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New Chevys CEO says sales on rise, reports business on track despite slower expansion

New Chevys CEO says sales on rise, reports business on track despite slower expansion – Chevys Inc., Ronald P. Maccarone

Alan J. Liddle

EMERYVILLE, CALIF. — New Chevys Inc. chief executive Ronald P. Maccarone said he inherited a “healthy” company but is tempering expansion pending fuller economic recovery in core markets and the completion of infrastructural refinements.

Chevys is the systemwide-sales leader in the domestic casual-dining Mexican restaurant segment.

Maccarone served as Emeryville-based Chevys’ executive vice president and chief financial officer from early 1999 until last month, when he was promoted to chief executive and president by the board of J.W. Childs Equity Partners of Boston, which is the majority shareholder of the 174-unit chain operator. At the same time J.W Childs board member Jerry Horn, a former chief executive of General Nutrition Cos., was named to the new post of Chevys’ chairman.

The promotion of Maccarone followed the resignation of chief executive Scott Bergren, who left after nearly seven years to become senior vice president of new concept development and design for Tricon Global Restaurants.

Within days of Maccarone’s appointment, his old post was filled through the promotion of Teresa “Terrie” Robinson to senior vice president and chief financial officer. She previously was Chevys’ vice president of planning.

Maccarone said his administration was planning no dramatic changes for Chevys, which operates 131 Chevys Fresh Mex, Rio Bravo Fresh Mex and Rio Bravo Cantina casual-dining restaurants and six full-service Fuzio Universal Pasta outlets. The company also franchises an additional 40 Chevys and three Fuzio’s units to others.

“The company is operating very well, so from that perspective I don’t have to reinvent the wheel,” Maccarone said shortly after being named chief executive. “We’re focused on making it better, and I look forward to being a driving factor in that.”

Chevys’ slow but continuing expansion of its nine-unit Fuzio group recently saw the opening of the multiethnic, table-service chain’s first ground-up suburban unit, in Dublin, Calif. Fuzio also opened a franchised branch at the Arundel Mills mall in Hanover, Md. The company closed a Fuzio in Chicago last year.

While Maccarone has been non-committal about Fuzio’s growth prospects, some industry observers wonder whether Chevys’ circumspect manner about the brand might be tied to Tricon’s search for a full-service pasta concept to pair with its Pizza Hut dine-in locations. If Tricon’s current binge of co-branding leads to such an integration, its execution would rest with former Chevys chief executive Bergren in his new role. Obviously, Bergren knows Fuzio’s strengths and weaknesses because the development and initial growth of Fuzio came during his watch at Chevys.

Though declining to provide details, Chevys’ chief of marketing, Bruce MacDiarmid, declared that his company’s core Mexican dinnerhouse business “is up for 200; we feel very positive and feel the worst is over,”

However, “being essentially a [San Francisco] Bay Area company,” in terms of concentration of corporate-run units, “we were hardest hit by the dot-coin meltdown,” as opposed to the general economic and post-Sept. 11 malaise.

Supply chain support and technology are two of the areas Chevys is focusing on as part of its internal improvement campaign, Maccarone indicated. In addition, menu and operational refinements are under way constantly at the company’s Santa Rosa, Calif., “next-generation” test restaurant, which debuted six menu items that are being rolled out nationwide this month, MacDiarmid said. Among the new menu items is a “Napa Valley” quesadilla made with Brie, chicken, sliced apples, tequila-caramelized onions, a garlic-herb tortilla and fresh mango chutney.

“Over the last year one of the things that have worked well for us is the use of flavored tortillas,” MacDiarmid said. The wrap-inspired upgrading of breadlike tortillas has led to such new menu items as a “Tuscan-dolla” quesadilla of marinated Mozzarella, fresh basil and vine-ripened tomatoes in a grilled garlic-herb tortilla.

Despite such menu innovations, MacDiarmid said the company’s most successful menu move in some time simply entailed letting guests pair one of the chain’s traditional Mexican foods like an enchilada with one of its signature fajitas in a “Best of the Best” combo. Also generating consumer interest, he indicated, is the return of such favorites as a portobello mushroom-asparagus fajita with salsa vinaigrette, and jalaperio-jelly-glazed baby back ribs.

Based on the success of a trial in Portland, Ore., last year, Chevys is planning a Maine lobster fajita promotion this summer, MacDiarmid said. The lobsters will be flown in Live daily and used in $14.99 combo fajita platters and an $18.99 standalone fajita offering.

MacDiarmid said the company also is concentrating on maintaining its value image by offering menu items in the $8-to-$10 range. He said that price point “leads to frequency.”

Founded in the San Francisco Bay Area in 1986 by Scooter and Warren Simmons, Chevys was purchased as a 37-unit chain in 1993 by Taco Bell Corp., which positioned Chevys for national expansion but then spun the brand off to J. W. Childs and some company managers in 1997. Two years later then-94-unit Chevys purchased the 66-unit Rio Bravo Cantina chain from Applebee’s International.

During the past two years, Chevys has closed or converted some of the Rio Bravo units while emerging as the nation’s leading casual-dining Mexican chain operator, pulling significantly ahead of onetime larger rivals Don Pablo’s Mexican Kitchen, Chi-Chi’s and El Torito. Combined, Chevys’ and Rio Bravo’s systemwide sales totaled about $407 million in calendar 2000, compared with system wide sales of about $297.3 million for Don Pablo’s, $217.5 million for Chi-Chi’s, $193.0 million for El Torito and $108.0 million for its sister chain, Acapulco.

Referring to Chevys’ growth spurt from 1998 through 2000, Maccarone said, “We basically doubled the size of the company in three years.” While the recession changed the growth outlook, “the last year gave us an opportunity to take a deep breath and focus on some infrastructure things to help us be a more efficient player when we resume growth,” he added.

Virtually all the major players in the Mexican casual-dining segment reduced net unit counts by culling underperforming or strategically misplaced restaurants during 2001. But like a python digesting its prey to gain strength for a future hunt, Chevys is “in a mode where we are absorbing what we acquired,” Maccarone said.

“The franchised side of our business continues to grow,” he said, but in terms of “our core Chevys restaurants, we won’t be opening any [in the short term].”

A 30-year veteran of the retail home-improvement store industry, Maccarone previously worked five years as executive vice president and chief financial officer at $1 billion-a-year Eagle Hardware & Garden Inc.

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