Breakout brands, acquisitions push multiconcept operators to growBreakout brands, acquisitions push multiconcept operators to grow

By Lisa Jennings


Say, “Union Square Hospitality Group,” and people think New York. Say, “Fox Restaurant Concepts,” and the area around Scottsdale, Ariz., is the stronghold. And, of course, Lettuce Entertain You Enterprises dominates Chicago.


For years, multiconcept operators have laid claim to specific markets or regions, building powerhouse companies characterized by innovative brands that spanned cuisines and price points for consumers and offered employees numerous possibilities for professional development.


But many are now stepping beyond their familiar territories, lured by the siren song of growth. Their expansion strategies are as varied as their holdings, with 
some leaning on a breakout concept and others scouting far and wide for new acquisitions and investments. The goal for each is similar, however: to reach audiences in new markets — and perhaps even become a national player.


“It’s going to be interesting when one of these guys really hits it; we haven’t seen that yet,” said Tom Dillon, president and chief operating officer of the bicoastal Patina Restaurant Group.


Here’s a look at how some of the major multiconcept players — categorized by the mode of growth — are branching out.


The concept creators


Many of the best-known multiconcept companies develop their new restaurant concepts and brands in house.


Danny Meyer’s USHG has long been known for its New York-focused higher-end restaurants, such as Union Square Cafe, Meyer’s original concept that opened in 1985; Gramercy Tavern; and Eleven Madison Park. The company currently operates nine unique restaurant concepts in the city.


Meyer opened the Shake Shack burger concept in 2004 and found a growth vehicle that is taking USHG well outside of the New York market.


USHG now operates 11 Shake Shack locations in the United States, with No. 12 expected to open before the end of the year. Two Shake Shacks also have opened in the Middle East, and more are planned.


Next year, three more locations are confirmed: a second unit in Miami, a first for Philadelphia and one in New York’s Grand Central Terminal, said Theresa Mullen, a USHG spokeswoman. All are corporate owned and the company has no plans to franchise, she said.


Richard Coraine, USHG’s senior managing partner for new business and development, said it made sense to grow Shake Shack, given the popularity of better burgers and the concept’s broad appeal.


“It took us five years to get the second Shake Shack open, but we wanted to be confident that we could execute well,” Coraine said. “Now, we have the systems and people in place, so we feel we can move the needle much quicker.”


USHG is also looking to grow some of its other concepts. The company is opening a second location of the casual Blue Smoke barbecue joint in New York this December. And Untitled at the Whitney Museum of American Art is another with broad appeal that the company may multiply, Coraine said.


One of the key drivers in growing such brands is the need to build in career opportunities for employees, Coraine noted. 


The limitations for employees in building a standalone restaurant could be illustrated by Meyer’s recent decision to sell Eleven Madison Park to the restaurant’s general manager, Will Guidara, and executive chef, Daniel Humm.


According to The New York Times, Guidara and Humm wanted to launch their own restaurant company, but they also wanted to stay at Eleven Madison Park. Rather than asking them to resign and then having to rebuild the team, Meyer agreed to sell them the restaurant.


Last year, USHG also experienced the first loss of a concept with the closure of Tabla. But USHG at the end of December is expected to launch a new restaurant called North End Grill with Tabla’s chef, Floyd Cardoz.


North End Grill will be a casual bar-and-grill-style venue that Coraine said would stand out for “the quality of ingredients and the warmth of the welcome.”


The bicoastal Patina Restaurant Group is also continuing to develop unique concepts, while looking to multiply existing brands within its portfolio.


With a complex history and an established presence on both the East and West coasts, Patina is the result of a multiconcept merger of venues created under New York’s Nick Valenti, now chief executive, and Los Angeles chef Joachim Splichal. With more than 60 restaurants and revenues of $186 million in 2010, according to the Nation’s Restaurant News Top 200 census, the company is known for restaurants in high-volume cultural and entertainment centers.


Two of the company’s concepts were recently named among Esquire magazine’s Best New Restaurants 2011: Ray’s & Stark Bar at the Los Angeles County Museum of Art and Lincoln Ristorante at New York’s Lincoln Center.


Patina also is looking to multiply its Naples 45 brand, Dillon said. A casual pizzeria, the Naples 45 Ristorante e Pizzeria location in New York’s MetLife Building averages about $8 million per year. And two variations of the concept in Disney theme parks together average about $10 million in annual sales.


The challenge for multiconcept operators, said Dillon, is knowing when to “really put your weight behind one thing.”


The key is identifying a unique concept with broad appeal and economics that work, Dillon said. Then, a company must deliver consistent quality and food, even at high volumes.


“If you can check all of those boxes, then you probably have a concept you can grow,” he said 


Richard Melman’s Chicago-based LEYE also has a handful of its brands on a growth track.
With 80 restaurants reflecting 42 brands in eight states, LEYE is known for its collection of one-of-a-kind concepts, mostly in the Chicago area. Only a few LEYE brands have multiple locations — though the company gave birth to both the Maggiano’s Little Italy and Corner Bakery brands, which were spun off early and grew to become large chains.


Now, Kevin Brown, LEYE president and chief executive, sees the four-unit Wow Bao and four-unit M Burger concepts as scaleable, and the company also is looking to grow Mon Ami Gabi, Paris Club and Hub 51.


In addition, new LEYE concepts are coming. Last month, the company’s Foodease food court concept debuted in downtown Chicago, and the company recently unveiled Saranello’s, a casual Italian restaurant in Wheeling, Ill.


Sam Fox of Fox Restaurant Concepts has shifted his focus entirely to multiplying existing brands.


“I think we have enough concepts today,” he said. 


Fox has 33 restaurants among 12 concepts across five states. None were specifically designed to be a growth vehicle, he said.


“It has always been about opening one great restaurant,” he said. “It was about [scratching] our creative itch.”


However, Fox has identified five brands within his portfolio for growth: True Food Kitchen, North, Sauce, Zinburger and Culinary Dropout. And the company is moving beyond Arizona, California, Colorado, Texas and Kansas, where it has traditionally operated.


The health-focused casual-dining brand True Food Kitchen has four locations and $10 million in financial backing from P.F. Chang’s China Bistro Inc.


Fox also recently sold licensing rights to Zinburger, a four-unit casual wine-and-burger bar, to The Briad Group, one of the largest franchisees of the T.G.I. Friday’s brand. Livingston, N.J.-based Briad last year opened a Zinburger in Clifton, N.J., and more are planned for the East Coast, said Fox.


The 10-unit Sauce, a fast-casual pizza concept with a $9 check average, also has potential, but Fox said growth is likely to be more organic than strategic.


“We don’t have a plan to open 50 or 100,” he said. “We’ll just go to another city, and if it works, we’ll keep going.”


Fox just opened the sixth location of the casual Italian concept North with an updated menu and decor. Two more locations of the single-unit gastropub Culinary Dropout are also planned.


“That’s the environment right now,” said Fox. “People want things casual.”


The culinarians


Some of the nation’s multiconcept powerhouses began with one chef and one restaurant.


Wolfgang Puck, Thomas Keller, Mario Batali, José Andrés, Bobby Flay and Emeril Lagasse are only a handful of famed chefs whose holdings have grown to include diverse business interests in addition to multiple restaurant concepts. From Flay’s seven-unit Bobby’s Burger Palace to Keller’s The French Laundry, these concepts are inextricably tied to the founding chefs.


“Twenty years ago, there weren’t any chefs like Mario Batali; there were very few chefs who had the financial capital to take big leases and do big things,” said Dillon of Patina group, who worked previously for multiconcept operator/chef Richard Sandoval.


Today, chef-driven concepts are sought after by real estate developers looking to lure customers to venues as diverse as airports and department stores.


Of the chef-focused multiconcept operators, one of the biggest is Puck, whose operations range from event catering to branded grocery products. The company licenses about 80 fast-casual Wolfgang Puck Express locations, mostly in airports, and two casual-dining Wolfgang Puck Bistros.


But it’s Puck’s fine-dining group, which operates 20 restaurants, that has been breaking new ground with growth focused on foodservice within high-end hotels.


On Nov. 1, a newly renovated Hotel Bel-Air opened with Puck doing all food and beverage, including a new restaurant called Wolfgang Puck at Hotel Bel-Air.


Tom Kaplan, the fine-dining group’s senior managing partner, said Puck is “going back to his roots with California cuisine served in a beautiful garden and bucolic setting.”


The new venue follows on the heels of the 2010 opening of Puck’s newest upscale Asian concept, WP24, in The Ritz-Carlton in downtown Los Angeles. 


The company also is multiplying its modern steakhouse Cut, which first opened in the Beverly Wilshire Hotel in Beverly Hills, Calif., in 2006. 


The company now has Cut locations in Las Vegas, Singapore and, most recently, London. Kaplan said they are looking to take the brand to more U.S. cities, as well as the Middle East, China and Hong Kong.


“We thought the uniqueness of Cut would translate well both domestically and internationally,” said Kaplan. “America is known for its steak restaurants, but no one has gone beyond our shores with a modern steak concept.”


Puck’s fine-dining group now has locations in Washington, D.C.; Detroit; Dallas; and Atlantic City, N.J. But one region that has eluded Puck over the past 30 years is New York City. Kaplan said the group has not yet found the right location or partner there for a Puck concept — though he said Cut might be the right concept for Manhattan.


“It’s not a matter of wanting to be in every state,” Kaplan said. “It’s about making sure the concept is executed perfectly, and that takes infrastructure. To do the kind of quality we want to do, we need a bigger infrastructure, and we’ll have it in time.”


For now, Puck’s fine-dining strategy is to partner with hotel groups, but that’s not to say the company’s existing freestanding restaurants are being forgotten.


Spago in Beverly Hills, which celebrates its 30th anniversary next year, is scheduled to be closed for about four weeks in 2012 for a remodel and menu overhaul.


“We’re calling it, ‘Act Three,’” Kaplan said. “We haven’t lost our focus on the mothership.”


The acquirers


One powerful contingent in the world of multiconcept operators is a group known for deep pockets and strategy of both creating brands and pulling others into their portfolios through acquisition or investment.


Among them is Houston-based Landry’s Inc., whose chief executive, Tilman Fertitta, has been collecting out of bankruptcy what he sees as turnaround opportunities.


Most recently, he made a bid with actress Eva Longoria of “Desperate Housewives” fame to buy her Beso restaurant in Las Vegas, which filed for Chapter 11 reorganization earlier this year.


Before that, Landry’s bought the Claim Jumper casual-dining chain and high-end Oceanaire Seafood Room out of bankruptcy.


Over the past year, Fertitta also purchased the casual-dining Bubba Gump Shrimp Co. chain based in San Clemente, Calif., and he attempted to buy the upscale-casual McCormick & Schmick’s seafood chain, based in Portland, Ore. The company rejected his hostile bid, but analysts expect he will try again.


Now, Landry’s has close to 30 concepts and almost 300 restaurants in the United States, and several concepts have been identified as potential growth vehicles internationally. The company had an estimated $875 million in foodservice revenue in fiscal 2010, according to NRN’s Top 200 census.


Tavistock Restaurants, based in Emeryville, Calif., is another well-funded group, tied to the global investment firm Tavistock Group, which was founded by U.K.-born billionaire Joe Lewis.


The restaurant division began in 2003 with the acquisition out of Chapter 11 bankruptcy of the former Constellation Concepts, a multiconcept operator of 17 restaurants, including the Napa Valley Grille and California Cafe brands.


Over the past eight years, the company has bought several smaller multiconcept operations, including E-Brands Restaurants, based in Orlando, Fla., parent to the casual-dining Timpano Italian Chophouse and Samba Room brands, and Boston-based Back Bay Restaurant Group, with 22 restaurants under the Abe and Louie’s, Joe’s American Bar & Grill, Atlantic Fish, Charley’s, and Coach Grill brands.


In addition to the collection of casual and higher-end concepts, Tavistock in 2007 added the Freebirds World Burrito chain, which it is aggressively growing through franchising and by opening company units.


Only one of Tavistock’s concepts was developed in house: Zed451, a churrascaria-meets-steakhouse restaurant with two locations, which Tavistock also plans to grow.


Now, Tavistock operates or franchises 100 restaurants across 16 brands, and revenues over the past 12 months have totaled about $300 million, said Jeff Carl, Tavistock’s chief marketing officer.


Unlike Landry’s and Tavistock, SBE, based in Los Angeles, has grown through strategic investment, rather than acquisition.


Founded in 2002 by Sam Nazarian, whose hospitality arm started with a collection of nightclubs, SBE has grown to include hotels and restaurant concepts ranging from the high-end Bazaar by celebrity chef José Andrés in Beverly Hills to a West Coast franchise operation of the Papaya King hot dog chain.


SBE’s restaurants also include internally grown brands, such as the casual-dining Mercato di Vetro, an Italian concept that opened in Los Angeles last month. 


But Nazarian also has an eye for strategic partnerships, such as the five-unit Katsuya brand developed with designer Philippe Starck and master sushi chef Katsuya Uechi. 


Most recently, SBE became an equal parter with Los Angeles restaurateur Adam Fleischman, whose casual-dining Umami Burger chain is now slated for rapid growth, along with a fast-casual variant called U-Ko.


Matt Erickson, vice president of SBE’s restaurant operations, said a key to SBE’s growth strategy is the symbiotic relationship between the company’s hotels, restaurants and nightclubs.


“People can stay in our hotel, eat in our restaurants and go afterward to our clubs,” Erickson said.


Nazarian’s goal is to establish all three components in certain “hub” cities, including Miami, New York, Las Vegas and Los Angeles, he said Erickson.


And with Los Angeles well established as home to the company’s first SLS Hotel, the next hub city to conquer is Miami, where an SLS is scheduled to open early next year. Andrés has signed on to head food and beverage service for all SLS hotels.


SLS Miami will have a version of The Bazaar as well as a Katsuya and the SBE nightclub concept called Hyde, said Erickson.


Umami Burger also will be brought into SLS hotels in future, along with the company’s Mediterranean concept Cleo, he said.


“The No. 1 thing we preach in the restaurant group is our culture,” Erickson said. “And the No. 1 rule is love and support your staff. That goes across every brand.” n



Contact Lisa Jennings at [email protected].
Follow her on Twitter @livetodineout.