eatZi's Carves Out Growth Plan

[URBAN GURU]

By Connie Gore
Last updated: July 12, 2005 06:29am

DALLAS-Catering to upscale retail's push to expand with retiring Baby Boomers on the horizon, well-known restaurateur Phil Romano and his eatZi's partners are launching a carefully packaged plan to add 30 stores in five years in a bid to go national. Chicago gets this year's only opening, but the run rate picks up to possibly three in 2006 and then steps up to as many as seven per year through 2010.
"Our goal is to become a national concept. How many stores depends on what the final model looks like," Rick Claes, president and CEO of the Dallas-based eatZi's, tells GSR. "We are still tweaking the design." For those outside the eatZi's circle of service, the upscale hybrid of restaurant and retail has built loyal culinary followings over the past nine years in Dallas/Fort Worth, Atlanta and Rockville, MD. It now boasts one of the highest volumes per unit in US restaurant rankings, exceeding $13 million in annual sales. If retail is the perspective, eatZi's logs $1,200 per sf in annual sales. The next ribbon-cutting, which has been two years in the making, will be at the end of August in Century Shopping Centre at 2828 N. Clark St. in Chicago's Lincoln Park/Lakeview neighborhood.

"They're the best in my opinion," says Richard Hollander with Fort Worth-based Buxton, which has been at eatZi's side for the last two years of planning. "I don't know of anybody that's doing what they're doing precisely."

The Austin-based Whole Foods has tried as has Central Market, a high-end grocery store concept of San Antonio-headquartered H.E. Butt Grocery Co. With competitors mimicking the European-style market and bakery concept, eatZi's decisionmakers have decided to distinguish their niche with an "easy gourmet" branding in the bid to become the premier culinary choice--"a high-quality habit" on a daily basis or at least several times a week, Claes says.
The expansion strategy, targeting 15 major metros, is based on a "hub and spoke," corporate-owned setup with a flagship store and satellites. The idea went into beta testing last year in Atlanta. Not only did Atlanta get a second store with more cafe seats than any other eatZi's, but it's just the second freestanding location in the network. Claes says the spotlight goes to Dallas in 2006, when a second location will get under construction at midyear--most likely in North Dallas--and the "mother ship" in Oak Lawn gets a redo.

[RobertB]

Boy, is the food good, but it's hard to pay that much for good food and then have to go over to the microwave to nuke it. But if I lived close by, where I could bring it home and cook at leisure, it probably would be more appealing. Looks like this is a concept that requires a strong urban setting. Could suburban North Dallas really support an eatZi's?

[tamtagon]

Looks like this is a concept that requires a strong urban setting. Could suburban North Dallas really support an eatZi's?

I'm surprised they havent expanded in N. Dallas already - NorthPark or Galleria area would be prefect, based on the success of the Buckhead eatZi's in Atlanta.

[RobertB]

So much for the growth plan, unless the plan included growth in unemployment:

November 16, 2006
Eatzi’s Closing Everywhere (But Dallas?)
Filed under: News You Can Actually Use, Actually, Dish
http://www.dallasobserver.com/blogs/?p=1769

The Oak Lawn Eatzi’s will be the only one left at the end of business today.

Yesterday, the local corporate office of Phil Romano’s gourmet take-out chain Eatzi’s Market and Bakery was closed down. At the end of business today, its outlets in Houston, Atlanta and Rockville, Maryland, will shutter for good, joining the Chicago Eatzi’s on the deceased list. That means that come tomorrow, there will be but one Eatzi’s left: the original Oak Lawn Avenue location. Does this mean the end for Eatzi’s? Hard to say at the moment.

One of Eatzi’s biggest suppliers told Unfair Park it was informed today that on Monday, Eatzi’s would be filing for bankruptcy in federal court here. “That’s not true,” said a woman who answered the phone at the Oak Lawn store today. She would verify the closing of the other locations but wouldn’t give her name. She passed us off to a general manager, who only identified himself as Drew and told us to call corporate HQ. We tried every extension, but nobody answered.

Unfair Park called the Houston location moments ago, and initially, the man who answered the phone there said he could not comment on the closing. Then he changed his mind: “Yup, we’re closing,” he said. “Not gonna lie to you.” He says the employees there found out only last night, while some were processing orders for Thanksgiving dinners. “The holidays are just around the corner,” said the Eatzi’s worker. “Thank you, Mr. Scrooge.”

That was the same thing they heard in Rockville: Desiree Lewis, the office specialist there, said workers found out yesterday they were shutting down the store. “We’re all surprised and all pretty much jobless now,” she says. “It’s definitely a surprise. And there was no hint whatsoever, as far as I know. It’s a pretty sad situation right now.”

Unfair Park was unable to reach Romano. When we do, and likely before, we will update. –Robert Wilonsky

[Golden Eagle]

I miss my location on Post Oak since I've been living in OK City. Since we've been putting together a deal with Whole Foods for the last two years, I'm hoping that can be abandoned and that eatZi's is interested in entering the Downtown area...

edit: Oh.

[RobertB]

I miss my location on Post Oak since I've been living in OK City. Since we've been putting together a deal with Whole Foods for the last two years, I'm hoping that can be abandoned and that eatZi's is interested in entering the Downtown area...

edit: Oh.
Don't give up too soon. This is from today's Quick:

Staging a comeback
Dallas restaurateur Phil Romano created Eatzi’s Market & Bakery a decade ago. But in recent years, he’s been seething as the concept floundered.

Now he’s re-acquiring the upscale takeout operation and planning to cook up a comeback, he said yesterday. "I was watching the wrong things happen at Eatzi’s, and so were the customers," Romano said. "It lost its culture, it lost its personality. And we’re going to get that back."

Romano said he was buying the original Eatzi’s location on Oak Lawn Avenue from current owner Eatzi’s LLC for an undisclosed amount. Romano was a minority investor in Eatzi’s LLC, which is backed by Castanea Partners, a private equity investment firm based near Boston.

Eatzi’s other locations -- in Houston, Atlanta and Maryland -- will be shuttered.

Executives from Castanea Partners could not be reached for comment. Romano said if he can get the operation back on track, he plans to build additional locations in the Dallas-Fort Worth area.
It sounds like we haven't seen the end of EatZi's after all. Expanding to Maryland? What were they thinking?

[RobertB]

As promised, Willonsky kept trying to get hold of EatZi's founder Romano. In the latest D.O. blog entry, the guy doesn't mince words: "The place had gone to s*** in a handbag." It goes on to say:

He says when he told employees he was coming back to run the store, some of them hugged him; others, he said, greeted him with tears. “They remember the way it was,” he says. “And that’s the way it’ll be again.”
Full article, complete with uncensored righteous indignation, available here: Romano Back in Business…at Eatzi’s (http://www.dallasobserver.com/blogs/?p=1772)

[Golden Eagle]

Expanding to Maryland?

Yeah...DC suburbs.

[RobertB]

Expanding to Maryland?

Yeah...DC suburbs.
Still, it was a boneheaded move.

Contrast EatZi's expansion with that of WingStop. WingStop started small, expanded locally and carefully, and is now both ubiquitous and successful.

EatZi's daily routine is a couple of orders of magnitude more complex than "cook wings, serve wings, repeat". Who in their right mind would take something that hard to manage, and franchise it a thousand miles away? That makes it impossible to ensure that the quality meets the established standard, though it certainly helps American Airlines' bottom line. That second, third, fourth location should be within a few minutes' drive -- I be hesitant to open as far away as Fort Worth until I knew that it was working in North Dallas.

Houston, Atlanta, D.C., and Chicago isn't a plan for success -- it's a plan for a sightseeing trip. I can see why Romano has such choice words for the bozos he sold to.

[RobertB]

The latest news from the D.O. Blog: There’s That Eatzi’s Lawsuit We Were Looking For (http://www.dallasobserver.com/blogs/?p=1846). The landlord in Chicago is asking the "Eatzi's LLC" folks for over $4.2 million in accelerated rent on both the building and the fancy cookery inside it. As far as I can tell, this suit affects only the boneheads whose "growth plan" was based on the "planting seeds" model (bury the thing so deep that it has no chance of seeing the light of day). Phil Romano doesn't look to be directly involved, unless perhaps they can hear him laughing all the way from here to the Windy City.

[VectorWega]

EatZi's is a great idea that is very poorly executed. Take the salad/sandwich lines for example. It's very hard to tell which line is which and where you are supposed to stand (without getting in people's way).

Then, ordering a sandwich is very confusing. People get to the front of the line and ask a million questions because they have no clue about the different bread types and different spreads, etc. This brings the entire process to a screeching halt. They should provide menus explaining all of the options at the beginning of the line (due to disorganization, who knows where that is).

I took my friend there for the first time a while back and he told me he is getting the #4 sandwich. I had been to EatZi's dozens of times but had no clue what he was talking about. Then he pointed above (we were in the back of the line) and there was a list of sandwiches (all this time I had assumed that you just custom build them). Well, once he got to front, he told them he wanted a #4 and they had no clue what the hell he was talking about. I guess I wasn't the only one that had never seen that sign.

[VectorWega]

Still, it was a boneheaded move.

Contrast EatZi's expansion with that of WingStop. WingStop started small, expanded locally and carefully, and is now both ubiquitous and successful.



I don't know how profitable the sandwich/salad portion of the store is, and how it fits with the rest of the store, but it seems to be the most popular part of the store.

IMO, they could split that part out and make a more upscale version of Subway/Quizno's and include salads. They would obviously have to stream-line their process, but places such as Subway and Chipotle have proven that this small store quasi-fast-food business model is an excellent one.

They could open stores like that in Southlake, Frisco, Ft Worth, etc and IMO they would do quite well.

They could also sell bread and some other food items and compete with the likes of Panera Bread (although, I would try to keep the sites relatively small).

[vman]

[QUOTE=VectorWega]EatZi's is a great idea that is very poorly executed. QUOTE]
You are so right. I tried Eatzi's when I first moved to Dallas. I walked in on a busy Sunday afternoon, and it was majorly chaotic and trying to figure out the store's "system" was so confusing, that after about 45 minutes of utter confusion, I just walked out. I've never been back.

[tamtagon]

I lived in Dallas when it opened, and it took me about a week to figure the place out. After that, I was glad so many people got confused, it made it all that much easier to speed through. Confident eye contact and familiarity with the employees helped almost as much as my anti-pretentious disposition when locating the hidden express lanes. haha

[Tnekster]

Romano hopes to get store back on course
http://www.dallasnews.com/sharedcontent/dws/bus/stories/011307dnbusromano.31017e3.html

11:46 PM CST on Friday, January 12, 2007
By KAREN ROBINSON-JACOBS / The Dallas Morning News

After decades of birthing food concepts, only to sell them off, Phil Romano is looking at a do-over.

The father of such well-known brands as Fuddruckers hamburger restaurant and Romano's Macaroni Grill, Mr. Romano has his sights set now on resuscitating his 11-year-old gourmet food concept, Eatzi's Market & Bakery.

In November, Mr. Romano took control of the brand, which was headed for receivership. Of the 28 concepts he's launched, dating back to one in Florida in 1965, Eatzi's is the first one he's ever reclaimed.

"I do things now that will make me feel good," said Mr. Romano, 67, who estimates that he's put $6 million of his own money into the concept to date.

"Reviving Eatzi's is going to make me feel good because people love the concept."

It's not unheard of for an entrepreneur to take back an ailing concept, but it's not the normal progression.

"You still have some sense of ownership, and you think you can bring it back to whatever sense of greatness that you initially envisioned," said Alex Susskind, an associate professor at Cornell University's Center for Hospitality Research.

"You can probably think of more people who pass on their concept than people who go back to get it."

For Mr. Romano, the hatch-and-release program has worked particularly well. He's sold at least seven of his concepts, including Fuddruckers, Macaroni Grill and Cozymel's, netting him, he estimates, about $70 million.

Although he's thought about renewing his ties with at least two of the brands, the deals never became real until Eatzi's – one of two tweens that now garner most of his attention. (The other is his 10-year-old son, Sam.)

Striding through the narrow aisles of the original Eatzi's on Oak Lawn Avenue in Dallas, Mr. Romano has a vision of the future. And it looks a lot like the past.

"We're bringing it back to the old days," he said, when the concept was launched as a 50/50 joint venture with Dallas-based Brinker International Inc.

Exiled will be the eyebrow-high metal shelves, to be replaced with lower-slung shelving, allowing for better sight lines.

The market sells about 60 kinds of pastry, 35 breads and 11 types of olives. But Mr. Romano thinks there are too many types of potato chips. And he's nixed the jellybeans.

"I don't want any crap around with my food," he said. "I want to put stuff in here that people can't buy anyplace else."

For example, for $9.99 shoppers can pick up a meal of mojo citrus pork loin with asparagus vinaigrette or apricot-ginger glazed ham.

When the concept launched, Mr. Romano thought it had the potential to become "the epicenter for food in any community," according to his 2005 book, Food for Thought.

After the Dallas store opened, outlets followed in Houston in 1997, followed by Chicago and elsewhere. In all, eight Eatzi's stores were opened, mostly in the eastern U.S.

In 2002, Brinker sold its share to Castanea Partners Inc., a private-equity investment firm based near Boston. Mr. Romano maintained a minority stake.

Three years later, Eatzi's was planning to add 30 stores over five years, according to Mr. Romano's book.

By the end of last year, though, all but the Dallas and Chicago sites were closed. The two remaining stores share a Web site even though they have different owners and operate separately.

Mr. Romano called expansions in Chicago and Atlanta costly, and said they drained resources from the other stores. At about 18,000 square feet, the Chicago store is double the size of the 9,000-square-foot original. And one of the two Atlanta stores was larger than Mr. Romano had envisioned.

'The downfall'
"The big stores in Atlanta and Chicago were contrary to our plan," said Mr. Romano, who envisioned a network of smaller outlets. "This was the downfall."

Mr. Romano said he also saw a decline in the quality of products purchased for the stores and of the labor.

Last April, the Dallas store lost about 90 workers in a raid by agents with U.S. Immigration and Customs Enforcement, he said.

"I don't think anybody anticipated Eatzi's downfall as quickly as it did," said Peter Repak, an operating partner with the Chicago store. "The old company is dead. It's gone. There's no more to be said."

Officials with the investment firm did not respond to calls seeking comment.

Mr. Romano described them as "good guys," adding, "We both took a hickey on this," citing an initial $17 million investment in the brand.

Eatzi's was not the first Romano concept to fall short of the inventor's vision.

Fuddruckers' story
His first big sale was Fuddruckers, a burger-themed restaurant he started in San Antonio in 1980. Known for fresh-baked buns and an expansive "fixins" station, the brand went public in 1983. He sold a majority interest in 1986.

The chain expanded rapidly before being forced to seek a merger partner, according to the trade publication Chain Leader. It then suffered as the vision changed with a progression of owners and executive teams.

Mr. Romano said he spoke at one point with an executive and an investor who were "going to take it private and fix it. I said I'd be interested in taking it private with you. I made the offer. They never accepted."

"It's like raising a child," he added. "You raise it and nurture it and let it go out into the world. It's not mine anymore, but it's like having a child you produced."

Matt Pannek, who took over in June as chief executive of Austin-based Fuddruckers Inc., acknowledged that "there have clearly been hard times and good times" for the brand.

"Luckily, we're in the good times," he said, adding that the company plans to open up to 33 new restaurants by June. "The core pillars of the brand are back to where they were when Phil founded it."

Mr. Romano's largest concept, the eponymous Romano's Macaroni Grill, also has faced challenges. Founded in San Antonio in 1988, it was sold to Brinker a year later for $5 million in stock.

The second-largest Brinker brand behind the flagship Chili's Grill & Bar, Mac Grill has more than 240 locations. But the brand has struggled to find its niche, posting negative same-store sales in the first nine months of 2006.

"I know exactly what's happening with Macaroni Grill. I go in there, and I see things being done that shouldn't be done. I won't say what, just changes [from the original concept]," he said.

He declined to elaborate "in a public forum."

"They know I'm here, and they could call me at any time they wanted to," he said of Brinker executives.

So far, they haven't. Officials with Brinker declined to comment.

Short-term plans
No matter. For now, Mr. Romano said he said he's excited about raising his son (for whom Nick & Sam's steakhouse is partly named) and refining his game plan for Eatzi's. In the short haul, Mr. Romano plans to operate Eatzi's as a single store.

"Within a year, I'll start building more Eatzi's in Dallas," he said. "I want to grow through Dallas," he added, mentioning possible stores in Southlake and Plano. "Not jumping around.

"We're going to get this squared away," he added, "going to where it should be going."

[RobertB]

As reported in this new thread (http://forum.dallasmetropolis.com/showthread.php?t=6805[/url), Eatzi's is opening a new location at Parker Road and the DNT in Plano. DMN article on the other thread, or here: 1st suburban Eatzi's headed to West Plano Village (http://www.dallasnews.com/sharedcontent/dws/bus/stories/041907dnbusplano.3665258.html). Choice quote:

"It's an urban development in ... a suburban location," said David Palmer, Cencor executive vice president. "Cities like that stuff nowadays."
Yeah, they like "that stuff". The architect describes it as "urban edge", with "a lot of brick and metal". My first response was "great, more faux urban", but they're even talking about a parking garage instead of the usual acres of concrete. Maybe it's more than buzzwords this time. We can hope.

Nothing in the article about Eatzi's corporate troubles, though Romano is quoted as saying "I have always been interested in expanding to Plano, but the zoning had to change and the site had to be perfect. The zoning finally changed, and West Plano Village is that perfect site." I wonder what sort of zoning Romano was looking for?