Sustainability, new prototypes in plans for Phillips Seafood

Nation's Restaurant News, July 28, 2008 by Milford Prewitt

BALTIMORE -- Given its century-old roots in Maryland's Eastern Shore, its investment in sustainable aqua culture in the Chesapeake Bay and its close identification with this city's signature dish, the crab cake, it's easy to forget that Phillips Seafood is far more than just a local favorite.

Phillips is a family-owned global company that's looking forward to another century in business by ensuring that the lifeblood of its success, crab, can be harvested through sustainable methods and processed to produce a high-quality product.

Part restaurant operator and part crabmeat processor, distributor and manufacturer, the 92-year-old Phillips is a vertically integrated company that, according to company sources, may be the world's largest "undocumented" producer of what is known as blue swimming crab. The company processes 16 million pounds a year, either for sale to others or for use in its own restaurants.

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Phillips reported foodservice sales of about $160 million on 16 restaurants in 2007.

Now Phillips is adding yet another revenue stream to its operations: foodservice franchising.

After decades of being recognized for its 1,600-seat restaurant in Ocean City, Md.--an operation that started off in the mid-1950s as a carryout shack and that has since been expanded a dozen times to its current square-city-block size--and its anchor restaurant property in Baltimore's Inner Harbor, the company is launching three different foodservice vehicles to franchise to veteran operators, hoteliers, multiconcept dinnerhouse companies and institutional contract feeders.

John Knorr, vice president of national accounts and franchising for the company, said Phillips has developed a level of operational know-how, market appeal and national brand awareness, largely built on the company's presence as a crabmeat and crabcake vendor and distributor.

Knorr said the heart of the 16-unit restaurant division's franchise growth vehicle will be modernized prototypes of Phillips Seafood's full-service outlets. After opening a company-owned store in Atlantic City, N.J., about four years ago to display to potential franchisees, it recently signed a deal with Columbia Sussex Hotels, a lodging franchisee based in Ft. Mitchell, Ky.

Columbia Sussex opened a full-service unit in the Sheraton Philadelphia City Center, but more opportunities exist to roll out additional franchised units in the franchisee's hotels and casinos across the United States.

Even more recently, Interstate Hotels opened a full-service Phillips prototype in Rockville, Md., a Washington, D.C., suburb.

Although Phillips full-service outlets range from 10,000 square feet to 40,000 square feet-- the size of its flagships in Washington, D.C., and Baltimore--the new franchised vehicles will be built to suit. However, they probably won't be as large as the flagships, Knorr said.

All new full-service franchise launches will be designed with a sophisticated urban interior that reflects less of the chain's heritage family-seafood-dining ambience and more of a "big city" feel and with open kitchens where appropriate.

Honey Konicoff, vice president of marketing for Phillips, said hotel franchisees who are signing up for the full-service vehicle are looking for sophisticated amenities for their clientele, a market position Phillips is capable of filling.

"What makes a hotel operator want a Phillips Seafood restaurant is that they generally want to align the foodservice in a boutique-hotel environment," she said. "They are looking for what we like to describe the restaurants as being--polished casual, not too stuffy and not too upscale."

At the same time, Knorr added, a number of full-service, multiconcept dinnerhouse operators are looking to diversify their portfolios with a seafood concept and knocking on Phillips' door to explore mutual benefits through franchising.

The company also rolled out two other concepts: a fast-casual vehicle with counter service and a quick-service prototype designed for food courts, in-line locations, airports and other high-traffic pedestrian environments. Both have been branded Phillips Seafood Express.

HMS Host agreed to open the 2,000-square-foot fast-casual concept at its Charlotte, N.C., airport facilities and Atlanta's Hartsfield-Jackson International Airport.

Phillips also has been remodeling some of its older stores.

Steve Phillips, Phillips president and chief executive, whose grandfather Augustus launched the company as a seafood processing plant in 1916, said he is proud of his company's long history and its commitment to the environment and sustainability.

"We hired experts, we follow the United Nation's recommendations on seafood processing, we train our employees around the globe how to pick crabmeat," he said. "But none of that means anything if the nations we find our product from abuse the resource.

"I mean, look at the Chesapeake Bay. We are getting nowhere near what we used to get out of there 50 years ago, and it could happen other places."