Repeat Business

Lettuce Entertain You CEO Kevin Brown values structure, growth and new concepts.

By David Farkas, Senior Editor -- Chain Leader, 2/1/2007

For most of its 35 years, Lettuce Entertain You Enterprises has enjoyed a reputation for good food and attentive service at its collection of innovative eateries. Yet two things always stood out more than LEYE’s vaunted hospitality: founder and Chairman Richard Melman’s inclination to keep his stable of restaurants in Chicago, where the company is headquartered, and his reluctance to repeat a concept.

"What he did made such a difference," says retired Chicago Tribune food and wine columnist William Rice. "Instead of cloning, he kept innovating."

Melman still wouldn’t repeat himself, acknowledges CEO Kevin Brown, a 30-year Lettuce veteran. But Melman isn’t insisting Brown or Lettuce’s 37 other managing partners follow suit. Since the mid-’90s, the privately held company has been evolving into a multiunit company capable of opening several restaurants a year outside Chicago.

Today, with partnerships in some 73 restaurants, Lettuce is breaking new ground in Atlanta, where it operates one Wildfire, and opening outposts in three lucrative cities: Mon Ami Gabi in Minneapolis, Wildfire in Washington, D.C., and Strip Burger in Las Vegas.

At home in Chicago, Brown is carefully watching two quick-service restaurants: Wow Bao and Magic Pan Crepe Stand. Both may prove ideal for airports and other small-space sites. Seven new restaurants are scheduled for this year. Brown is also keeping his eye on 2-year-old Osteria via Stato, a Tuscan-style eatery he believes is the next iteration of casual Italian.

Chain Leader recently grilled the 51-year-old executive in ever-popular Shaw’s Crab House, a Chicago restaurant Brown helped create in 1984. Although he declined to share any financials beyond last year’s systemwide sales ("roughly $325 million"), Brown eagerly talked about what’s in store for Lettuce in the days ahead.

Lettuce is well-known for its partnership program. Briefly describe it.

We provide an infrastructure for partners to grow their businesses. We want them to make decisions. They are intimately involved in design decisions and real estate. They know all their cash flow and staffing needs. They own equity in this company. It’s a growing equity, by the way. We don’t say you’ll have it for four or five years and we then start over. We have successful concepts that are 10 to 15 years old showing nice sales growth.

Those would be…

Mon Ami Gabi, Wildfire and Big Bowl. We had company growth and same-store-sales growth in 2006. I’m confident we can continue to drive sales and revenues because the battle is always on the cost side. I can’t control construction costs, real estate or minimum wage. But we can make our restaurants better.

To some extent you can control real estate by where you put the restaurants.

And we are not forced to take locations. That is an advantage.

Not being driven by a private-equity firm saying…

Get out there and grow!

On that subject, can you talk about how you work with developers?

We have a good reputation with developers. I don’t think we are the fastest. But I think they know when we put restaurants in, they are good and they stay good.

Do you have a strategy when it comes to lifestyle centers?

We are more sophisticated today. We have good modeling tools and research tools that we look at. We look at each site specific for the concept because we are growing different brands. We don’t have one pat answer.

Let’s take one of the more interesting concepts, Mon Ami Gabi, which has a relatively complicated menu.

It’s very food driven.

And thematically driven. What have you learned so far about the best fit for a Mon Ami Gabi?

The interesting thing is we thought maybe—when we called it Un Grande Café—it wasn’t going to stay around. Here we take a restaurant that was doing OK and re-concept it. We did it ourselves in three or four weeks. And, boom, we have a nice business.

But what have you learned?

That it’s a sophisticated concept. It’s not a casual concept. It’s definitely a polished-casual concept. You want to be in markets where people get a European-style concept. That’s not every market. We have another site for it in D.C., and we are very interested in one in Minneapolis, though I’m not certain about it.

You have said you like Minneapolis, Washington, D.C., and Chicago. Why’s that?

We want to stay market-centric. We get to take advantage of our frequent-dining programs and gift-card programs. And frankly it’s nice to go someplace and see multiple restaurants. There’s usually someone out there sticking a flag in the ground. [Managing Partner] Howard Katz is doing that with Wildfire, and so we are looking at what else will work in Atlanta.

What’s keeping these growth concepts competitive?

The leadership has to keep them competitive. We continue to go in and start with food. We watch and monitor what’s selling and what isn’t. We continue to upgrade menu and service training.

How many Big Bowls, say, can you do per year?

We can do one to two. It’s really up to the team. It’s funny. You probably interview a lot of people who say they are opening 10 or 20 or 40 restaurants this year.

It seems the people I’ve been interviewing are looking for franchisees. Even Wally Doolin has said he wants to franchise Buca di Beppo.

That’s interesting. We love to own and work with our restaurants. It would be hard for us to franchise. It’s not in our mind-set.

What about Wow Bao and Magic Pan?

We will have two Wow Baos in the Loop [Chicago’s financial district] soon. If there’s ever a concept that had that kind of potential [for franchising]—and I’m not saying we will do it—it’s that concept. And Magic Pan is another one.

Because each is simple to operate?

Yes, due to their simplicity. At Wow Bao we partner with a bakery that makes the bao, so the product comes in ready to go. There aren’t a lot of knives. ’07 will be the year we learn more about Wow Bao.

Can you picture them in airports?

Both of them. Wow Bao would be perfect, in fact. We see it competing in the quick-service area. It’s almost a sandwich substitute—a Chinese slider.

The second Wow Bao, in the Loop, will have 75 seats versus none at Water Tower Place, an upscale shopping mall. Are you tempted to turn Wow Bao into a fast-casual restaurant?

We liked the location because it was a restaurant. But it’s more square footage than we wanted.

But you guys are restaurant operators.

Yeah, but we’re not that calculating. When you are going into the second restaurant, you’re not thinking, "Let’s roll this out." We don’t lock in on formula. We lock in on discipline on how we want to operate. That’s more of our nature than not. If Rich had his druthers, he wouldn’t duplicate a single restaurant. He would change Mon Ami Gabi. We battle back and forth on this point. I’m somewhere in the middle of it all. I like the structure and the growth, and at the same time, I want to create new concepts.

An insider at Lettuce described the company to me as a cult, with Rich as the high priest.

Oh, there is no question.

And that Rich takes care of Kevin and Kevin in turn takes care of everyone else.

I’ve said this many times: I view [our growth] as the opportunity to become sort of like Disney. Rich is like Walt Disney in this business. My goal is continue to grow Lettuce Entertain You and build its reputation along with the Melman name. Who wouldn’t want Rich Melman working side by side with him? People all over the world want him to give them an hour of his time. Does it add a certain amount of craziness? Yes, but every business has its craziness.

I was reading the book you say is on your nightstand, Let My People Go Surfing.

It’s a great book! I love [Patagonia] and its clothing.

Yvon Chouinard describes himself as a reluctant businessman and says that he’s never respected business. Do you identify with him?

He’s more radical. But he’s not unlike what a true founder of an organization is like. And they think differently. I’m part of the next generation coming in. I have that balance between left brain and right brain. I’m not afraid to think creatively. Yet we have to build a structure to grow this business to provide opportunities.

That brings up an interesting point. One can say there’ll never be another Rich Melman. But, on the other hand, aren’t you looking for that kind of creative potential in partners?

If I were to describe our growth, I’d tell you there’s no steadfast number [of restaurants], but we will be strategic and opportunistic. Strategic with concepts we know work well. We have seven or eight of those. At the same time, 25 to 30 percent of our growth is going to be new concepts. That won’t be one person, though Rich likes to drive it. But we have other partners with ideas. We’re doing a new burger concept on the side of Cafe Ba-Ba-Reeba in Las Vegas.

Do you have a name for it?

Strip Burger. It’s going to be right on the Strip.

What separates your burger joint from anyone else’s?

Hopefully, the quality of the food. And fun. There will be a bar component.

Is it QSR?

No. You can sit down. There’ll be waiters.

Is it tough for you to step outside the box of full service?

Our history certainly is full service. What gives us strength is that we are so diversified. If we are in one category and it slips, we don’t have to retool the whole company. And we will continue to re-concept certain locations.

Is that currently the case with Scoozi, a smash hit in its day?

We are thinking about that.

What do you have in mind?

I can’t tell you, but we are toying with ideas.

Are there other assets in the stable you’ll re-concept?

Osteria via Stato is a great example. Papagus [which formerly occupied Osteria’s space] was a very good store for us, and although it had not finished its run, it wasn’t continuing to be driven the way it could have gone. We’d had partner leadership in there of Greek heritage, and he really drove the concept. Then he went to [Brinker-owned] Maggiano’s. It’s sometimes hard to put a person in charge that doesn’t have the passion for Greek even if they execute well.

Back to quick service vs. full service. Is it that Lettuce has yet to learn how to operate them profitably?

I think we will learn it. We have one Wow Bao at Water Tower. We are very successful with it. We don’t really have a fast-casual component the way you see it today. But we might be changing that.

With Wow Bao?

No, we have a concept coming that could be a blend. We are working on that as we speak.

Should Chipotle CEO Steve Ells be worried?

No [laughing]. Chipotle is such a great concept. It’s so simple. If you read [Chouinard’s] book, what does he always talk about?

Keeping it simple.

And that’s my mind-set. As crazy as this company looks, we think simple. And we focus on details right in front of us. We’re not foolish. We have a plan. We have these ideas about where we want to go. But we don’t spend a lot of time in a room wondering about how big we are.

Would you say that’s an advantage over competitors?

Let me tell you what gives us an advantage: We don’t have to be bigger. I don’t wake up in the morning saying, "I need 15 percent growth."