The restaurant company is finding more synergies and efficiencies from its recent addition of Benihana and Ra Sushi, and can now also expand its real estate opportunities
When Emanual “Manny” Hilario came on board as chief executive officer of One Group Hospitality in 2017, the company had about $100 million in revenue. Now, it’s pushing nearly $900 million. On Wednesday, he told analysts at the Stephens Investment Conference that the company still has a long way to go before reaching its potential.
Its flagship STK brand, for instance, is close to opening its 30th location with a global footprint spanning Las Vegas, Nashville, London, Dubai and more.
“We believe it can be 200 units,” he said. “It’s still early.”
In 2019, One Group acquired Kona Grill, paying about $25 million for 24 restaurants. Earlier this year, the group bought Safflower Holdings, parent company of teppanyaki brand Benihana and Ra Sushi, for $365 million. The company has since focused on integrating Kona and Ra Sushi to maximize efficiencies and Hilario believes 200 units is also feasible for each of those brands.
“We see a lot of white space,” he said. “We are on the path to $5 billion when you do the math on white space opportunities. We’re still very early on in our growth.”
Hilario said the company is in a good spot because it has adopted back-office synergies as it grows, and it has found favorability with landlords because of the breadth of its brands and ability to cater to different occasions.
“With our current portfolio, we can do urban and suburban. Before, with just STK, we did just big (designated market areas) and urban,” he said. “Before we were limited to 10,000 square feet. We now have more flexibility to go into smaller markets. We can do high quality real estate of any size. That will help us become a more dynamic company.”
The company is also leveraging its brands to build a more robust loyalty program, which Hilario said is “big in today’s environment.”
“You’re not going to have STK every night, so having Benihana or multiple brands gives you an opportunity go out. It provides a much stronger platform for loyalty, which matters to consumers today. Loyalty creates a pathway of providing one-on-one connection with customers,” he said.
As for those customers, Hilario said there have been a few shifts this year, including more weekday business and earlier dining hours, as well as plenty of trade down activity. One Group has played the value game with all of its brands, for instance offering a $39 deal at Benihana and Kona, and a $69 “night out” deal at STK. There is also a takeout/delivery deal for $9.99 cheeseburgers across its brands.
The company has been conservative about taking too much pricing and will continue to maintain moderate increases in the low-single digits when necessary. Hilario said this strategy has helped keep traffic levels above its category peers and will position the company advantageously when consumers are ready to return to their normal restaurant visitation habits.
“One reason we’re super cautionary on pricing is we’ll get rewarded with traffic on the upside. It’s our long-term strategy to be modest on pricing, and when traffic comes back, it brings on that incremental profitability,” he said. “There are cycles in this industry and the higher end goes in first. When it goes down, we feel it. But on other side, when it goes up, it goes really up. The upcycle is good.
“I’m not making bullish predictions, but if we follow a typical cycle, the other side usually means really good things.”
Contact Alicia Kelso at [email protected]
