La Madeleine: from humble beginnings this bakery-cafe and bistro takes on the competition with French savoir faire

Nation's Restaurant News, Jan 31, 2005 by Elissa Elan

Say you're a French bistro masquerading as a fast-casual concept. With a Gallic nod to your competitors in the bakery-cafe field, you say, "Vive la difference" and invite customers to partake in your offerings with a decided sense of joie de vive.

That's what La Madeleine does, and perhaps that's part of the reason why the chain has managed to succeed despite more than a few setbacks over the last 22 years.

The 64-unit, privately held bakery-cafe and bistro chain has been selling classic French pastries since its inception in 1983 and heartier food soon thereafter, making it, along with the Fuddruckers hamburger chain, one of the oldest fast-casual concepts.

Founded by Patrick Esquerre, a French immigrant who came to the United States with a desire to open a neighborhood bakery, La Madeleine has grown to become more than just a boulangerie. Today the concept trades in Arizona, Georgia, Louisiana, Maryland, Texas, Virginia and Washington, D.C., and employs a total of 2,400 people.

With its country French decor of weathered wooden tables, antique bricks and stone fireplaces, the chain serves all dayparts and generates an average check of about $10. La Madeleine grossed $118 million last year and expects to boost that result by $3 million in 2005.

According to Roz Mallet, La Madeleine's chief operating officer, the margins of the chain are healthy, and a growth plan now is in place.

"Our average volume is $2 million, and we have 64 units at this time," Mallet says. "All of our stores are company owned, and we're right at $121 million in annual revenue and looking at 15 to 20 percent growth long term and 10 percent in the immediate future."

Greg Buchanan, who was named the company's new president earlier this month and formerly was its chief financial officer, says the current growth plan calls for five openings in 2005 and between nine and 10 new stores in 2006. There currently are no plans to franchise the concept.

"We recently hired a director of real estate to lead our site selection and growth," Buchanan notes. "We want to target trade areas with similar demographics to those where our existing customers are. so we will focus our growth in our existing markets for the next few years before moving on to new markets."

Food industry consultant Malcolm M. Knapp believes the plan is a sound one.

"It always costs less to build out where you're already at," he says. "It makes a great deal of sense, especially since it allows you to leverage your supervisory costs."

Though the company today is cautiously moving forward, it has not been without its problems. During the 15 years in which Esquerre built his chain, it grew to 62 units. But growth stopped there for several reasons: infighting among its investors about expansion, a failed plan to expand into the Chicago market and debt that was as high as $33 million, according to published reports.

Ultimately, Esquerre resigned his post in 1998. The company was sold in 2001 to private investors, including Summer Street Capital and Morgan Keegan Investments, reportedly for about $60 million, or less than $1 million per restaurant, though the actual price was not officially disclosed.

In March 2002 La Madeleine hired Wallace B. Doolin as its new chief executive. Before joining the chain, he had spent eight years as chief executive of Carlson Restaurants Worldwide, parent of the T.G.I. Friday's dinnerhouse chain. He brought in a new management team, which included Mallet, chief marketing officer Debra Tippett and Buchanan. Doolin then began to position the company for some long-awaited growth.

Last year the company opened two restaurants, its first new units since 1999, in Houston and The Woodlands, Texas. In November, however, Doolin left the chain to take the reins at troubled, Minnesota-based Italian family-style dinnerhouse chain Buca di Beppo.

"We miss Wally, but we're moving forward with our strategy," Mallet says. "We continue to execute the plan and have good direction with the board. And Wally continues to be a member of the board. We have lots of good gross initiatives in place, and I think we've all taken it upon ourselves to keep the brand moving forward. We owe it to our customers. We've simply closed our ranks a bit and kept moving."

But what makes La Madeleine stand out from its competition is its ability to offer a casual-dining ambience and food in a largely fast-food world. To that end, the chain--whose target customers are upscale, aged 25 and older and well educated--is offering hearty dinner items, such as pork and beef, as well as specialty coffees and wines. Those items have been signatures since La Madeleine's inception, though they haven't been publicized all that much.

"Because La Madeleine is a fast-casual concept, people don't necessarily expect that wine will be offered on the menu," says Susan Dederen, the chain's director of research and development. "We've always offered it, but now we're finally highlighting it. It's a nice addition since we serve classic French dishes, and a glass of wine goes really well with them."