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R&IEditorial Archives2003April 1 — Business

Sizzle Space
Five steakhouse chains are ready to take on the leaders

Steak is less an option than a given on most menus in all foodservice segments. It can be the ideal comfort food or a special-occasion splurge, a signature item that determines diner destination or a trusted fallback order when nothing else sounds quite as good.

The steakhouse is an American institution. Every town worth its salt has at least one venerable chophouse with a reputation built on decades of satisfied guests. Steakhouses flourished in the 1990s, and independents and chains with steak on the menu if not in their names multiplied. The economy since has become less amenable to growth, but steakhouses continue to proliferate.

Last year alone, category leader Outback Steakhouse, based in Tampa, Fla., added 45 units along with 10 locations for its upscale Flemings Prime Steakhouse & Wine Bar concept. Multiconcept operators, too, have been adding steak-specialty restaurants to their holdings, such as Nick & Stefs (Restaurant Associates), Tuscan Steak (China Grill Management) and Girarrosto Toscano (Parasole Restaurant Holdings).

Despite such activity, however, American diners love for steak remains unsated. The chains profiled here believe they have established brand identities, menus and price points that appeal to underserved audiences. Their confidence is grounded in the knowledge that a great steak served at an attractive price in an appealing environment is a combination proven to have drawing power.

Home base: Nashville, Tenn.
Units: 6
Seats: 200 to 250
Check average: $35
Average unit volume: $4.5 million
2003 growth plans: 3-plus
Why watch it? Niched between Outback and Ruths Chris, with growth capital behind it.

The steakhouse boom was cresting in 2000 when Nashville-based OCharleys Inc. acquired two-unit Stoney River. The economy has become less supportive since, OCharleys Executive Vice President Rich May concedes, but company confidence in its second concept is undiminished: Four units opened last year and at least three are planned this year. Weve seen a proliferation of competition at the bottom and the top [of the price spectrum]. Is there an exploitable, defensible niche between? We think there is.

OCharleys Vice President Tony Halligan sees Stoney Rivers competitive advantage not only in its pricing but in its ability to deliver high-end food quality and service for that in-between price.

It says steaks on the door, so wed better have great steaks, May says, but a page of gourmet entrées such as pecan-crusted swordfish precedes the menus steak listings. We want the concept to be accessible and inviting to everyone, says May. Alcoholic beverages account for about 20% of sales, with 50 wines available by the glass.

OCharleys will continue to seek high-end residential areas outside city centers for expansion, May says. Conversion of OCharleys units to Stoney River is unlikely.

Home base: Woodbury, N.Y.
Units: 11
Seats: 210 to 260
Check average: $20 (dinner)
Average unit volume: $3.6 million
2003 growth plans: 3-plus
Why watch it? If it works in Yonkers, it can work anywhere.

The ski-lodge architecture, stone fireplace and menu offering McClure Pass Potato Soup and Telluride Tenderloin could make you believe youre in Colorado, or at least well west of the Hudson River. But Boulder Creeks units surround the Big Apple in such noncowboy locales as Yonkers, N.Y., and New Brunswick, N.J.

The concept is a joint venture of Italian-born friends from Brooklyn, Mario Sbarro (chairman of Italian chain Sbarro Inc.) and Tony Scotto (whose Scotto Bros. Enterprises separately owns several upscale steakhouses).

Since the first unit opened on Long Island in 1996, Boulder Creek has expanded (three opened in 2002) by offering great steaks and great fun at a fair price, says Marketing Director Marivi Wolfe. We have an enormously loyal customer base who come two or three times a month, she says.

Entrées range from an 11-ounce flat-iron steak ($13.75) to a 32-ounce porterhouseThe Outlawfor $29.95, along with fish, chicken, ribs and chops, averaging $12. The most popular dessert? New York-style cheesecake, of course.

Home base: Chicago
Units: 9
Seats: 200 to 250
Check average: $28
Average unit volume: $2.5 million
2003 growth plans: 4 units
Why watch it? Parent has shown it can open units quickly.

Multiconcept operator Restaurant Development Group (RDG) took a break last year from torrid expansion of its Bar Louie concept long enough to open six Nick & Tonys chophouses. Units were opened in Cincinnati; Minneapolis; Omaha, Neb.; Pittsburgh; and other Midwest markets, but plans include locations in Boca Raton, Fla.; Houston; and Washington, D.C.

Prime steaks are the menu focus, with a selection that ranges from an 8-ounce filet for $21.95 to a 24-ounce porterhouse at $32.95. The most popular item is the Chicago-cut bone-in filet ($29.95). Other entrée choices include meatloaf, pork chops, pan-roasted halibut, rotisserie chicken and ribs, and a variety of pastas. A bar menu includes casual foods such as pulled-pork and pulled-chicken sandwiches.

Leather booths give Nick & Tonys a clubby feel that is softened by art deco design elements. Weve tried to make it a restaurant that can be what customers need it to be, says Liza Lathouris, RDG marketing director. Its atmosphere, menu and pricing let it be a power-lunch spot, an after-work cocktail place or a family-dinner restaurant.

RDG also is developing a lower-price, steaks-and-burgers concept called Red Star Tavern. Three locationsin Chicago and Geneva, Ill.; and Pittsburghare open. A Columbus, Ohio, unit is on deck.

Home base: Brentwood, Tenn.
Units: 23
Seats: 40
Check Average: $7 (lunch)
Average unit volume: $750,000
2003 growth plans: 25-plus
Why watch it? Takeout continues to grow and concept has few competitors in its niche.

While steakhouse category leader Outback Steakhouse has added curbside pickup for takeout orders, it doesnt deliver. Off The Grill does. At its 23 locations (three of them company-owned), free delivery accounts for 60% of sales.

Dine-in business is strongest when units first open, says CEO Alan Thompson, but takeout and then delivery build in popularity once a customer base is established. About 40% of business comes at lunch, primarily deliveries to office desks or meetings, while dinner is evenly split between office and residential customers.

Pricing puts Off The Grill between fast-casual burgers and Outback or other casual-dining chains. The menu includes burgers ($5.99) and rib-eye sandwiches ($6.95) that are popular at lunch, as well as a variety of steaks. The 10-ounce Kansas City strip is $13.99 and a 12-ounce rib-eye is $14.99, while an 8-ounce chopped steak is $7.99. All are served with salad, baked potato and dinner roll.

Grilling steaks is the easy part; doing steak delivery well is tough, but we do it well and thats our advantage, says Thompson. Delivery is guaranteed within 30 minutes and Thompson says steaks moved immediately from grill to foil wrap, foam container and insulated delivery bag retain their heat within a few degrees for at least that long.

Off The Grillprimarily in Southern and Southwestern markets nowhas an ambitious expansion plan, with multiunit development agreements signed for New York City (50 stores), San Diego (55 stores) and Phoenix (9 stores), according to Thompson.

Home base: Irving, Texas
Units: 10
Seats: 150 plus 60 at the bar
Check average: $15.87 dinner; $11.08 lunch
Average unit volume: $2 million
2003 growth plans: None
Why watch it? Industry veterans are rejuvenating an established regional brand.

Harrigans Chophouse Grill has been around for 25 years, passing through a succession of ownership (including Atlantas Avado Brands, which operates the Don Pablos and Hops Bar & Brewery chains). Now managed by Apex Restaurant Group, Harrigans is getting a top-to-bottom facelift in preparation for expansion in several years.

A revamped menumade possible by partnerships with new suppliersupgrades the steaks, which are grilled over hickory and introduces salmon and halibut entrées. Prime-rib sandwich, smoked pork rib roast and grilled mahi mahi also signal the upscaling. But Harrigans President Gary Hicks (a former Avado executive) expects check averages to increase no more than 5% with the new menu, keeping pricing in that seam separating casual and fine dining.

Were positioning as a casual chophouse, between, say, Outback and The Capital Grille [in price], he says. Were a neighborhood restaurant with reasonable prices and excellent food and service. We have a great name and history that we can build on.

As with the menu, Harrigans has set relationships with beverage suppliers to add what Hicks calls recognized and respected wines and handcrafted beers at affordable prices. Steak and chop portions for customer pickup and home preparation will be available at a counter, where house-brand rubs and seasonings also will be sold.

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