Dinnerhouses boost sales with updated menus, new marketing pushes

Nation's Restaurant News, July 25, 2005 by Sarah E. Lockyer

Dinnerhouse chains in the Second 100 relied on new-unit development and updated menu offerings to improve sales growth throughout their latest full fiscal years. The concepts gained ground against the sector's first-tier market leaders by introducing menu makeovers and marketing campaigns that sought to differentiate their offerings from others in the cluttered casual-dining market.

Such growth and innovation continued in the first half of this year, with Famous Dave's of America Inc. representing a prime example. The Eden Prairie, Minn.-based company's Famous Dave's barbecue chain added five franchised units during the first quarter ended April 3 to reach 188 locations, including the chain's first restaurant in the Philadelphia metropolitan area. The company also entered into area development agreements during the first quarter for eight new restaurants, including the chain's first Florida and West Virginia locations.

"We have a lot of room to grow," Famous Dave's chief executive, David Goronkin, says. "We want to become the category-defining brand in barbecue. We are very excited."

This year Famous Dave's anticipates opening between 25 and 30 franchised restaurants, versus its 12 openings in 2004, Goronkin continues. In addition, the company will open as many as two corporate units, the first such openings since 2003, when the company halted corporate-store growth to focus on its fundamentals, Goronkin says.

During the next six years the chain intends to add 177 franchised restaurants to bring Famous Dave's systemwide unit count close to 400, Goronkin said.

Sue Perram, a research analyst and vice president at Avondale Partners LLC in Nashville, Tenn., initiated research coverage on Famous Dave's last month and cited its growth prospects. "We do not believe that there are any geographic barriers for the brand," she wrote in a recent research note. "The high quality of food, such as St. Louis-style ribs, Texas beef brisket or Georgia chopped pork, can be customized with any of Famous Dave's five signature sauces to suit regional tastes. With a presence in only 29 states, [Famous Dave's] still has more territory to cover."

Famous Dave's, in addition to its planned unit growth, expects to drive sales with new marketing and menu offerings, Goronkin says. In 2004 the company introduced television advertising to its corporate-restaurant markets and plans to spend about $3 million on marketing and advertising in the current fiscal year, Perram indicates.

On a more local level, the chain employs a "Rib Team" that participates in barbecue contests and community festivals nationwide to introduce the Famous Dave's brand to untapped markets.

"We say we want to put a bone in your mouth," Goronkin says, "so that people can experience Famous Dave's at its best."

Chevys Fresh Mex, with latest-year systemwide sales of $309.7 million from 69 company and 38 franchised restaurants, is another dinnerhouse chain looking to become its respective segment leader, according to president Charles "Chuck" Rink.

Though the Mexican dinnerhouse segment is crowded, Chews' parent, Real Mex Restaurants Inc., which bought Chevys out of bankruptcy in January, believes it is positioned to help the brand resume expansion. Apart from Chews, Real Mex operates the 75-unit El Torito/El Torito Grill chain and 39 Acapulco dinnerhouses, with the latter brand reporting average annual sales per unit of about $2.4 million.

Real Mex ranked No. 83 among the Top 100 companies, with latest year revenues of $324.9 million, excluding the newly acquired Chevys. Backed by Real Mex's resources, Chevys is eyeing a strong growth trajectory, Rink says.

"A company emerging from bankruptcy does require some concept work," he explains. "And we're currently doing that with new menus, new uniforms and a new beverage program. We're bringing back the luster to the Chevys brand, and after that we're back on a growth path."

Chews' West Coast locations will introduce a new menu July 25. Rink says, and units systemwide will follow suit by September.

Houlihan's Restaurants' president and chief executive, Bob Hartnett, subscribes to the same philosophy when it comes to menu offerings.

"Fundamentally, we believe that the food is the core reason people go to restaurants," he says. "The food needs to be high-quality and interesting, the flavors today need to be bolder.... Menus today really need to be broader than they were 10 years ago. It is more difficult to operate, yes, because of our culinary variety, but it is important."

Leawood, Kan.-based Houlihan's now includes 76 corporate and franchised branches of the namesake concept and has six other brands in its portfolio. The flagship chain recently introduced more than 20 new menu items, including whitefish tacos, Thai Chile Buffalo Wings and a calamari salad tossed with Napa cabbage, cashews and a house banana-ginger vinaigrette.

In addition to its menu makeover, the chain says it plans to have between 300 units and 400 units operating within the next 10 years.