Friday, February 8, 2013

Two Italians taking to the mattresses?

 If Olive Garden hadn’t hit a slowdown, the acquisition of arch-rival Romano’s Macaroni Grill would’ve been just another restaurant deal (albeit one to notice; the buyer, Ignite Restaurant Group, expects to collect at least $180 million in revenues during the second half of the year from a business it’s buying for  $55 million in cash.)

But the growth plan sketched for investors on Tuesday by Ignite’s CEO suggests Mac Grill is plotting a high-road challenge to Olive Garden, once Darden’s big earner. Many observers believe Olive Garden’s problems stem in large part from an attempt to push the brand upscale. Ignite says it’s convinced the 210-unit Grill chain is the right concept to claim that higher ground and fill a role once occupied by the Garden: providing an affordable yet “fine Italian dining experience for Middle America,” in the words of CEO Ray Blanchette.

As he explained, the heartland consumers who flocked to Olive Garden in the chain’s earlier days have become much more sophisticated. He estimates that 80 million Millennials “are coming into the marketplace with an enormously high food IQ. They know quality. They understand service. They’ve been raised in restaurants and with the Food Network.”

At the same time, “you look at the boomers on the other side, [who] have tremendous disposable income…their palate has evolved along with everyone else’s.”

So, Blanchette stressed, Mac Grill will focus more on “new product news” than discounting or bargain flycasting. He aired plans, without getting too specific, to add “more interesting” pastas, along with braised meats and other center-of-the-plate lures.

A big part of the effort, he said, will be a re-invigoration of Mac’s wine program. One of the concept’s signatures was the presentation of a jug of wine to customers right after they’re seated. Patrons are invited to help themselves, then tell the server what they owe at the end of the meal. It was a neat differentiator.

“Over time, that sort of fell away from the business. We think it’s really important to bring that back to the nucleus,” say Blanchette. But Ignite plans to take a higher-ground approach by using a more elegant vessel, like a carafe.

That will be a springboard, he suggested for selling bottles of wine for $30 to $50. Vintages purchased at the higher end of that spectrum will be decanted tableside, part of an effort to provide more polished service, according to Blanchette.

Right now, he noted, about 80% of a Mac Grill’s sales are generated by food, posing a revenue and profit opportunity on the beverage side.

Blanchette indicated that the Grill chain shares Olive Garden’s challenge at lunch. Almost two-thirds of Mac’s sales come in the evening.

But, he stressed, Mac’s locations are “really unbelievable,” a key consideration for any chain going up against Olive Garden. When Brinker International owned the chain, Blanchette explained, they picked sites and negotiated leases that “we couldn’t replicate” today.

“There’s just not enough activity in the commercial real estate market for us to go out and recreate what they’ve done,” he remarked. “These are high quality locations.”

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