Late last year Ruth’s Chris Steak House Inc., the operator or franchisor of more than 100 fine-dining steakhouses, agreed to acquire a 19-unit upscale seafood concept, Mitchell’s Fish Market, as well as three steakhouses, from restaurateur Cameron Mitchell.
The deal, which totaled about $94 million, was embraced by both parties. Mitchell had been seeking to sell his concept, one of various brands under the Columbus, Ohio-based Cameron Mitchell Restaurants LLC, to a more sophisticated restaurant company that could activate further growth, and Ruth’s Chris was looking to purchase a concept that wouldn’t compete with its namesake steakhouse chain, but would provide additional growth opportunities for the publicly held parent company, based in Heathrow, Fla.
Craig Miller, chairman, president and chief executive of Ruth’s Chris, said the deal is likely to close sometime next month.
Were you in the market for a secondary growth brand for some time prior to this deal, or did this opportunity just present itself?
It was a little bit of both. We have a great vehicle with Ruth’s Chris…and there is a lot of growth left for that concept, but we also feel that the high-end segment of the restaurant industry has a lot of opportunity. We were looking for a type of brand that would complement Ruth’s, and we found that [Mitchell’s] philosophy and how he runs his restaurants would be compatible.
What were the most important characteristics you looked for in a growth concept?
We wanted a brand that was consistent with what we do at Ruth’s Chris. The high-end market is something we know a lot about. We also wanted a chef-driven concept—the culinary aspects of the restaurant business are critical to a company’s long-term success. We wanted a quality product with quality execution that we know American consumers are looking for today.
Did you wait until valuations dropped from the record highs before seriously considering an acquisition?
From time to time markets tend to be on extremes, and the debt markets supported some extremely high valuations where deals were heavily leverage-driven. At that time, many restaurant companies looking for strategic purchases were priced out of the market. We wanted to pay a fair price, and that’s what we were able to do. The debt markets, when they contracted, brought valuations in to what we considered a fair range.
What are the benefits you expect from this purchase?
We will get some balance in our portfolio, with seafood and beef concepts, and average checks around $40 [at Mitchell’s] compared with about $70 [at Ruth’s Chris], so that helps us gain balance from a consumer standpoint. Also, as a larger market cap company and having more scale, it covers the costs of being public, leverages overhead and spreads your costs over a bigger revenue base.