Houston-based chain, blending gourmet accents and counter-service convenience, eyes franchising

Cafe Express strikes fast-casual balance: Houston-based chain, blending gourmet accents and counter-service convenience, eyes franchising

Ron Ruggless

Cafe Express, the 18-unit chain in which Wendy’s International increased its equity stake in February from 45 percent to 70 percent, was a pioneer in the expanding fast-casual segment.

Founded in 1984, Cafe Express married the quality and innovation of casual-dining menus and decor with a service model more akin to fast-food restaurants. Twenty years later the combination has become a hot offering in foodservice.

For Cafe Express’ part, the chain generated revenues of $29 million last year, a 16-percent increase over its 2002 volumes, Wendy’s indicates The Houston-based bistro operation added about six new restaurants in 2003, and the brand’s average-unit volumes were about $2.1 million.

Wendy’s veteran Brion Grube, who’s been president and chief executive of Cafe Express since early this year, says: “It is all about the food. One of our themes is: It’s a better place to eat. The reason is that you have a very stylish atmosphere that’s very colorful.” Referring to the concept’s Oasis bar condiment island of gourmet add-ons, he adds, “We also see ourselves having the freedom and flexibility of self-service.”

According, to Grube, Wendy’s is looking to franchise Cafe Express eventually.

Launched in Houston as a high-quality, casual adjunct to co-founding chef-restaurateur Robert Del Grande’s fine-dining Cafe Annie, Cafe Express continues to emphasize an innovative menu of European-accented specialties.

“That’s innate,” says Grube, who also has served for several years on the board of the full-service Pasta Pomodoro chain, another Wendy’s investment vehicle. Cafe Express’ food “is fresh; it is quality. I think the other aspect of our business is our Oasis table. That Oasis table allows you to specialize your dish with various condiments, various sauces that you can use to enhance your dish.”

The Oasis station holds not only napkins and cutlery for patrons but also such condiments as extra-virgin olive oils, Parmesan cheese, mustards, various vinegars and olives, capers, roasted garlic cloves and sun-dried tomatoes.

Cafe Express’ menu, which includes pastas, salads, sandwiches, roasted chicken, soups and side dishes, produces a per-person check average of $9 for lunch and $10 to $11 for dinner. Each location has a bar serving a selection of beer and wine as well as cappuccinos and espressos.

The Oasis, Grube adds, “gives you a great deal of freedom and flexibility as you individualize your dish in the restaurant. That’s a distinct advantage and a differentiation piece.”

Wendy’s initial 45-percent stake cost $9 million in February 2002. Six months ago the chain upped that stake to 70 percent.

Jack Schuessler, Wendy’s chairman and chief executive, said at the time: “We are extremely optimistic about Cafe Express’ prospects. The stores produce high average-unit sales, the menu is outstanding and customers are very loyal.”

Schuessler added that Wendy’s would “focus on store operations and systems to improve profitability and position the chain for growth.”

According to Grube, “Wendy’s has taken a larger position because we feel good about the brand.

“We also feel that taking a larger position enables us to do some things with the systems to really help grow and develop the business. There are some significant costs involved when you look at putting in better inventory systems, theoretical food cost systems, labor management systems. Those things help you to have a consistency from store to store to store in terms of how you control and how you manage the business.”

All of that, Grube adds, “is something that Wendy’s brings to the table.” The Cafe Express organization “can leverage some of the work being done in some of the other companies and piggyback on some of the results. There are synergies in applying them. You are not always re-creating the wheel.”

Co-founder Lonnie Schiller acknowledges that Cafe Express has grown slowly. Between 1984 and 2002, when Wendy’s first bought a piece of the business, the Schiller Del Grande Restaurant Group–whose partners, Schiller, Del Grande and their wives, Candice Schiller and Mimi Del Grande, also own the fast-casual Taco Milagro Mexican concept–opened 13 Cafe Express units. The count grew to 18 branches in the past two years, all in the Houston and Dallas markets.

“We’ve grown Cafe Express very slowly over the years,” says Lonnie Schiller, who maintains some ownership in the concept. “Perhaps we were slightly ahead of our time with what is now referred to as ‘fast casual,’ but that slow growth allowed us to solve and refine many of the issues that an emerging concept naturally faces.”

With Wendy’s application of large-scale systems, growth should be easier, Grube says. “We need to develop those things so we can replicate the chain and make sure that when you do that it is replicated profitably and that it has the right economic viability,” he says.”

Grube says he plans to identify a new expansion territory for Cafe Express to develop. “In 2005 we plan to do some back fill in both Houston and Dallas and also start a new market,” he says. “We’d like to start with one or two in a new market and build out from there.

“We would like to look outside of Texas,” he adds. “We know it works well in Texas, and we want to see if it plays well outside this region. We haven’t identified the next market yet, but we definitely want to be in a new marketplace. Ultimately, we would like to be able to franchise the concept.”

Grube’s executive background in helping to grow Wendy’s in Canada and then in heading the burger chain’s international division suits him in terms of experience that can help Cafe Express grow, he says.

Schiller and chef Del Grande remain shareholders in Cafe Express and continue as advisers. “Robert is actively involved in developing food, in conjunction with Susan Bennett, who is in charge of our research and development and quality assurance,” Grube says. Bennett has been with Cafe Express for all of its 20 years.

New dishes are being introduced. “Right now we’ve got a new … blue-cheese, spicy beef salad,” Grube says. “It’s a little more carb friendly, with excellent slices of beef. It’s a little different for a salad, because it’s not in a bowl but on a platter. The beef is on the bottom of the platter, and the lettuce and arugula are mounded in the center. Around that you have walnuts, blue cheese, grape tomatoes and slices of apple on the top. It’s a nice taste profile and goes after both male and female customers and also plays to carb-friendly [needs].” The spicy beef salad is $6.99.

Cafe Express’ menu prices range from $6.29 for a Caesar salad to $10.49 for a half roasted chicken with two vegetables and soup or salad. Prices were increased in January.

Grube says Cafe Express is making few physical changes in existing units, except for adding some two-top tables. “When you think about our lunch business, a lot of times we run out of tables and not seats,” he says. “We are looking store by store at adding two-top tables, which would make us more effective and more efficient.”

The restaurants currently average about 6,000 square feet with inside seating for 150 to 170 and patios that add 30 to 100 seats.

“One of the things that we would like to test is a smaller version,” Grube says. “We would like to take a look at 4,500 square feet with a little smaller profile. And we’d also like to look at downsizing the menu a little bit, making it a little simpler.” He envisions smaller units having about 110 seats with more if there are patios.

Cafe Express’ demographics are split nearly in half between men and women. “It’s maybe slightly higher female,” Grube says. “From a consumer standpoint we are probably in that 29-to-59 age range. It’s a consumer who is, needless to say, concerned about quality yet still conscious about convenience. They want to have high standards and high quality but want convenience.”

He says the average consumer typically is middle-class and higher. “It isn’t just about Cafe Express, but it’s about many concepts today. You have a much more traveled consumer who has experienced different tastes and foods,” Grube says. “We see that people are looking for distinctive tastes, textures, profiles. That is a consumer that will seek out Cafe Express.”

Grube was named to the board of Cafe Express in July 2003.”The first thing that I did was take a trip to Houston, visiting all the stores without telling anyone I was coming. I didn’t get a dog-and-pony show,” he says. “I was impressed with the consistency and the high quality of the food. I ate at all the Houston units and, at the end of the day, was satisfied with the food experience.”

He sees a major challenge in providing more customer contact in the dining room. “How do we go out and follow up on the customer experience beyond the counter?” he asks “That can only make us better from a hospitality standpoint. We need to take that beyond where we’ve been before. We need to tear down that wall and make it more personable in terms of the contact. That’s an opportunity for us.”

He says Wendy’s systems “should be invisible to the consumer.” But efficiencies can come from Wendy’s buying power, he notes.

“We are real pleased with Cafe Express’ look, and we want to be able to replicate that,” Grube says. “But if you are putting an air conditioner in, why not use the Wendy’s brand [from its] 6,000 restaurants?” The parent chain’s supply chain management also can apply to such basics as salad greens, he adds.

“There are tremendous opportunities there,” Grube says. “How do you leverage Wendy’s buying power, leverage technology?”

Cafe Express plans to open a new unit in November in The Woodlands outside Houston, marking a ratcheting up of growth.

“As you take a look at young companies, I think the hardest thing for them to do is get the capital to grow,” Grube says. “One of the things Wendy’s supplies in this endeavor is the balance sheet and to get capital to grow. We have the flexibility to draw on the parent company.”

COPYRIGHT 2004 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2004 Gale Group