New CEO, menu mark sea change for San Diego institution

The turnaround strategy at Rubio's has included a revamped menu with lower prices and new items.After two years as chief operating officer of Rubio's Restaurants, Sheri Miksa talks about software and soft-shelled tacos with equal enthusiasm. She loves charts, graphs and grids, and she smiles at the mention of her daily visits to Rubio's. Miksa's tenacity and tedium have paid off. In her time with the Carlsbad-based restaurant chain, Rubio's has rebounded after an aggressive expansion plan caused the company to lose money starting in 2000. Revenue and net income hit new highs in the quarter that ended in September, and the stock reached a 52-week high of $13.15 on Wednesday. New boss at Rubio'sThis week, the company announced the promotion of Miksa to chief executive officer, with founder Ralph Rubio stepping aside as CEO while remaining chairman. "I bring the structure, the process and the management," Miksa said. "You have to bring discipline – unlike saying, 'How cool would it be to add this product or maybe turn the menu on its ear?' "

She said Rubio "brings the passion, the entrepreneurial spirit and the (attitude that says), 'What about this?' " Rubio's was swimming in shark-infested waters for a while in 2000, when the stock hit a low of $2.56. The company expanded too quickly after it went public in 1999. Since then, Miksa has switched to less-costly packaging, raised safety standards for workers and veered away from pricier menu items to introduce the fresh and affordable menu in June.

In the quarter through Sept. 30, net income grew 70 percent to $1.4 million, while revenue increased 11 percent to $36.2 million. The stock is up 112 percent over the past year.

"She has a good, deep understanding of the Mexican category," said Ron Paul, president of Technomic restaurant industry consultants. Before joining Rubio's, Miksa tracked America's love of coffee as chief operating officer at Seattle Coffee Co. In the '90s, she worked at Taco Bell Corp. as a director of operations. At Rubio's, Miksa is leading the company through a transition from a relatively small chain, with 152 outlets in six states, to what analysts say could become a nationwide franchise within the $8.1 million "fresh Mexican" industry. In the past, however, the flagship of San Diego's venerable fish taco has floundered in the tough waters outside the California market. "We grew too fast. . . . We chose cities that were not optimal," Rubio said, referring to stores in Denver, Salt Lake City and others that closed in 2002. In all, the company closed 13 stores in 2002, when Miksa became chief operating officer. In 2003, she had to implement programs, such as a costly menu change, that were devised before her arrival at Rubio's, analysts said. Through the year, the company incurred several one-time costs. It looked to improve its image by changing its name from Rubio's Baja Grill to Rubio's Fresh Mexican Grill, capitalizing on America's new penchant for freshness. More upscale restaurant prototypes added display kitchens and an expanded salsa bar. Analysts said the changes initially hurt the bottom line, but paid off in the long run. "She had to muddle through, make the best of it and turn it around by (the) end of the year," said Stephen Spence, an analyst with Longbow Research. By summer 2004, Rubio's had revamped its menu, lowered prices and added meals including the popular Carnitas Street Taco for $1 and Taco Meal Deals with a taco, rice, beans, chips and a drink for $3.99. "They're not just fish tacos anymore," Paul said. "Today you can add chicken, beef or fish."

Also available are lobster, shrimp or vegetarian dishes. Looking forward, Paul said, "Rubio's has to decide whether it's going to be more quick-casual or more fast-food" to better position itself against competitors. Miksa said she wants to bridge the two and create a trend she called the "affordable fast casual market." It's food served in the atmosphere of competitors such as Chipotle, Baja Fresh and Qdoba at the cost of a typical fast-food meal. Analyst Spence expects that the "pace of store expansion will be more aggressive than it has been. The company will seek to franchise as well, which it hasn't done in a while."

Today there are five franchises. The first franchise was founded in 2001. The story behind Rubio's creation is the stuff of San Diego legend. The first Rubio's opened in 1983 near Mission Bay. Rubio, who was studying at San Diego State University in the early '70s, got the recipe while surfing on spring break in San Felipe, Mexico. At 28, he opened his first restaurant, Rubio's, "Home of the Fish Taco," with roughly $75,000 from his father, Ray. Today Rubio closes his eyes and pauses for an extra second when he talks about his cravings for chunks of mild white fish dunked into beer batter and fried. He describes the burst of flavors that comes after the fish is tucked into the fold of two soft corn tortillas and topped with shredded cabbage, Rubio's secret sauce, salsa and a sprinkle of cilantro and lime. "From the first time I had it, I fell in love with it," he said. "There's something extraordinary about the fish taco." Now, 60 million fish tacos after Rubio's first sale, the former CEO said it is time to step aside. "Any smart founder knows there's a need to hand the reins over to somebody who is smarter and better than you," Rubio said. Miksa and Rubio are yin and yang. Where Rubio will polish off his entire meal, Miksa will nibble and compare five dishes. Rubio built his company largely by brainstorming ideas and writing them down in the middle of the night. Miksa, who received her MBA from Stanford, is a proponent of test marketing and extensive research. The two speak of each other in superlatives – and both say their mission is to "introduce America to the fish taco."