Courting Customers Ted Fowler hopes Golden Coralís food-court prototype brings class to mass feeding.
By David Farkas
CEO Ted Fowler intends to improve mass feeding at Golden Corral with a new prototype resembling a mini-food court.
Did you know you’d be dining with a celebrity?” Van Eure asks a visitor who walks into the crowded Angus Barn with Ted Fowler, chief executive of Golden Corral Corp. Fowler—or “Mr. Fowler” as everyone in the restaurant calls him—doesn’t act like a big shot, but he’s treated like one. He gets a quiet table, the chef stops by to chat, and the sommelier offers a tour of the restaurant’s award-winning wine cellar.
His experience isn’t surprising. After Golden Corral, a 470-unit grill-and-buffet chain sprawled across 38 states, the Angus Barn is Fowler’s favorite place to eat. What’s more, Eure, owner of the legendary Raleigh, N.C., restaurant, is one of Golden Corral’s directors—prized for her service expertise, Fowler says.
He is hoping to add to his own customers’ experience with a prototype set to debut later this year. After sitting in on more than a dozen focus groups, he says, he has some notion of what the buffet customer expects. And management is willing to test those notions.
But ask Fowler for specifics and he clams up, explaining he wants a head start on his competitors, chiefly Greenville, S.C.-based Ryan’s Family Steak Houses and Edina, Minn.-based Buffets Inc. He requests that this article not include the cities in which the restaurants will open. (Hint: northeast Ohio and south Texas.) Still, the innovative executive, who has a shelf of industry awards including the prestigious International Food Manufacturers Association’s Gold Plate, is willing to reveal a few details of the prototype over expertly cooked salmon and Pinot Noir.
SNAPSHOT
Company
Golden Corral Corp.
Headquarters
Raleigh, N.C.
Units
470
2005 Systemwide Sales
$1.43 billion*
Average Unit Volume
$3.4 million
Average Check
$7.80
Expansion Plans
5 company units, 25 to 30 franchised units in 2005
*Chain Leader estimate
Catching Up
“Where were the best buffets? On cruise ships. Where are the best buffets today? In Las Vegas,” Fowler says enthusiastically, barely waiting for answers. “Their ornateness and food display—that’s where the world is moving.”
Much of the restaurant world is arguably there already. All-you-can-eat concepts, which appeal to value-oriented customers, typically lag behind entree-oriented chains, adding items like wraps and posh lettuces long after their acceptance in casual-dining restaurants.
Display cooking was well-entrenched in chains, for example, when Golden Corral adopted a modified version three years ago, followed by Ryan’s. Buffets Inc., which operates Hometown Buffets and Old Country Buffets, hasn’t added it to units.
However, display cooking boosted operating costs, forcing Golden Corral to hike prices 80 cents in 2002; the check average is still a competitive $7.80. Fowler doesn’t want to raise prices again. He’d rather adjust the menu and seating. “Most of the foods you’re bringing in have a lower cost,” he explains, citing Asian dishes that mix vegetables with beef and chicken.
Fowler plans to increase seating slightly, adding more deuces and booths. “Used to be big parties came to Golden Corral. But now that we have healthy options, we’re seeing singles, couples,” he says.
Three years ago, the company hired retail consultant Paco Underhill, author of Why We Buy, to figure out how customers used its restaurants. Underhill’s research surprised management, revealing that party size and customer-tracking patterns veered away from conventional wisdom. The company used much of Underhill’s discoveries to develop the prototype, dubbed the “pavilion.”
Courtside Seats
The prototype will have a food-court feel, with foods grouped according to type. In addition to the giant and expensive Las Vegas buffets, Fowler has taken inspiration from Marche Movenpick, whose Canadian parent, Richtree Inc., filed for bankruptcy last fall, shuttering its unprofitable Boston outpost in the process.
The concept, which remains open in Canada, encourages repeat visits with a variety of food stations where trained workers plan and prepare dishes daily. Golden Corral isn’t likely to hire chefs or put hourly workers in stations, but as Fowler describes it, the prototype will be “a bold stroke.”
To be sure, buffet concepts have long grouped foods—proteins, produce, desserts, etc.—on their bars. Yet Golden Corral has been particularly effective at merchandising its offerings, introducing an open-market environment that includes colorful signage and grocery-store produce cases. Competitors have followed suit.
“You really do accumulate money if you do a good job with customers.” —James Maynard, founder and chairman
Golden Corral currently dominates the $3.5 billion “family steak” category, according to Technomic Inc., a Chicago market-research firm. As of 2003 (the last year for which reliable figures are available), the chain controlled about 35 percent of the market—far above Ryan’s 24 percent. The remainder is divvied up among Ponderosa and Bonanza, 15.5 percent; Sizzler, 9.4 percent; Western Sizzlin’, 7.3 percent; and the rest, 8.8 percent.
Those numbers are slightly misleading, however, because they omit Buffets Inc., a popular competitor that doesn’t grill steaks and therefore ends up in Technomic’s “cafeteria/buffet” category. Had the 345-unit chain been included, its 2003 systemwide sales of $985 million would have ranked it between Golden Corral’s $1.3 billion and Ryan’s $827 million.
As significant as those sales figures seem, they belie miserly bottom-line growth. Pretax earnings for Ryan’s and Buffets Inc. have dipped in recent years due to store closings and sluggish same-store sales. No surprise. Traffic slumped 4 percent at grill-buffet restaurants between August ’03 and August ’04 while traffic was up 2 percent industrywide during the same period. Without giving specifics, numbers-shy Fowler claims the closely held company posted record-level sales and profits.
A rough winter and rising gas prices is hurting everyone this year. Ryan’s, for example, reported that same-store sales tumbled 3.6 percent and 2.7 percent in February and January, respectively. Golden Corral officials acknowledge same-store sales were flat in both months. Buffets no longer reports sales trends.
The Price of Value
All of which makes research even more crucial for Golden Corral. So far, it shows value-conscious customers, generally, those with household incomes of $50,000 or less, are willing to consume less-traditional fare in a more vibrant setting—as long as they don’t have to pay more. Fowler wants to deliver it with Asian “pagodas” and hacienda-style stations—two of the five display-cooking areas in each pavilion—offering everything from lettuce wraps to beef enchiladas made with whole-muscle meat (now used for pot roast) instead of ground meat. These items will be added to the 150 dishes already in rotation.
The company’s experience with wok cooking, for instance, comes by way of North Carolina franchisee Billy Sewell, who has added woks to an open grill line in seven of his 13 restaurants. Crucially, the 18-inch woks, which cost about $600, helped the former corporate employee lower food costs last year, because recipes like beef and broccoli, for example, use smaller amounts of proteins than traditional meat dishes.
Golden Corral’s research shows that value-conscious customers are willing to consume less-traditional fare in a more dynamic environment as long as they don’t have to pay more.
Ideas like Sewell’s are necessary for earnings growth, but operators must figure out how to pay for them, says a former executive who competed against Golden Corral. The executive, who requested anonymity, recalls guests praising the new redesign, but they didn’t want to pay for it. That’s the dilemma, he says.
Fowler says the prototype will not herald an increase in prices that could conceivably hurt business. “The price structure will be very similar, because we are going to do some things that will make us more efficient,” he explains. “We think we can increase the seating capacity to do higher volumes to once again spread our fixed costs over...look, we are not taking this into another price segment.”
Fowler pauses to gather his thoughts, then continues. “We might have to get a little more money. But back to my sheep theory: You can have a wool coat every winter or lamb chops once. We might need [to raise prices] 20 cents,” he explains.
It costs anywhere from $2.6 million to $3.2 million to open a Golden Corral, depending on land and the size of the unit. Fowler says prototype costs could climb 10 percent to 15 percent, at least at first. The company wants to “plow the ground” instead of franchisees. “I feel we should be at the head of that,” he says.
Hometown Buffets founder and former CEO Dennis Scott says Fowler is on the right track. Asked to describe the kind of buffet restaurant he would open if he were to start again, he mentions Golden Corral. “Guests are saying that’s what they want.”
Golden Corral’s food-court prototype will offer new display-cooked ethnic foods in vibrant settings like Asian pagodas.
Rough and Ready
Coming off a very good year, Golden Corral is likely flush with cash, if history is any guide. It has typically hoarded cash, preferring to use it for things like R&D instead of investing it for a return.
“I was always zealous about keeping the cash available,” says Chairman and majority owner James Maynard, who founded the company in 1973. “I never wanted Ted Fowler and our management team to ever wonder, ‘Did we have to produce cash flow rather than going out and doing our business?’ In this industry when you stop growing, you are usually dying.”
Fowler is only too aware of that predicament, having once come close to drowning in red ink when he plunged ahead with an earlier prototype: the large Metro unit that obsoleted the company’s 500 steak-and-salad-bar units. Those were trying years financially as the company shuttered small-town restaurants while working out costly leases. Yet the company and franchisees (many of them former employees) eventually opened enough Metro units—whose volumes nearly tripled the older restaurants—to finance the closings.
That rough period is long gone. But Fowler appears prepared to do battle, if it comes to that. After spooning a generous amount of “Zing” pepper sauce (a house specialty) onto his salmon, he wonders if his guest has read Born to Fight, a recently published history of the Scots-Irish. Fowler doesn’t say if he’s a descendent, but he does say it’s the best book he’s read in a long time.