The Next Generation

Upcoming concepts from Top 400 chains move quality up a notch to capture hot markets and fit changing consumer lifestyles.

Restaurants and Institutions

Allison Perlik
Senior Editor

Few multi-unit operators inspire as much widespread admiration from competitors and consumers as P.F. Chang's China Bistro and The Cheesecake Factory.

It's a telling fact about the nature of chain business, then, that both companies plan to pursue expansion beyond their core businesses in the next year: Scottsdale, Ariz.-based P.F. Chang's with upscale-casual brand Taneko Japanese Tavern, and Calabasas Hills, Calif.-based The Cheesecake Factory with a still-unnamed pan-Asian concept.

"Chain restaurant business has grown up, and a lot of companies have the infrastructure to accommodate more than one brand," says Allan Hickok, former Wall Street analyst and founder of Minneapolis-based consultancy Restaurant and Retail Strategies. "Growth opportunities continue in every market segment because so much of the business remains independent."

Heeding this advice are several more well-known industry names looking to capitalize on the market's emerging opportunities. Tampa, Fla.-based Carrabba's Italian Grill is testing a carryout concept inside a major grocery chain; Aliso Viejo, Calif.-based Marie Callender's updates perceptions with the modernized Marie Callender's Grill; and Dallas-based Tony Roma's is courting diverse audiences with express and fast-casual units.

A hefty share of the newcomers head right for the red-hot, upscale-casual arena, soon to be home to high-end seafood brands from Tampa, Fla.-based OSI Restaurant Partners and Columbus, Ohio-based Cameron Mitchell Restaurants as well as the concepts from P.F. Chang's and The Cheesecake Factory.

Known for high-quality products, sophisticated environments and check averages between casual and fine dining, upscale-casual brands cater to the growing number of diners who want upgraded experiences and are willing to pay for them. Heavily represented among these consumers are two highly desirable demographics: 20- and 30-somethings who cook infrequently and eat out regularly, and aging baby boomers with discerning palates and disposable income to burn.

Another crop of chain entries is shaped by prevalent lifestyle trends rather than age. New ventures from Carrabba's and Tony Roma's emphasize speed and quality, reaching on-the-go customers with nontraditional locations that make it easy and appealing to purchase meals away from home.

NRgize Lifestyle Café, the 11th quick-service brand from Scottsdale, Ariz.-based Kahala Corp. (owner of Top 400 concepts Blimpie, Surf City Squeeze and Taco Time), targets health-conscious Americans where they congregate: The concept serves smoothies, fresh-squeezed juices and packaged salads and sandwiches from locations inside a national health-club chain.

Beyond capitalizing on such strengths as a deep pool of financial resources, operational know-how, established supply lines and strong buying power, R&I's Top 400 companies find additional motivation for branching out, from maintaining the steady growth investors demand to retaining valued, in-house talent.

Despite the benefits, established companies looking to diversify chain portfolios face a challenge not shared by start-up brands, notes Dennis Lombardi, executive vice president of foodservice strategies for WD Partners, a multi-unit design and development firm in Columbus, Ohio.

"Sizeable companies can't develop a brand that appeals to a small niche; it's got to appeal to a broad spectrum of consumers so they can open enough stores to move the needle on their corporate income statement," Lombardi says. "If a brand is too narrowly focused or too far ahead of the curve, it may not work."

Cameron Mitchell Restaurants joined the Top 400 this year with its Mitchell's Fish Market concept. A new concept—Mitchell's Ocean Club, opening next month in Columbus, Ohio—broadens appeal beyond seafood with 10 prime steak entrées along with a piano bar and heated terrace that offer guests multiple dining experiences.

Minneapolis-based Dairy Queen hopes to lure an audience beyond its core users with freestanding DQ Orange Julius stores (formerly known as DQ Treatworks). New products such as Caramel Apple Turnovers and Chocolate Molten Cake are menued alongside smoothies and other fruit juice-based drinks, allowing patrons to indulge or to grab a light, health-oriented offering.

"The idea is to extend our leadership in the treat segment and broaden the spectrum of what customers might consider us for," says DQ Vice President Ann Stone.

Long a leader among traditional, high-end seafood chains, Boston-based Legal Sea Foods shifts its focus to hip, high-tech consumers with LTK. The brand's second location (the first operates inside Logan International Airport) is an upscale neighborhood restaurant serving global cuisine from shareable small plates to hearty entrées.

Customers can dine in the lounge, at communal tables or in booths. Using handheld point-of-sale systems, servers place orders directly from tables, while guests can access the menu, surf select Web sites and dock their digital music players on one of several computers located in the restaurant.

"When you're thinking about market share, it makes sense to delve into a different demographic," says Executive Chef and Vice President Rich Vellante. "There are many times we look at a location and say, ‘Legal wouldn't be good for this market, but it would be great to have a different concept to put here.'"

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New Tastes From the 400
Which of these emerging chains will follow their parent brands to become one of the Top 400 restaurant concepts?

• Blue Coral Seafood & Wine: Former Red Lobster head honcho Edna Morris heads this high-end dinnerhouse scheduled to open this summer in Newport Beach, Calif.
• Carrabba's Italian Market: This 1,000-square-foot space in Sarasota, Fla., hopes to capitalize on the success of prepared-food sales in supermarkets.
• DQ Orange Julius: The co-branded food-court concept gets new wings as a freestanding brand that lets customers choose whether to eat light or indulge.
• Marie Callender's Grill: The venerable chain targets a younger demographic with upgraded décor and higher-end offerings such as slow-smoked tri-tip steak with bourbon-barbecue sauce.
• Mitchell's Ocean Club: A step above sister brand Mitchell's Fish Market, this supper-club-style concept could become a third venue for expansion for Cameron Mitchell Restaurants.
• NRgize Lifestyle Café: This juice bar brand opening in health clubs nationwide offers Kahala Corp. franchisees favorable cost structures and a highly targeted audience.
• Taneko Japanese Tavern: P.F. Chang's CEO Rick Federico says the upscale Japanese segment is ripe for expansion beyond typical teppanyaki concepts.
• Tony Roma's Fast & Casual: Smaller prototypes serving a limited menu allow the veteran company to lower expansion costs and raise customers' interest.