Concepts of Tomorrow
Growth Strategies For Emerging Full-Service Restaurants
Will the folks in plaid go for a campy seafood
concept in the ‘burbs? You bet your SUV they will.
ROCK ON A ROLL
It’s a dream come true for an emerging chain. A big restaurant corporation notices you, likes what it sees, and purchases a stake in your operation. It’s a satisfying achievement. The deal provides you with the funding to build your little chain into a big one, with an influx of cash that eliminates the problem of rounding up even more money from friends, relatives, acquaintances, bankers and venture capitalists. Moreover, such attention from a major chain provides validation. If one of the big dogs thinks you’ve got something with legs, then your future looks unmistakably bright.
Just such an experience happened to Randy DeWitt, owner of Rockfish Seafood Grill—a four-year-old casual seafood concept with 10 North Texas locations, owned by DeWitt’s Dallas-based See-Worthy Restaurants. Last summer, Brinker International approached DeWitt and purchased a portion of Rockfish, announcing tentative plans to buy the rest of the chain at a later date. The proposed scenario would play out similarly to Brinker’s acquisition of Lettuce Entertain You’s Big Bowl, which it purchased in 2000, after having bought an interest in the chain two years earlier.
DeWitt and his wife, Michelle, opened the first Rockfish Seafood Grill in Plano, Texas in 1998. Throughout the early 1990s, the DeWitts had operated several small oyster bars called Shell’s, and they started Rockfish with virtually no casual dining experience. Nonetheless, visions of a chain came shortly after the concept’s launch. "We were open about two months and I took a vacation. When I came back, the GM showed me numbers that were off the charts in terms of volume," says DeWitt, who was amazed by the number of table turns and how long guests were waiting for one of the 1,800-sq.-ft.
restaurant’s tables. "Some of the stories I heard about Chili’s success in the early days came back to me. That’s when the light bulb went off, and I said, ‘We have to develop this as a chain that could take us beyond this marketplace.’"
Is Rockfish riding the wave of seafood’s popularity, or is it helping to set the trend? It doesn’t matter. What does matter is that seafood is hot right now. Established chains are thriving. Segment leader Red Lobster says it will add eight units to its portfolio this year. And in addition to a host of independent concepts popping up from coast to coast, a variety of national and regional chains, from the casual, like Boston’s funky Naked Fish (COT October 2000), to higher-end operations like Parasole Restaurant’s The Oceanaire (COT March 2001) are emerging and adding to their ranks. Also, like Brinker’s purchase of a stake in Rockfish, Tampa-based Outback recently went fishing for a seafood vehicle and acquired a portion of the privately held Bonefish Grill. Outback is now helping to grow that concept into its next big chain. But will the new casual chains create additional seafood dining occasions, or steal market share from long-standing operations like Red Lobster and Landry’s sundry chains?
Mark Kalinowski, restaurant analyst for NYC-based Salomon Smith Barney says that emerging dinnerhouse chains like Rockfish and Bonefish "will likely not expand the seafood market, given that Red Lobster (and independents concepts) are very well penetrated." He adds, "In terms of market share, I believe that Red Lobster will continue to rule the sea. The company has a strong hold on the seafood market and given its brand awareness, it will be some time before (if at any time) it loses any material share to these competitors. It will be more likely that (concepts like Rockfish) will steal share from independents."
With the motto, "Great Seafood, Not a Lot of Clams," Rockfish aims for a broad market. Entrees run from $7 to $14; average check, $14.50. "That’s our competitive weapon. I think we’re positioned as premium quality at a moderate price point," DeWitt says. "We’re not upscale like McCormick and Schmicks, but in our specifications, we’ll match them item for item. We use the same high quality, but the price points are lower."
But how? With massive volume per square foot of restaurant space. Quick table turns give Rockfish more bang for the buck, and what’s more, "We have a smaller footprint than our upscale competitors (4,000 square feet), but our volumes meet theirs," says DeWitt. Smaller spaces also lower Rockfish’s fixed costs as a percentage of sales.
ROCKFISH DIFFERENTIATES ITSELF WITH ITS CAMPY, YET still slightly upscale atmosphere. While DeWitt likens the design to a mountain fly-fishing lodge, there’s a fun nostalgia reminiscent of the summer camps of baby boomers’ childhoods. The jukebox and an open kitchen add to the casual aura. There’s also a chef’s table for guests who want to be close to the action.
The campiness of the concept is played up by Rockfish’s use of its corporate chef as its mascot. Chef Kenny’s (Kenny Bowers) winking mug grins from the menu, and from marketing materials and the chain’s quarterly newsletter. A recent issue called Bowers "a crazy man with a knife." It also offered this weird
quote: "Kenny says that if you can’t make a martini with a shrimp and Tequila, you’re just not trying."
"Our entire meager marketing budget is wrapped up in supporting Kenny as a celebrity chef. It’s also a reflection of who we are. But more than the official quirky countenance of the chain, DeWitt calls Bowers a driving force behind the Rockfish brand and vital to its national viability. Joining the company shortly after the first Rockfish opened, his contribution, explains DeWitt, was to take Rockfish from a Gulf Coast regional restaurant in menu to a "tri-coastal" concept with a broader array of offerings. This broader menu partially explains the reason Brinker "bit" at the prospect of acquiring Rockfish. "Today, our menu has influences of the Northwest and New England, as well as the original Gulf Coast items," says DeWitt. "Kenny broadened the appeal of the concept and gave it legs. Before, the menu played well in this market, but we were worried about how we would go national with it." The menu is heavy on shellfish and other unintimidating items like Shrimp Parmigiana ($9.97) and fried Farm-Raised Catfish ($9.62).
The laid-back concept strategically appeals to those DeWitt calls People in Plaid. "To me, there are two kinds of casual dining customers. People in black, and people in plaid," he says. People in black frequent chic ops like P.F. Chang’s. People in plaid have kids, live in the suburbs and drive SUVs. "We still like high income and educational levels, but ours are suburban markets versus urban."
With a strategy borrowed from similar successful models at Outback and P.F. Chang’s, each unit is managed by a chef/ partner who invests $25,000 in his or her unit in exchange for a base salary and 10% of its profits. Rockfish looks for someone with a solid culinary background, then works, if necessary, to develop business skills. Each chef/partner gets to flex some creative muscles by coming up with daily specials.
Although (thanks to Brinker) money is no longer an obstacle for the growing chain, DeWitt is taking expansion slowly, building out existing Texas markets and identifying new markets including Phoenix and Denver. "It’s hard to project exactly how many we’ll do this year, so we’re taking it one store at a time," DeWitt says.
In apparent preparation for broad expansion, however, the c.e.o. has beefed up his infrastructure, hiring consultant Debbie Norman Breard to lend expertise in site selection, lease negotiations and new store construction. Breard has experience growing retail chains like The Container Store and Blockbuster Video.
An interesting phenomenon is that Rockfish’s partnership with Brinker has attracted Brinker talent, "a good sign that there are many people out there with good feelings about the company," says DeWitt. Tim Fox, a Brinker vet whose resume includes helping to grow the Canyon Cafe and Dave and Buster’s chains, joined Rockfish last summer. Fox will oversee the chain’s build-out. Culturally, says DeWitt, having a Brinker veteran in this position is a great asset. "He’s a good bridge between the two organizations," he explains. Ditto on Clay McAfee, another Brinker/Canyon Cafe vet who has joined Rockfish as v.p. of operations.
Little has changed at Rockfish since last summer’s big deal. "The concept has been a work in progress from day one, but we’re not doing anything differently now than we were before Brinker. We are just following through with our plans," says DeWitt, who characterizes the partnership as "hands-off" at the unit level. See-Worthy, however, has farmed out its accounting and payroll functions to the larger company.
DeWitt won’t discuss Rockfish’s food costs or average unit sales, although industry estimates put them at $3 million. Going forward, the company will both buy and lease spaces. It also will pursue both freestanding and end-cap shopping center sites.
Time will tell how the Brinker partnership will play out. SSB’s Kalinowski observes, "Brinker will likely hold off until the concept attains a better diversification of units in different regions. This will give more of an indication that the concept has a broader appeal."
Doug Brooks, Brinker’s president and c.o.o. says, "We have no plans to purchase all of Rockfish at this time. Our current relationship is fairly new—it’s a partnership in the fullest sense and we’re excited about it. We’ve previously said that we might consider full ownership at some point in the future if Rockfish turns out to be as successful on a large scale as we think it will be. There’s no specific timeframe for considering that possibility, though."
However, "Everyone’s expectation," DeWitt says, "is that we’ll continue to develop the concept and at some point, Brinker will want to bring it into their portfolio." While neither he nor Brinker will discuss the specifics of the agreement, DeWitt characterizes Brinker’s stake as "less than 50%." The cash from the company’s purchase of Rockfish stock is providing the funding for next phase of expansion.
So what happens to Randy DeWitt then? "I would hope they’d ask me to stay on," he says. "It’s what I would like to do."