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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