Published News

Nation's Restaurant News - May 20, 1996

Joe's Crab Shack
A Best-Sheller in the Making

...continued from Published News

"We think Joe's has great growth potential," says Tilman J. Fertitta, president of the 48-unit company. "It's definitely easier to grow than Landry's, because of the casualness, and the building is easier. We think we can grow it easily to a hundred units." The 8,000- to 8,500-square-foot units do an average $3.1 million each in sales, just a crab claw's width less than the $3.2 million average for the 38 Landry's units, Fertitta says.

Such numbers weren't considered when the company first acquired Joe's Crab Shack. "We were thinking about converting the first unit to a Landry's," Fertitta says. "We ended up making a deal. The company had another one they were building, so they sold us that one in the process. We were still thinking about converting them. We tweaked the menu, redid the signage. Opened the third one in Addison [a Dallas suburb], and that one took off like gang-busters." The company now has one unit each in the Texas cities of Galveston and Kemah, three in the greater Dallas area, four in Houston and one in New Orleans.

Joe's Crab Shack has a check average of about $14.60. "It's real reasonable," Fertitta says. "At the same time, though, you can have some people next to you spending $30 a piece, eating all kinds of exotic crabs."

Restaurant analysts find themselves hooked by Joe's Crab Shack's casual atmosphere. Barry M. Stouffer, a restaurant analyst and partner with J.C. Bradford & Co. in Nashville, TN., recently visited a Joe's unit in Houston on a Thursday night. "When we got to the restaurant, several waiters were on top of the tables dancing," he recalls. "That's a lot of fun. Some of the customers got up and danced with them. If you weren't into that sort of thing, though, it was only for one song, so it wasn't so long that is was bothersome."

"Joe's is very casual," Stouffer adds, "but you wouldn't feel out of place if you were dressed up. It can attract a broad range of customers. It has the low-price-point option, but you can also spend quite a bit of money if you want to. "It has a real casual, neat atmosphere, like a place on the Gulf or the seashore."

David Adelman, a first vice president and restaurant analyst with Dean Witter in New York, says, "Joe's fits into Landry's because it gives them another concept to bring into a market without cannibalizing themselves as much as if they brought in another Landry's."

"It also gives them the opportunity to be a little more casual," he adds. "It has a little bit lower price point than Landry's, and it's the kind of place that's a little more family-friendly. There are certain markets where you would only want to put in a casual concept, and there are others where you might want to bifurcate the market and pinpoint a little more carefully with what the customers might want."

"The American public is becoming much more casual," Adelman continues. "We're an increasingly casual society. It's not very pretentious. It was certainly good for them that they bought it and not a competitor. If you have a good niche, you like to dominate." And Landry's is trying to get the seafood market in a claw-like pincer movement. "Landry's has taken on a much more formal feel," Fertitta says. "But we get a lot of the same customers at both concepts."

Kathy Ruiz, corporate executive chef for Landry's adds that "if somebody wants an intimate dinner and conversation at Joe's, they'll probably be disappointed. "You have to go in there and get ready to be messy, to crack your crabs and get your hands all dirty." The menu is varied, which Ruiz says was an undertaking of Landry's. "It was a great concept when we took it over," she says. "But the menu was a little too limited. A lot of crab houses just have crab, but we have a much greater variety. more choices," Ruiz explains. Items include coconut shrimp, garlic crabs, chicken and sausage gumbo, seafood enchilada, and red beans and rice.

Big sellers, according to Steve Riley, director of existing operations for Landry's, are the Crab Feast ($18.95 for one, $35 for two), a variety of all the crab items, and the fried shrimp plate ($6.95 for lunch, $8.95 for dinner) with fries and coleslaw.

About 19 percent of sales are in liquor, beer or wine, compared with 16 percent at Landry's. Food costs run around 34 percent, and labor hovers at about 14 percent. Each unit employs 70 to 90 hourly workers. Units seat about 180 in the dining room with an additional 80 to 100 seats on the patios. Each Joe's Crab Shack unit costs about $1.7 million to build.

Recruitment of employees has been relatively easy, Riley says, because of the restaurant's casual theme, which allows workers to dress in shorts and T-shirts, and the potential high earnings.

"We've been very fortunate in the type of employee we attract," he says. "We look for people who can generate activity spontaneously." With little warning, waiters will top the tables, start dancing to such disco hits as the Village People's classic "YMCA" and urge patrons to join them.

"I think a lot of people come to Joe's because of its unique personality that's generated through the management and staff," Riley says. "It's trained, to a degree, but much of it is through the hiring techniques. We look for robust personalities."

Fertitta adds: "A waiter doesn't have to be perfect. Recruiting is easier. And the kids are welcome with the earrings and the weird haircuts. You're looking for theater. That's part of the interview process."

Riley says that translates into a fun experience for the customer. "Anybody who gets energized through the fun-type atmosphere, they leave with a good feeling," he adds. Fertitta expands on the philosophy: "We like to think that if you've had a bad day, you want to go to Joe's that night."

The dual seafood concepts under Landry's umbrellas also provide the company with management flexibility, Fertitta says. "It's effectively the same food, the same systems and controls," he says. "We can interchange managers. It's like having a General Motors car, an Oldsmobile, Buick or Chevrolet."

One major change in the concept since Landry's bought it was an expansion of the crab offerings. "We decided to run with it as it was because they had good systems and a good concept," Riley recalls. "But after a brief period, we determined there was a need to diversify the menu a little bit. "We feared that one day, in the middle of winter, Joe's Crab Shack would be out of crabs. We've never experienced that problem because we've hedged our bet against seasonality."

Fertitta explains further: "When we bought the concept, it just had blue crabs. Now what we do we carry all of them: Alaskan, Dungeness, King, blue, stone. That way you've always got three or four different species. We turned it into a crab place."

While seafood is expensive, corporate chef Ruiz says the company keeps costs manageable by volume buying. "We're such a large corporation that we have buying power that the smaller corporations can't have " she says. "We balance out costs. And with the high volumes, you can do a little higher food costs."

Analyst Stouffer says Joe's return on investment is strong and the segment is still open for competition. "There is not much out there in the way of seafood restaurants," he says. "You have Red Lobster, of course, but Joe's doesn't look like that restaurant at all. There isn't that much organized competition besides Red Lobster. And the sales Red Lobster is doing shows there is an appetite for seafood."

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