling.
“It’s a well-balanced concept between the café and the gaming,” said Charity Johns, vice president of operations for Laredo Hospitality.
Leff said the company would spend about $250,000 on the buildout of Stella’s Place. The Lake in the Hills location will employ six to eight people.
State lawmakers approved video gambling in 2009 to help pay for a $31 billion capital bill for infrastructure projects, but the machines didn’t started operating until last fall.
The law allows bars, truck stops, fraternal clubs, veterans clubs, and other liquor license holders to have up to five video gaming terminals. It limits wagers to $2 per hand and payouts to $500 per hand. Machine operators and local businesses collect most of the gambling revenue, but the state takes a 25 percent cut, and local governments get 5 percent.
In McHenry County, some towns, such as Crystal Lake and Lakewood, have banned video gambling. Municipalities that allow it include Algonquin, Huntley, Marengo, Harvard, McHenry, Richmond, Hebron, Johnsburg, McCullom Lake, Fox River Grove, Lake in the Hills, Spring Grove, Ringwood and Woodstock.