Growth Strategy: The Melting Pot's Slam Dunk

Bob Johnston re-engineers The Melting Pot, planning for 175 franchised units by 2010.

By Christine Zimmerman, Contributing Editor -- Chain Leader, 4/1/2003

Melting Pot CEO Bob Johnston

It almost defies reason that fondue concept The Melting Pot is experiencing a growth spurt right now. Making guests cook their own food for average checks in the high $30s (mid-$40s in some markets) seems nervy. But The Melting Pot is pulling it off, mostly because of its uniqueness and ability to franchise. The Tampa, Fla.-based company has 65 units, 10 of which opened in 2002. Fourteen more will open this year. Ten of those 14 units are already moving right along, meaning construction or site development has begun, according to CEO Bob Johnston. His goal is to have 175 units open within the next seven years, the majority run by franchisees.

The Melting Pot is firmly in the southeastern United States. Johnston says he sees major growth in the Midwest and West. “There’s some opportunity in the Northeast, too,” he says. The company is also discussing the possibility of going international.

In the meantime, the concept has been undergoing a “re-engineering,” Johnston explains, including taking a new look at business plans and unit designs.

But its overall strategy is much the same as it was when it was founded in 1975: to make patrons feel like The Melting Pot is the place to celebrate the special moments of their lives. This is not an eat-and-run kind of place; most guests settle in for two-hour, four-course meals.

History in the Making
Melting Pot management has learned from the past. The chain’s initial growth was not quick, at first because of lack of infrastructure. The franchise system developed one unit at a time.

For six to eight years beginning in 1985, Melting Pot opened two or three restaurants a year. Johnston calls that the “trial and error” phase of the company. During that time, some restaurants were closed because the company was still identifying target markets based on demographics and location. For instance, some closed because the location was too seasonal or transient.

“Fortunately, this set the framework to develop the targeted marketing strategy used today,” says Johnston.

‘Corny’ Can Work
It has helped the company to stay on track with a simple mission. “We focus on the event-dining experience,” says Johnston. “As corny as this sounds, we provide an opportunity to escape. We let people get away and spend time together.”

Jim Sullivan, CEO of foodservice consultancy Sullivision Inc., says, “The diner’s experience at Melting Pot is an engaging, interactive and sensory-driven experience. You can’t throw this good a dinner party at your home.”

He adds, “The food, atmosphere and service seem to have the right edge and focus as a result of the company’s recent retooling.”

Sullivan, who has watched The Melting Pot for about 10 years, has made presentations to its top management and operators at training sessions.

So how does Sullivan measure the chain’s success?

“Clearly by double-digit increases in same-store sales at a time when the industry growth is slowing,” he says. “Also, a respectable increase in per-person spending indicates they are creating a yearning among their customers for more of the experience.”

In the year ended August 2000, Melting Pot was up 16 percent in same-store sales and 22 percent in total sales. In both 2001 and 2002, comps were up 11 percent. Sales in 2002 increased 26 percent over the prior year, according to Johnston.

Anyone Can Play
Johnston explains that because the Melting Pot concept is simple, the company readily attracts franchisees, a good number of whom are from outside the restaurant industry.

The company puts great emphasis on training operators to make up for a lack of restaurant-management experience. Each franchisee spends a month training in Tampa, working every job.

Lane Scelzi is a good example of a onetime outsider on the inside. Scelzi, who is in the process of opening his third unit in the Seattle area, worked for UPS and then for GTE Directories Yellow Pages, among other places. While he did work as a server and bartender in college, he had no restaurant-management experience. One visit to a Melting Pot in Cincinnati sold him on the viability of the concept.

“We really had fun there, and I figured, this is what Seattle needs,” he says. “We have a lot of fish and steak restaurants in Seattle, but no fondue.”

Scelzi decided to make a career change in 1996, and he opened his first Melting Pot in 1998. The 7,200-square-foot unit cost $1 million to open.

“What was appealing is that overhead is low. There are no ovens, fryers or hood systems. And you don’t have to hire a chef and give him 50 percent of the profits to develop great menu items,” he says.

Johnston says the cost of investment is reasonable given the volume of the restaurant. The franchise fee is $28,000, he estimates. The cost of opening a restaurant can run from $500,000 to $800,000, minus real estate. Most franchisees have two or three units each.

Designing Woman
Amy Gil, Melting Pot director of design since July 2002, is behind the new look of most Melting Pot units. The design most representative of the chain is in St. Louis.

“It reflects the direction in which we are moving,” she says. That means a wine room and newly muted colors. The chain will be pushing more wine varieties in order to raise check averages. A new unit in Minneapolis, for example, will offer 250 different wines. Systemwide, alcohol averages 20 percent of sales.

Consultant Steven Olson from AKA Wine Geek has trained Melting Pot management on food-and-beverage pairings. “They are smart. They care, and they just get it. The beverage program is user friendly and works well with the food,” says Olson. He notes that the menus suggest pairings, and servers are trained to make wine suggestions.

Inside Story
As for interior colors, the older deep purple, mustard yellow, dark olive and rust are being replaced with softer purples, light olive and burgundy. Ceilings are painted a mossy gold. Most of the artwork used in the restaurants is by local artists.

“We want to have a feeling that makes a guest say, ‘It’s all about me,’” says Gil. “They have to be comfortable enough to sit for several hours.”

She says it has been challenging to design space that’s intimate enough in one corner to propose marriage and open enough in another corner so that 30 people can celebrate a birthday.

“They cannot simply push tables together like many restaurants to accommodate larger parties because of the electrical wiring to each table. The new design allows them to accommodate larger parties from eight to 40 or more,” Sullivan notes.

As for the intimate seating, Gil added architectural glass panels between booths to enhance privacy and limit the feeling of being “closed into a little box.”

The new design is a success, Johnston says, and existing units are retrofitting.

Dipping In
Design is helpful in making The Melting Pot a great place for a social gathering, Scelzi says. But the real key is fun at the fondue table.

The meal begins with cheese fondue, $14 for two people. Diners dip fresh breads, vegetables and apples into mixtures such as the Cheddar Cheese Fondue with aged medium sharp cheddar and Emmentaler cheeses, lager beer, garlic and seasonings.

Salads, $5, are followed by fondues for two, $48; or single entrees, around $18. The French Quarter entree features andouille sausage, shrimp, beef tenderloin and boneless chicken breast rolled in Cajun spices and ready for dipping into Gorgonzola port, lemon pepper or Louisiana hot sauce.

Dessert, $14 to $28, includes a choice of several chocolate fondues into which diners dip fruit, cheesecake, marshmallows, pound cake and brownies.

Work Ahead
In Sullivan’s opinion, The Melting Pot needs to work on two things to keep its growth strategy on track.

First, he says, the company needs to “further evolve” its current marketing focus and brand, and educate the consumer about what it is and what it offers.

Second, Sullivan says, it needs to stay on top of its tough training challenges.

“Melting Pot is very intensive in both product knowledge and technique for servers, greeters and managers. So their unique training challenges will be either a constant source of innovation, or frustration, as they continue to grow.”

Johnston says its “training champion” initiative, in which a dedicated employee from each store helps transfer knowledge and skills to other employees, inspires teamwork.

Says Sullivan, “I have a favorite saying: ‘strong culture, thin rule book.’ Melting Pot appears to have developed a strong culture and is actively defining the core principles and beliefs to be shared by its teams. That’s key to an operation’s present and future success.”