Houston Chronicle - April 16, 1995
Landry's Led by Shrewd Big Fish: While some say Tilman Fertitta is a shark, he has the seafood restaurant chain headed for bigger and more profitable waters.
...continued from Published News
El Paso-As the sun sets behind the Sierra de Chihuahua range in nearby Mexico, the dinner hour is still in full swing at the hottest new restaurant in town-Landry's Seafood House.
Although the place opened only three days earlier and Landry's has not used one commercial to promote it, there are 20 people sitting contentedly, on the benches outside the restaurant. There's no room at the 52 tables inside, and the bar is completely jammed. "There aren't too many good seafood places in El Paso," Ted Lee explains as he waits patiently in his blue jeans and western-cut shirt. "Red Lobster was about the best, and that's like fast-food seafood."
So Lee waited a half-hour just to try Landry's, a restaurant chain he'd never heard of until he saw this one being built. Customers arriving later in the evening didn't find it any easier to get inside. The wait was 35 minutes long at 10:30 p.m., and the kitchen staff braced itself for a late dinner rush.
"It's like this every time we open a new restaurant," says Landry's Executive Chef Kathy Ruiz, who commands the small army of cooks working frantically in the kitchen. "Every restaurant we open, I think, 'Oh God, we can't serve all these people!' Then the next place we open is even busier."
Everything about the El Paso eatery indicates Landry's has reeled in another whopper. In its bid to open restaurants across the nation, Landry's has sprouted from nine locations in 1992 to 31 today. About nine more are set to open this year. Sales have jumped from $22.4 million in 1992 to a projected $100 million by year's end.
Landry's success has prompted Nation's Restaurant News to call it one of the nine hot restaurant concepts for the 1990s. Forbes placed the company No. 5 on its list of America's best 100 small companies for growth. Investors also are bullish on the Houston company, driving its stock from $12 per share in 1993 to $35 at Thursday's close.
But company Chief Executive Tilman Fertitta isn't sitting around his new El Paso restaurant, smiling about his good fortune. The 37-year-old CEO isn't chatting up diners or the chef. He's fixated on an errant light bulb sitting atop the restaurant's roof.
"That is too much light being thrown up there," Fertitta exclaims, pointing to one of many electric fixtures on the building. "Send someone up there right now! They should take one of those bulbs out."
While he's a stickler for all kinds of detail, Fertitta has this thing about lights. Before he will sample one bit of the food, he will prowl the parking lot and look at the restaurant's extensive lighting scheme from every angle. Because walking on foot won't offer him all the vantage points he wants, Fertitta will hop into a rented van and drive around the neighborhood to get a better look.
"If you can't do something as simple as getting the light bulbs right, you probably aren't paying attention to all the other details, and you probably aren't getting the food right," he reasons. "It's about discipline."
Fertitta's enthusiasm for lighting extends beyond work. His big Memorial-area home has enough outdoor lights to prompt his friends to dub it "Fort Kilowatt."
On a recent weekday, Fertitta and four Landry's executives met at Fort Kilowatt, where they began another full day of traveling around the company's growing empire, which includes the Willie G's and Joe's Crab Shack chains.
Taking the company jet, they flew to suburban Dallas to pore over details of a Joe's Crab Shack under construction. Because Landry's tries to incorporate some variety into the design of each of its new restaurants, there's no shortage of details for them to consider.
"Why do we have sprinklers out here on the patio?" Fertitta asks a member of the construction crew. "Make sure the speakers out here have a separate volume control."
"Look at that crappy landscaping job over there," he says pointing at a new restaurant across the road. "It looks like it's in the desert. I want lots of nice trees in here. I want to come back later and think, 'There is too much landscaping.' "
Before Fertitta leaves Dallas, he orders the crew to repaint the exposed sprinkler pipes, rebrick one wall, cut a concrete median out of the parking lot and replace it with plants, add a row of oak trees out front and find some way to get a bigger electrical sign on top of the building.
"To say Tilman is a hands-on manager is to say Marilyn Monroe is cute," says Alen Smith, president of Allen Ewing & Co., an investment firm that specializes in restaurants. Fertitta takes the hands-on approach to extremes.
"I like to be able to do everything in the company, including fly the company plane," he says. That may sound brash, but it's vintage Fertitta.
"Landry's will be a giant company someday, because our concept works," is one sample of his blunt speaking style. "We know it. Wall Street knows it. Our competitors know it." Or, "The day we miss our earnings projection will be the worst day of my life." Or, "There is no one else in the country who could go out and open the kind of restaurants we do."
Speaking of Tony Vallone, owner of La Griglia, The Grotto and the legendary Tony's restaurants, Fertitta says, "I am in awe of Tony's ability to make great food. But Tony is in awe of how much money I make."
Although Fertitta didn't start Landry's, there is no question who is in control now. His personality is indelibly stamped on the company. Strong-willed and uncompromising, he has fashioned the company into a fast-moving and aggressive enterprise.
"You can come into our offices at nine at night and we're still there," says Howard Cole, Landry's director of operations. "We have an intense culture. We want to be the best, and we are willing to sacrifice to get there."
That drive has made Landry's a darling of Wall Street. Smith of Allen Ewing & Co. calls the company one of the three or four hottest restaurant chains in the country.
"This company has great potential. They should be able to grow to 300, possibly 400 restaurants," agrees Barry Stouffer, stock analyst with J.C. Bradford.
"It's not whether we will grow; the question is how fast we will grow," crows Paul West, Landry's chief financial officer.
Landry's is confident it can succeed because competitor Red Lobster has grown to monstrous proportions. The only major seafood chain in the nation, Red Lobster has 631 restaurants and rakes in $2 billion in annual sales. Fertitta is adamant customers will flock to Landry's if it can beat Red Lobster's food and service at comparable prices.
"I'll give you an example. Red Lobster was voted the best seafood restaurant in Oklahoma City for the past five years in a row," Fertitta said. "I heard that and knew we had to go to Oklahoma City."
After Landry's opened its first location in Oklahoma City this past January, it promptly set a company record for opening-week sales. Months later, customers are still waiting up to two hours to get inside the place.
"My husband and I both thought it was better than Red Lobster," says Paula Diaz, a restaurant reviewer for the El Paso times.
While business remains strong in Oklahoma, the opening-week sales record has been shattered by each new Landry's including the restaurant in El Paso.
Despite Landry's successes in Colorado, Florida and Oklahoma, its restaurants are overshadowed by more popular and more acclaimed restaurants here in its hometown.
"People in Houston have no idea how big our company is," Fertitta admits.
The reason Landry's is overlooked in Houston, he says, is the quality of the city's restaurants is way, way above average.
"Houston has the best food in America," he says. "Take a successful chain like Applebee's. They couldn't stay open in Houston for 30 days."
Even though Landry's is relatively unheralded in Houston, it has the respect of the city's most esteemed restaurateurs.
"What Tilman has done is phenomenal," says Tony Vallone. "He's smart, he's a workaholic and he is innovative. When anyone has accomplished as much as he has, you have to take your hat off to them."
But what about Fertitta's claim that Vallone is in awe of his ability to rake in the big bucks?
"That is not an overstatement," Vallone says. "Look at the numbers his company is doing. They are fantastic."
When Carrabba's President Johnny Carrabba is scouting for new sites for his growing chain of Italian restaurants, he frequently comes across a newly built Landry's.
"They are building monuments out there, and they look great," he says. "Their new restaurant in Naples (Florida) is one of the best looking restaurants I have ever seen in my life." Carrabba believes Landry's is growing rapidly-much faster than his own chain-because of Fertitta's willingness to take risks. Fertitta's biggest gamble was taking a little Texas restaurant chain public, and then hitting the jackpot. That gave him the cash to open new restaurants at a much faster pace.
"He has more guts than we do," Carrabba said. "I am a restaurateur, and Tilman is a businessman. He's a wheeler dealer. I wish I had his business skills."
It's clear Fertitta has admirers from coast to coast. It's also clear he has bitter enemies right here in Houston. The angriest are the Landry's founders he bought out in 1988. The Landry's chain was started during the oil boom by a handful of family members and friends who moved to Houston from Louisiana. The ownership mix varied from restaurant to restaurant, but the main players included brothers Billy and Floyd Landry along with Nat Peck, Jim Gossen and Denis Wilson.
Introducing their own pungent style of Cajun cooking to Texas, they hit it big with restaurants called Don's, Willie G's and Landry's. The partners made loads of money and became culinary celebrities in their adopted city.
But their success created problems along with the profits. At the height of their popularity, the partners stopped speaking and started suing one another. Their feud created an opportunity for a young man who had come to Landry's after a career as a Shaklee vitamin salesman, owner of arcade games, custom home builder and small-scale hotel developer. It gave Fertitta the chance to make it big.
In 1987 and 1988, he gradually bought the Landry's and Willie G's restaurants lock, stock and barrel. He even bought the exclusive rights to their names, which banned the Landry's from using their family name in connection with a restaurant.
It wasn't long after the buyout that his former partners began to claim Fertitta took advantage of their friendship, betrayed their trust and paid them only a fraction of what the company was worth.
"I was in business with a man I thought was honest," says Wilson, who now owns Denis' Seafood Restaurant in west Houston. "But now I know I can't trust the man. He lies… it sounds like sour grapes, I know, but I want people to know what kind of snake is in that barrel." Wilson's complaints are large and small. He says Fertitta actually hurt the company by making bad business moves-including opening two restaurants that flopped-before the buyout. He also says Fertitta bullied co-workers and suppliers and refused to pay some kitchen workers overtime, even thought they were working extra hours.
The U.S. Labor Department did sue Landry's claiming it failed to pay workers $375,000 worth of overtime in the late 1980s. Fertitta says the case was based on a technicality, and the two sides settled, with Landry's agreeing to repay a portion of the money the government said it owed.
Wilson even ridicules his former partner's ability in the kitchen.
"Ask Tilman to cook you a snapper. He doesn't know how," Wilson snorts. "He can't cook. He is a biz-nez-man. Well, if that is what a businessman is, I want no part of it." Fertitta - who grew up in Galveston, working in the kitchen of his father's seafood restaurant - dismisses the acrimony as petty jealousy.
"There is a lot of resentment because they are all struggling now. They could have been big-time - huge!" says Fertitta, raising his hands above his head. "But they were too busy arguing with each other."
While it's unlikely Fertitta will ever win the praise of his old partners, he can console himself with the bouquets he gets from Wall Street. A report by J.C. Bradford says Fertitta is "hard-nosed, demanding," and gives him credit as being the company's founder.
Fertitta is "most responsible for the success of Landry's" reads a report by investment firm Smith Barney. We believe that the culture of this company stems from his own entrepreneurial drive and motivation.