Article

New owners of Pat & Oscar's launch revitalization effort

New owners launch innovative menu items and upgraded dÃ©cor to polish their 'diamond in the rough.'

November 19, 2009 by Valerie Killifer — senior editor, NetWorld Alliance

For nearly two decades, Carlsbad, Calif.-based Pat & Oscar's has focused on family dining. But after being tossed about among a slew of owners over the past 20 years -- some from as far away as Australia -- the brand not only lost some of its focus, also but its luster.

Enter John Kaufman and Tim Foley. Having joined the chain in 2008, the duo led a management buyout of Pat & Oscar's earlier this year, while it was owned by Australian private-equity firm Pacific Equity Partners, who had purchased it from Worldwide Restaurant Concepts, also the parent company of Sizzler.

Although Pat & Oscar's had been poised for sale by Pacific Equity, George Hunter, the firm's chief operating officer, said executives were given the opportunity to meet with and interview potential partners. Hunter was familiar with Kaufman and Foley, having worked closely with the men since they joined the company in 2008.

"It was a breath of fresh air to be able to align philosophies," Hunter said. "It was a little like coming home to have John and Tim join."

Kaufman and Foley gave each manager and senior team member stock in the company after its purchase, and quickly went to work defining Pat & Oscar's new operating principles. One of the team's first items of business: building a franchise program.

Expansion initiative

The company signed its first franchisee, Steve Gratz, in February 2009, and has two more in the system operating several locations.

"There were several business points to clear away for us to really start the revitalization or second coming of Pat & Oscar's," Kaufman said. "In order to do that, we had to get the company healthier than what it was, and that was selling off seed restaurants to franchisees."

He predicts he and Foley will learn a great deal from the franchisees in the sytem.

For example, Palm Desert, Calif., franchisee Ron Mehrens opened the first Pat & Oscar's Express location. The restaurant is located in the Westfield shopping mall next to Macy's, and was configured to catch both dine-in and express patrons. The restaurant features a walk-up counter for mall shoppers and a scaled-down version of the full menu. The counter is attached to a dine-in seating area which features the full array of menu options.

Another franchise also is testing a breakfast menu, Kaufman said, and a third has taken over one of the chain's Orange County locations.

So far, four of the company's 19 locations belong to franchisees.

New menu items

With its franchise model in place, Pat & Oscar's executives then went to work on the development of several new menu items – and even brought in the original founders to help do so.

"The first thing Tim and I did was talk to the people that had been running the company," Kaufman said. "And we had a wonderful senior leadership team. George had been with the company for 10 years and the CFO for seven. So, there was a lot of experience sitting at the table."

From their discussions with senior executives, Kaufman and Foley learned that the quality of menu items had been sacrificed in order to position the company for sale.

"So, there were no new initiatives except making sales consistent," Kaufman said. "We've gone back to bringing the love back into the food and continuing to raise the full flavors and bold taste of what it is we cook."

The new items, created by company executive chef Greg Schroeppel, are part of a company-wide initiative to bring in more exotic and seasonal flavors that could become part of a rotating menu.

The Chipotle Pastrami Melt was the first menu item launched under the company's new food and beverage vision, and the second was a Bangkok Chopped Chicken Salad. Several items also are still in the company's test phase and include creamed corn with roasted poblano peppers, creamed spinach, garlic rice, mac and cheese and coleslaw.

They company expanded its family-meal options as well and now offers a meal deal that feeds parties of six instead of the traditional two and four, and more items for purchase.

"Our core driver here was not to raise the price point. What we decided to do was allow the guests to do that," Kaufman said. "We put additions on the menu and what we've seen is an 11 percent increase in check averages on that side of the business."

And although Pat & Oscar's restaurants have sold wine and beer, the company recently partnered with the Gallo winery to help with wine pairings and branded menu items. The winery also helped educate Pat & Oscar's employees about potential wine pairings with menu items.

COO George Hunter said the partnership helped Pat & Oscar's elevate the dining experience by taking their beer and wine selection off the back shelf, putting it directly in front of guests.

"We've watched wine sales go from 1 percent to 5 to 6 percent in those locations that have educated team members," Hunter said.

The new menu is supported by a new interior design, including an updated color scheme and new furniture. AndPat & Oscar's executives say the changes have all been designed to revitalize the brand, employees and the guest experience.

"What we found coming here is that we had a true diamond in the rough that needed to be brought to today's look and feel," Kaufman said. "We haven't really touched the core of the concept. Everything we've done since coming into the company is all long-term thinking."