What else is on Landry's plate

The leadership team at Landry’s Restaurants must be a tuckered bunch. They’re in the midst of a remarkably shrewd attempt to take control of McCormick & Schmick’s, a competitor of the company’s namesake brand. But that’s just one of the matters that likely has them gulping coffee and dreaming of vacation.

There’s also a lawsuit arising from an earlier acquisition, revealed as part of the thrust and parry with McCormick & Schmick’s management. The executives filed a PowerPoint presentation yesterday with the U.S. Securities and Exchange Commission that spells out why they’d rejected Landry’s $9.25-a-share purchase offer. The presentation is apparently being given to shareholders, and hence had to be put on record with federal regulators.

Among the stated reasons for opposing the takeover are the alleged “dubious dealings” of Landry’s and its principal owner, Tilman Fertitta. The pertinent slide asserts that Fertitta has used “coercive tactics” in past takeover attempt. It cites the example of Fertitta’s release of an offer to buy Smith & Wollensky without the steakhouse chain’s permission.

McCormick & Schmick’s apparently thinks it’s coercive to let shareholders know what a prospective buyer is willing to pay, instead of letting the seller’s management filter that information to the owners.

The dubious-dealings slide also cites a lawsuit filed on April 27 by the former owners of Bubba Gump Shrimp Co., the Forrest Gump-themed dinnerhouse chain that Landry’s acquired last year. According to McCormick & Schmick’s, the suit accuses Landry’s of breaching its fiduciary responsibilities to the sellers.

No details were provided, and a number of internet searches turned up nary a word. Landry’s, as a private company, typically doesn’t discuss such matters.

If that’s all the team at Landry’s had on their plate, they’d be excused for looking a little haggard. But they also have to prepare for the likelihood of getting a green light on another acquisition, the purchase of an Atlantic City casino from Donald Trump.
Landry’s offer of $38 million has already been accepted. But the sale and changeover of the property to a Golden Nugget casino-hotel has yet to be approved by state gaming regulators.

Meanwhile, there’s still the issue of bagging McCormick & Schmick’s. As the company had said in an earlier SEC filing, it thinks Landry’s is trying to lowball the market with its $9.25 bid. So, it announced, management was commencing a formal sale. Suitors welcomed.

Fertitta responded by praising the company for realizing it should change hands. He then dropped his hostile takeover attempt and announced he’d pursue the company in the very fashion it preferred. He’d get in touch with the appropriate sales agents and begin the negotiations.

You have to wonder how he’ll respond if they show him the PowerPoint presentation.

Dueling growth strategies

Seldom have two restaurant philosophies been pitted so blatantly against one another. Contestants, start your cash registers.

In one camp are the experienced multi-concept operators who’ve decided to narrow their holdings to category titans—Taco Bell and Pizza Hut, but not the A&W burger chain, to cite the most pronounced example.

In the other group are the mini-conglomerates that figure they can maximize sales and profit growth by amassing a stable of next-tier concepts—The Office Beer Bar & Grill, not Red Robin or Max & Erma’s. They’re shopping for deals on brands that may not be tearing up the fast lane, but in the aggregate can still get you there financially.

The current test of strategies is shaping up in fast food, with Arby’s joining A&W and Long John Silver’s on the public auction block. Presumably there are plenty of other, smaller chains similarly available for the right price.

The situation echoes what happened in casual dining during most trying days of the Great Recession, when giants like Outback and Brinker pared down their portfolios—and counter-thinkers like Landry’s went on a shopping spree.

At the very least, the dynamic has changed the line-ups of who owns what. Among the new stables of restaurant brands are companies like Villa Enterprises Management, which just added The Office to such concepts as South Philly Fries, Banana Smoothies, and perhaps its best-known brand, Villa Fresh Italian Kitchen, still known to fans as Villa Pizza.

You might not know Beautiful Brands International, but you may already compete with one of its 12 concepts, including what may be the industry’s only crepe chain since the dissolution of Magic Pan, Le Beau Rouleau. Its other brands include Camille’s Sidewalk Café, Fresh Berry, Rex’s Bite Size Chicken, In the Raw Sushi, Dixie Cream Donut, Blazing Onion Burger Co., Greenz Salads, Caz’s Chowhouse, Top That! Pizza and SmallCakes, a “cupcakery.”

Then there’s Focus Brands, with Moe’s Southwest Grill, Schlotzsky’s, Carvel, Cinnabon and Auntie Anne’s.
One of the oft-mentioned other multi-concept franchisors is Kahala, the parent of Blimpie, Ranch 1, Cereality and nine other concepts.

Lesser known are Trufoods, parent of Wall St. Deli, Arthur Treacher’s and Pudgie’s Chicken; and Franchise Brands, the younger venture of Subway founders Fred Deluca and Peter S. Buck, with Mama DeLuca’s Pizza and Taco Del Mar.

All those clusters are tiny dots compared to the collection that Landry’s has pulled together: Some 33 brands, ranging from the Mongolian-themed Yak & Yetti to its namesake high-end fishhouse.

Will that more-is-better philosophy prevail? Or will Wendy’s prove that a focus on a single powerhouse brand delivers more of a return to franchisees, shareholders and employees?

We’re about to find out.