Web Exclusive: Restaurants Unlimited Poised for Expansion

The multiconcept operator is making the most out of its acquisition by Sun Capital and its purchase of Pacific Coast Restaurants.

By Maya Norris, Managing Editor -- Chain Leader, 1/22/2008 12:03:00 PM

For the past year, Steve Stoddard, president and CEO of Restaurants Unlimited, has been busy. The Seattle-based multiconcept restaurant company, which has eight casual and upscale concepts including Kincaid’s Fish, Chop and Steak House, Palomino and Pizzeria Fondi, was sold to Sun Capital Partners Inc., a Boca Raton, Fla.-based private-equity firm, last March for an undisclosed price. Then in July RUI purchased Pacific Coast Restaurants, a Portland, Ore.-based multiconcept operator with eight casual and fine-dining concepts in Oregon, Washington and California. Stoddard spoke to Chain Leader about why these transactions position Restaurants Unlimited, which now has 58 restaurants in 13 states, to accelerate expansion.

Why did Restaurants Unlimited agree to be acquired by Sun Capital? Why did you feel that was the best move for your company?

From the perspective [of previous owner Rice Sangalis Toole and Wilson], it was the best buyer, the best bid, secure financing in order to close the deal in a reasonable period of time. That’s undoubtedly what was attractive to the ownership group.

From a management-group perspective, Sun Capital has been a very exciting new ownership group because they are one, well-capitalized, and second, they are very aggressive about growth. And that’s something that the management team here is very excited about—the ability and the opportunity to grow our company and grow our concepts.

Why was Pacific Coast an ideal acquisition for Restaurants Unlimited?

One, the geography is an obvious component of attraction. They are a primarily local company in the greater Portland market. Twenty-two of their 28 restaurants are in the greater Portland area, one in California and the remainder here in the state of Washington, which is where we’re headquartered out of.

Secondly, the concepts have similarity. We occupy a like niche in the industry, so it’s a business that we’re familiar with.

And then thirdly, their concepts will support the real-estate strategy for our existing concepts very well. The example that I’ve used: [ Pacific Coast concepts] Stanford’s and the Newport Seafood Grill are neighborhood restaurants. Whereas Kincaid’s is more of a special-occasion-dining environment, and Palomino is more of an urban-dining environment. So you take a market like Minneapolis, where we have enjoyed tremendous success through the years—we have three restaurants there: Kincaid’s over in St. Paul, one in Bloomington and then a Palomino downtown in Minneapolis. Maybe we can get one or two more Kincaid’s, possibly another Palomino. But the ability to come into that market now with Stanford’s and Newport Grill and be able to open four or six of each of them is very real. And quickly you can see the synergy that is created from that, when suddenly you go from a market where you have three restaurants to a market where you have 10 to 15 restaurants.

What are the primary growth vehicles?

Primarily we’ll be focused on our Kincaid’s Fish, Chop and Steak House concept. Opportunistically and in the right circumstance we’ll be looking to grow Palomino. And we’re looking to grow our Stanford’s concept as well.

We’d like to be able to open the [ Pacific Coast concept] Newport Grill. The Newport Bay concept is in need of revitalization. That work had begun just prior to our acquisition, transitioning one of the Newport Bays to a Newport Grill concept. We’re very excited about the results that has generated. We just completed the second transition of an old Newport Bay to another Grill. And we have plans to do several more. If that proves out, then we will want to grow that concept as well. We believe that can be a very complementary growth vehicle.

Lastly we’ve got our Pizzeria Fondi concept, where we have two open. We want to get a couple more open, and then we’ll step back and see what we have. And if so, we will want to aggressively grow that as well.

Looks like you’ll be opening a lot more units this year than you have in years past. Why did you only open three units in the last five years under the previous ownership?

We’d been in the sunset of the fund that we were with with RSTW. So there was a very limited amount of capital that was available. So our growth capacity was very little. RSTW were great owners. It was just unfortunate—it was just kind of a timing factor where we were in the life of that fund vs. where we’re at now in the life with Sun Capital, which creates a very different business environment for us.

So Sun Capital brings a lot of money to grow?

Not only money but the attitude. That’s not to say that RSTW didn’t have that attitude. They didn’t have the resources. Sun Capital has both the resources, but a very aggressive desire to support you in growing your business. I don’t think anything can be more clearly accentuated than no sooner than the ink was dry on our purchase, they turned right around and provided us the resources to purchase Pacific Coast Restaurants. So it’s not just growth through growing your own concepts, but also the ability to leverage acquisitions when it’s appropriate is part of the growth strategy as well.

What are the biggest synergies from the Pacific Coast buyout?

The greatest synergies will come from the real-estate strategy. Again using my Minneapolis example of suddenly you’re looking three years from now or five years from now, and you’ve got between 10 and 15 restaurants in that market. The synergies from staffing, from recruiting, the development of people, training, the multiunit management of it, etc. are all astounding in terms of what you currently have with having to put people on a plane in order to be able to accomplish everything. You’re able to build a different infrastructure and gain the synergies from that.

Purchasing would be the second synergy. We’ve gone from being in the ballpark of a $150 million company and Pacific Coast from being in the ballpark of being a $100 million company to now where we’re a quarter-of-a-billion-dollar company. That positions us very differently in terms of our relationships with vendors and how we can leverage those partnerships.

What challenges do you expect as you bring Pacific Coast into the Restaurants Unlimited fold?

Probably the greatest challenge that we’re dealing with is, ironically [despite] the parallel between the two companies--a great deal of the culture, the attitude, the spirits of both companies are very similar--what we have found as we have delved into it is almost everything from a technical perspective--all of the accounting and technology systems are different. They use a different payroll company than we do, point-of-sales systems are different, telephone systems are different, etc.

And then from a purchasing perspective, because they were a local company really, regional at best, their vendors were largely local as well. Whereas we being in 12 states, distribution is an important part of our purchasing strategy. So almost down the line, we do not share a commonality in any of the vendors. So the bringing together of those elements is a pretty significant part of what we’ve got going on right now and our focus.

Are acquisitions a critical part of your overall expansion strategy as you go forward?

I wouldn’t say that it’s critical. I would say that it’s complementary. I think that we will continue to look at acquisition opportunities. But we’re not just going to go out to acquire things to acquire things. Pacific Coast was an ideal opportunity and an excellent fit. And there’s certainly other opportunities like that that I can imagine, and if they make themselves available, then we’ll certainly want to give them consideration.