Group approach: entrepreneur still crucial – restaurant industry

Group approach: entrepreneur still crucial – restaurant industry – editorial

Charles Bernstein

Group approach: Entrepreneur still crucial

This is the age of the restaurant “group,” an umbrella organization that keeps various chains under its wing. A number of these groups sprang up in the past two years, and more are evolving now.

One of the most prominent of the established groups is TW Services, which is still under takeover threat from New York investment firm Coniston Partners and is being eyed by other companies. Under chairman Frank Salizzoni, TW operates Denny’s, Winchell’s, El Pollo Loco, Spartan Foods (a major Hardee’s franchisee), Quincy’s steak houses, and the Canteen food-service management company.

Then there is Norman Habermann’s Irvine, Calif.-based Restaurant Enterprises Group, which has Carrow’s and Coco’s coffee shops, Darryl’s, Baxter’s, Gladstone’s 4 Fish, and Las Brisas. To help finance its huge debt, REGI has sold Gilbert/Robinson (Houlihan’s) to The Riese Organization in New York. Peter Grace, chairman of W.R. Grace, which once owned these restaurants, retains a significant stake.

And the man who once ran Peter Grace’s restaurants, Anwar Soliman, has his own deal with a wide grouping of restaurants under the banner of the Newport Beach, Calif.-based American Restaurant Group. It comprises Grandy’s chicken, Stuart Anderson’s Black Angus steak houses, Velvet Turtle restaurants, Spectrum Foods dinner houses, and Spoons casual restaurants.

Gordon Miles and Thomas Doan’s San Diego-based Paragon Restaurant Group, which grew out of Vicorp Specialty Restaurants, consists mainly of the dinner houses that Vicorp purchased five years ago from Foodmaker’s Continental Restaurant group — Carlos Murphy’s, Mountain Jack’s, Boathouse, and Hungry Hunter.

In addition, Paragon purchased the Rusty Pelican seafood dinner houses last year.

These groups tend to emphasize casual dinner houses that can be replicated and feature an ambience where jackets and ties may be somewhat out of place. This is a trend that will accelerate as customers veer away from the so-called luxury restaurants toward lighter menus and casual dress.

Similar trends are evident in the rise of restaurant groups springing up now. They provide marketing and management help as well as capital for chains that want to grow but need extra support to do it.

The latest example, as reported in this issue, is that of Allen J. Bernstein, who has formed the Quantum Restaurant Group, Roslyn Heights, N.Y., and has acquired a majority stake in Peasant Restaurants, a 14-unit Atlanta group emphasizing casual dinner houses and “neighborhood” restaurants. He also has set plans for his group to acquire other chains in the casual category and is close to another such purchase.

A previous effort by Bernstein, as chairman of Denver-based Le Peep for the last six years, appeared to falter when founders-entrepreneurs Buddy and Rhoda Waldman could not cope with the rapid franchising and expansion and dropped from the scene. The Peasant situation seems decidedly different since the concepts are already well established in their niches. Prospects are good that Peasant president Stephen Nygren indeed will be retained at the helm as Peasant’s concepts expand.

This would contrast with the bitterness that develops when the entrepreneur is forced out after an acquisition and the feel of the concept is lost. A notable recent example is that of Don Callender’s being sidelined after Ramada Corp. acquired his Marie Callender’s chain. Inevitably, Ramada has sold the chain to an investment group.

Another fledgling restaurant group has in effect been formed in Stuart Benson’s recent buyout of majority control in the expanding New York-based Nathan’s hot-dog chain. Benson and his partners, including William Landberg, have indicated a desire to take over some of the Sizzler restaurants in the Midwest and to acquire other restaurant chains.

At the same time, the Buckley twins, Richard and Steven, from whom Benson wrested control of Nathan’s, are seeking other restaurant acquisitions.

In effect, there already are numerous independent restaurant groups. But a new twist occurs when a group repeats its concepts on a wide basis.

One of the masters of this technique is Dennis Riese, who with his Riese New York Group (separate from The Riese Organization run by his father and uncle) exercises vast real estate clout, has now signed a deal to be Richard Melman’s partner in Ed Debevic’s diners. He is ready to roll out a substantial number of Debevic’s after the concept crawled along with only five domestic units opening in five years.

What is intriguing about Dennis Riese’s role is his marketing of four different casual restaurant concepts–each with its own nuance and particular niche. Debevic’s comes in addition to Chi-Chi’s, T.G.I. Friday’s, and Chili’s franchise rights for him.

It is easy to visualize customers who crave variety going to each of these four on consecutive days. It is also a good bet that clusters of three or four of these units will pop up fairly steadily.

Norman Brinker, Chili’s chairman, has fashioned his own casual group in a sense, with Chili’s and the slightly higher-priced Grady’s chain that he acquired last fall. He is convinced that he can keep rolling out Chili’s units and expand Grady’s at the same time.

Groups can be great but are likely to succeed only when they are casual in food and dress code, offer real price-value, and have a true restaurateur operating them.

COPYRIGHT 1989 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2004 Gale Group