For the restaurant industry, a recession can mean feast or famine. For
The Atlanta-based buyout firm is looking for new restaurant acquisitions and add-ons to its FOCUS Brands platform, which already includes Carvel, Cinnabon, Moe’s Southwest Grill, Schlotzsky’s, Seattle’s Best International and McAlister’s Deli. Roark’s $1 billion fund, which closed in 2008, is 30% deployed.
PE Week contributor Erin Griffith recently spoke with Steve Romaniello, a managing director with the firm, on zigging while everyone else is zagging.
Q: What’s the firm’s outlook for restaurant performance this year?
We think its going to be another difficult year. Not quite as bad as last year, but we don’t expect to see meaningful improvement in many segments until we start seeing employment growth again. And no one has any idea when that will be.
Q: How has that affected your own companies?
It’s been mixed. We have brands in a variety of segments. We have a fast casual restaurant, Moe’s Southwest Grill, which, in recent months has seen significant growth in same store sales. The latest report I saw was mid-to-high single digit increases. We also have Cinnabon, which is largely in shopping malls, and that has had a more difficult go of it lately.
Q: What initiatives have you put in place to weather the economic storm for companies like Cinnabon?
We were fortunate that we guessed right back in late 2007 and started to tighten the belts and watch our costs and start a lot of work. To zig while everyone was zagging, so to speak. We wanted to be in the position to invest in our menu, staff, and service, while most of the industry was in the difficult place and not as easily able to do those things.
So, with our Schlotzsky’s restaurants, we renovated the stores, put in new [point of sale] systems, reevaluated the menu and we added some limited time products. We finished 2009 with positive comparable store sales.
At Moe’s, we improved the quality of the food and cleaned up the environment of the store, and started measuring the quality of the service more intensely. We believe this has led to this last six months of growth.
Q: What’s your ideal restaurant investment right now?
We’re looking for talented management teams. People with experience and passion for the brand.
Q: So food type isn’t a preference for the firm?
Not really. We have a couple of treat brands, a sandwich chain, Mexican food, and coffee. As long as it’s “on-trend.”
Today’s consumer is eating out less frequently. And when they do, they are looking for a total experience. They’re being less adventurous and they’re looking for a deal. And they’d like it to be at least perceived as fresh and even healthy.
If you look at Moe’s, for example. It has a really cool atmosphere, the food is awesome, it’s fast and all the food is fresh-there are no freezers or microwaves in the restaurants. It’s convenient and, being fast casual, there is no 20% tip you are going to get in a full service restaurant. The best-performing chains these days hit on most if not all of those criteria.
Chipotle does this well. So does Panera Bread.