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The Rise and Fall of Buca di Beppo
August 16, 2007

Can anyone recall Buca di Beppo’s pasta-laden heydays, in the spring of 2001, when the concept seemed relevant and the company’s stock price had climbed steeply, from $11 to $25, over several months? Today, sadly, you can lay your hands on a share of BUCA for less than $3.

It had been a helluva run for the Minneapolis-based concept, created by Phil Roberts in the early 1990s. Buca was nearly alone among Italian chains that brilliantly captured the country’s mood for nostalgia, appetite for large, family-style portions, and need for dining with large parties in small spaces particularly after 9/11.

One then could have easily asked: What didn’t Buca have going for it?

It turns out quite a few things, not the least of which included members of Buca’s former management team, who were charged and later convicted of company crimes in 2003. Today, for example, former CEO Joe Micatrotto takes his meal in a prison mess.

Still, it was more than crooked officers and legal fees that prompted Buca’s ongoing problems. Perhaps we should blame the moment. Nostalgia still sells, of course, though a lot less these days in restaurant circles; large portions have become nutritionally suspect in a country where one-third of adults are clinically obese; and eating in small, tchotchke-filled rooms now feels overtly theme-y if not claustrophobic.

This could explain why on Aug. 8 current CEO Wally Doolin reported in a conference call  that Buca Inc. remained unprofitable in the second quarter, losing $3.2 million, or 16 cents per share, down from a loss of $718,000, or 3 cents per share, during the same period last year. Revenue rose modestly, to $62 million from $61 million in the comparable period of 2006. Doolin blamed rising labor costs for much of the losses.

He noted a bright spot. Same-store sales leaped 3.7 percent; it was the 11th consecutive quarter of positive gains. Guest counts climbed, too, though Doolin didn’t reveal how much. Credit, he said, goes to a carryout program, lunch daypart, “e-club,” and Buca Mio, a single-serving effort.

Doolin’s goal is to raise average unit volumes, enough at least to cover the operating costs. To that end, he added, he’s closing “bottom-performing restaurants” and opening new restaurants in key markets next year. A handful of units make no money at all.

Then, in a response to a question about alcoholic beverage sales during the Q&A, Doolin joked that management itself was trying to increase them. Then he said something I found sobering. He conceded that beverage sales, particularly wine, have declined for four years. Four years? In a pasta- and meat-heavy concept that would appear to thrive on a customer’s thirst for hearty red wines?

Is it possible that Buca di Beppos, many of which are in suburbs, don’t attract a grape-loving crowd? That instead patrons rinse their tonsils in diet colas and the like? I bet that’s part of it. An aging population, long suburban drives and stringent drunk-driving penalties have put the kibosh on bar sales throughout casual dining. Like I said, the moment has passed.

Yet, Doolin suggested, there’s more to it than macro issues. “We’re getting guest feedback on server knowledge and speed of alcohol service,” he explained.

In other words, servers have little idea what they’re selling and can’t get a drink to customers fast enough for them to enjoy it. It’s enough to make you long for the good old days. Coke, please.

Posted by David Farkas on August 16, 2007 | Comments (0)