Real Mex Restaurants Inc. officially exited bankruptcy on Tuesday, and company officials say they have set the stage for a dramatic overhaul of the company’s three core brands.
Real Mex — the parent to the El Torito, Chevys Fresh Mex and Acapulco chains — was acquired in a bankruptcy court-approved auction last month by a group of noteholders that includes Tennenbaum Capital Partners, Z Capital Partners and J.P. Morgan Investment Management, in a deal valued at about $129 million. The group now holds an 85-percent stake in Real Mex.
As a result, Real Mex is emerging from Chapter 11 with a stronger capital structure and significantly reduced debt. About 40 underperforming restaurants were closed and lease rates have been renegotiated where necessary, Real Mex chief executive David Goronkin told Nation’s Restaurant News Monday.
Now the company is ready to proceed with a turnaround effort that includes menu upgrades and brand redesigns now in test, Goronkin said.
“It’s a new day at Real Mex,” Goronkin said. “This is the best position this company has been in for many years.”
EARLIER:
• Noteholders win bid to acquire Real Mex
• Two bidders compete in Real Mex auction
• Real Mex set for Ch. 11 auction
• Real Mex files for Ch. 11 reorganization
Real Mex, the nation’s largest operator of Mexican full-service restaurants, faces an uphill climb as it attempts to change consumer perceptions that its brands are outdated.
The company’s 132-restaurant portfolio includes “a collection of great Mexican brands that, unfortunately, had lost its way,” Goronkin said. “There was a homogenization effect across all brands.”
View a slideshow of the Real Mex upgrades
The recession hit Real Mex hard, as most of its restaurants are in California, where unemployment rates were particularly high. Declining sales left the company unable to service a high debt load, which led to the bankruptcy filing in October 2011.
Leadership changes
Goronkin, formerly president and chief executive of Bennigan’s Franchising Co., was hired in mid-2011 to turn the company around. One of his first moves was to build “brand silos,” with a leadership team that focused on creating a unique brand identity for each chain after years of shared management.
For example, in July 2011 Real Mex hired Edie Ames, former chief operating officer of Del Friso’s Restaurant Group LLC, as chief operating officer and brand president of El Torito.
Brian Wright was named president of Chevys, and Peter Burt is brand leader of Acapulco, reporting to Ames.
Each team was established with brand-specific culinary and marketing personnel and other infrastructure support, Goronkin said.
“We’re seeing some great elements of brand differentiation emerging,” he said, noting that customer service scores have already improved about 30 percent.
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Changes for brands ahead
• El Torito: With 59 restaurants and a more than 50-year history, El Torito is furthest along in its revamp.
The goal for El Torito is to return it to its roots as a chain known for culinary innovation, Goronkin said. When Larry Cano founded El Torito in 1954, the concept was a trendsetter, which some say inspired such chains as Taco Bell. Cano is credited with popularizing the frozen margarita, for example, and guacamole prepared tableside.
Ames said she tasked Pepe Lopez, a 33-year Real Mex veteran chef, with creating a new menu for El Torito that incorporates high-quality ingredients and bold, exotic flavors, such as yucca, cactus and spicy ghost peppers.
Currently in test in eight locations, Ames said the new menu is expected to roll out within a couple months.
New dishes include a lineup of housemade salsas that can be ordered in “flights” of three for sampling. The menu now designates low-calorie dishes, such as a Grilled Chicken and Avocado Salad with a light Serrano-grape vinaigrette.
Authentic Mexican dishes have also been added, such as Patron tequila shrimp in jalapeño butter with escabeche, and tequila-molcajete salsa served on a bed of sautéed spinach. The menu now includes a line of “street tacos,” such as pork al pastor, grilled halibut and crispy Baja shrimp.
A new value-positioned lunch menu, with prices all under $10, is available as an alternative to the all-you-can-eat $9.99 buffet.
El Torito has also repositioned its cantina as a Tequila Bar featuring more than 100 varieties of the spirit, specialty margaritas and other cocktails, and an expanded wine list, Ames said.
Staffers have new uniforms and the music focuses on contemporary Latin artists.
The company is also planning a building redesign, scheduled to be completed in a Redondo Beach pier location later this year.
The chain will also update its logo. The signature bull, for years shown in a passive bow, will instead be charging — “a bull with attitude” — which Ames said signifies new energy at El Torito.
“When you go through a restructuring, there is a tendency to hang your head,” she said. “But now our employees are taking pride in the brand again.”
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• Chevys: Based in Union City, Calif., Chevys, with 44 company-owned restaurants and 18 franchise units, is also returning to its roots, Wright said.
Founded in 1986, Chevys was once considered a pioneer in the “fresh Mexican” category, with its food all made fresh in house.
After working with consulting group Results Thru Strategy, the chain is now testing a new menu and brand positioning that emphasizes Chevys’ made-from-scratch tradition, and bringing back updated versions of original dishes, such as mesquite-grilled chimayo salmon fajitas served in a corn husk with barbecue sauce.
“Our food has always been made in house here, but people didn’t know it,” Wright said. “Chevys had lost its life. It had lost its luster.”
Among nine test locations in Sacramento, four have been reworked with a theme called La Cocina Fresca. An area in the dining room where tortillas were hand made has been transformed into a display kitchen, where guests can watch quesadillas being grilled or salads being tossed.
A new lunch menu features lighter options and value-positioned dishes starting at $6.99.
A new fresh-fruit margarita is featured every month, and instead of celebrating Cinco de Mayo only in May, the fifth of every month has become a celebration, with earlier hours, specials and promotions.
Wright said the chain has injected “more fun” into branding touches, from napkins printed with such sayings as “What happens on this napkin, stays on this napkin,” to posters proclaiming that “everything looks better with salt-rimmed glasses.”
The chain has launched new social media efforts on Facebook and Twitter, and a series of You Tube videos is planned to communicate efforts to “bring Chevys’ mojo back.”
Promotions include “Mexican Dice Night,” when guests can roll the dice before their meal. If they get snake eyes, dinner is on the house.
The test has only been in effect for about eight weeks, and the company will likely decide mid summer which elements will roll out chain wide, Wright said.
• Acapulco and other brands: With 18 units, the Acapulco chain isn’t as far along in its brand revamp. The brand will remain the more traditional Mexican concept, with a value position, and menu enhancements are in the works, Goronkin said.
Real Mex also plans to continue its one-off restaurants, such as Las Brisas in Laguna Beach, Calif., which Goronkin said is “killing it.”
Real Mex also operates one Who Song & Larry’s restaurant, one Sinigual location, one El Paso Cantina unit and six locations of El Torito Grill, a more upscale variant.
Mike Keeland has been named president of Real Mex Foods, the company’s manufacturing arm, a division Goronkin also plans to grow.
As a private company, it’s not clear whether new owners will report results as the company moves forward with turnaround efforts.
Although more work needs to be done, Goronkin said, the company is turning the page and moving ahead.
“We want people to know Real Mex is back,” he said.
Editor's note: An earlier version of this story incorrectly spelled the word “Cocina.”
Contact Lisa Jennings at [email protected].
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