Article

New Daphne’s CEO outlines brand future

September 16, 2010 by Valerie Killifer — senior editor, NetWorld Alliance

When Daphne’s Greek Café founder George Katakalidis filed for bankruptcy protection in January, the news came as a shock to many restaurant industry insiders.

Katakalidis founded Daphne’s in 1991 in San Diego while nursing a soccer injury from his days on the San Diego Sockers.

Over the past 19 years, Katakalidis grew the brand to markets outside of California that included Arizona and Colorado. The growth was entirely through company-owned locations, and at one time, the company had close to 90 stores opened.

Through the years, Katakalidis had established himself as a fast casual innovator with Daphne’s becoming the poster child of fast casual Greek cuisine. But the economic downturn that began in 2008 became a weight on the shoulders of Katakalidis and the brand.

Over the next two years, locations closed in Colorado, Arizona and even in California (although one location remains open both in Scottsdale, Ariz., and Boulder, Colo.) And Katakalidis, facing debt of an estimated $17 million, filed for Chapter 11.

Seven months later, the company announced it was to emerge from bankruptcy through the sale of substantially all of its operating assets to a buyer sponsored by Trefethen Advisors LLC.

The group is led by Bill Trefethen, the former founder of American Commercial Capital.

Trefethen has been a fan of Daphne’s for at least 10 years and was recently looking for a restaurant brand the company could invest in. He was considering the Fatburger franchise when the opportunity to purchase Daphne’s was presented. The deal closed in August.

“Daphne’s is a good niche for California and I was even surprised the company was in bankruptcy. So when I got the call, I got all over it,” he said. “We had to bid and close within a week. Since we wanted the company, we wanted to get it out of bankruptcy as quickly as possible. Daphne’s is a great niche and our niche should do pretty well in a world where everybody’s going to have to put calorie counts on the menu.”

Two-tiered strategic approach

Since taking over as the owners of Daphne’s, Trefethen, who is now CEO, and his partners have waged a full-scale review of the brand.

“The food’s good, so we don’t really have a food quality issue and if you rate our locations overall, they’re B locations as a whole,” he said.

Stage one of the overhaul includes addressing how to drive customers in for the dinner daypart, arming the brand with a modern look and feel and entering the world of social media.

“Prior to us coming in, the website was archaic and there was no social media presence,” Trefethen said. “So, we’re redesigning the website and we launched a new social media (strategy) last week.”

Stage two will focus on developing the concept as a franchise opportunity to open a combination of corporate and franchisee-owned locations, a strategy Katakalidis and the company started two years ago when the chain filed uniform franchise offer circulars in Arizona, Colorado, Connecticut, Delaware, Washington, D.C., Georgia, Kansas, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, North Carolina, Ohio, Oregon, Texas and West Virginia. 

“It’s super risky going into a new market and building them out,” Trefethen said. “And when you expand with all company-owned locations, it puts a lot of stress on the concept. If we’ve learned anything so far, it’s that stores work in certain markets and not in others and which markets have the demographics that are going for work for us.”

But the franchise option won’t occur until other aspects of the brand reimaging have been completed.

To help with the brand evolution, Trefethen has established a solid team involved with each aspect of its review.

“We have a team of professionals working on this whole thing and we’re in a period of brainstorming and figuring out where we’re going with the brand,” Trefethen said. “It’s establishing best practices, track performance … we’re looking at everything. (And) because we don’t have a lot of depth, we’re good at going forward because we have the funds to back it.”

A select number of stores are expected to roll out the new design after the first of the year, with some of the new brand elements to be phased in over time.

“The good thing is the company is not laden with debt any longer so we have some breathing room and if we need to invest in the concept, it’s about how do we invest in the experience and get the word out,” Trefethen said.