Seafood Leader - July/August 1995
Pride of the Gulf
From Main Street to Wall Street, Landry's Strikes It Rich With Seafood
...continued from Published News
Like the Rockets, Landry's is still on a roll in 1995. Fertitta and company appear to have hit on just the right combination of Gulf-flavored food and atmosphere to give casual seafood dining a shot in the arm. And if you haven't heard of Landry's yet, you will, because this Gulf storm is gathering strength as it sweeps across the country.
Even though it has just 31 restaurants spread from California to Florida. Landry's is the second-largest seafood dinnerhouse chain far behind 670-unit Red Lobster.
Seafood, observed 37-year-old president and CEO Fertitta, is a niche that either has frightened away potential investors or has invited misguided concepts. "Seafood has never expanded," he said. "I don't know why more people haven't done it."
Maybe because more people haven't come up with such an appealing idea. Landry's Seafood House and the slightly more upscale Willie G's were two Houston area eateries owned by the Landry family when Fertitta, who'd hit it big as a real estate developer, invested in them in 1986. He bought out his partners in 1988 with plans of turning the more casual Landry's into a chain -- but a chain where diners would not feel like they were eating in a chain restaurant. His modus operandi was to look for faltering independents in great locations, buy them out and turn them physically and gastronomically into Landry's. With 10 units by August 1993, he took the company public, raised over $60 million in two initial stock offerings and hasn't looked back.
Stock that opened at $12 a share in August 1993 has climbed steadily to trade at around $36 as of this May. Total revenues jumped to nearly $63 million in 1994, up from $34 million in 1993, and net earnings climbed 107% to $5.7 million ($.80 per share). Fertitta said the company will log close to $100 million in sales this year. Per unit sales average about $3.3 million a year (84% food and 16% liquor), with a per-check average of $16 at dinner and $10 at lunch. Food costs average 33%. Landry's has 31 units in 10 states and plans to have approximately 40 in 15 states by year's end and well over 50 units by the end of 1996. "We're meeting and exceeding all our expectations," said Fertitta.
This performance has grabbed the financial world's attention. Forbes named Landry's fifth out of their top 200 small companies in America. "It's a strong, strong company," said Reed Smith, restaurant analyst for Allen C. Ewing & Company in Tampa, Fla. Smith said the most remarkable element of Landry's growth is that their margins have not decreased at all through the quadrupling of units. Smith said there's really no seafood operation that compares to Landry's. "They are the only people offering a quality atmosphere with quality seafood at their prices," he said.
Ironically, perhaps, Landry's is thriving in territory where the 38-unit L & N Seafood Grill chain failed after its parent company, Morrison Restaurants, Inc. of Mobile, Ala. shut it down last summer. Smith said L & N simply did not offer the same caliber atmosphere, food and service as Landry's. "L & N didn't take the concept high enough," said Smith. "They fell between Red Lobster and Landry's. The Landry's concept is better all the way around."
Fertitta makes the concept sound simple. "I realized that you could take good seafood and put it in a beautiful building and it would work," he said. "We try to serve the best seafood and give an entertainment value... We try to do everything perfectly... We'll take independents and convert them into $4-$5 million restaurants."
"They have a crack construction and design team directed by executive vp Al Jaska. They're the best in the business," said analyst Smith. "It takes them the same amount of time to build a place from the ground up as it does to do a convert. It's really unbelievable what Al and his team have done with some of these properties."
LOCATION, LOCATlON, LOCATION
Wherever they go, and whether they're remodeling an existing restaurant or building from the ground up, Landry's looks for the best locations. They're on the water wherever possible, or parkside, or in a downtown historic district like New Orleans' French Quarter or Dallas' Market Square. Their first California restaurant opened recently on the waterfront in tiny Newport Beach and has been packed since day one. Almost every unit has a can't-miss-it old-time movie marquee out front on an eye-catching wood and brick exterior. The interiors feature big, open dining rooms and vintage signs designed to re-create the airy, energetic atmosphere of 1940s Gulf seafood houses. Landry's has been careful to keep the basic concept intact while making each restaurant different.
"We go after unique locations," Fertitta said from the road, this spring where he said he was having no trouble selling another $75 million worth of stock to fund further expansion. "The Corpus Christi unit is on a barge. We're in the heart of the French Quarter in New Orleans... We don't want to be just another suburban chain. Nobody else has a high-energy seafood concept."
And very few people have the energy that drives Fertitta. He radiates it. He talks fast and doesn't waste a word -- or a minute of his day. Fertitta grew up in Galveston, where he learned the restaurant ropes working in his father's successful seafood establishment. But Fertitta found his success as a builder, cashing in on Houston's boom and avoiding its devastating bust. Then he got back to his roots. "I was a businessman first, a restaurateur second," he said.
Today, Fertitta has his own little seafood joint in Galveston -- right on the water, of course. The Landry's there seats 600 and serves nearly 10,000 people a week at peak season, making it one of the busiest restaurants in America.
People flock to Landry's for food that's simple but satisfying. Fertitta has said he "caters to the masses, not the classes." Landry's regionalizes its menus and uses regional suppliers whenever and wherever it's practical. "We study a market and send in a research team before deciding on a site."