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RAVING BRANDS PLOTS EXPANSION FOR EIGHT DINING CONCEPTS

By Molly Knight

Raving Brands is eager to expand its footprint. In fact, the Atlanta-based restaurant conglomerate’s eagerness is such that it is willing to sign leases for new units before it has even lined up franchisees to operate them. “The fast-casual arena is very competitive,” said COO Stephen M. LaMastra. “And to compete, we knew we had to make the commitment to be aggressive.”

To further meet the demand for fast-casual food, the company offers a wide range of cuisines, says LaMastra, a former corporate strategy executive at Atlanta-based Ritz Camera who stepped in to lead Raving Brands last fall. Its stable of brands comprises Boneheads Grilled Fish and Piri Piri Chicken, Doc Green’s Gourmet Salads, Mama Fu’s Asian House, Moe’s Southwest Grill, Monkey Joe’s, PJ’s Coffee and PJ’s Coffee & Lounge, Planet Smoothie and Planet Smoothie Café, and Shane’s Rib Shack.

Though these brands are already familiar to shoppers at open-air centers throughout the Southeast, LaMastra says Raving Brands needs to expand into as many new markets as possible to stay ahead of the competition. By the end of this year, he says, the company plans to expand its eight brands by about 25 percent. Moe’s Southwestern Grill will open 125 new eateries, bringing its total to 419 in 32 states. Shane’s Rib Shack had 19 units operating at press time, but plans call for an additional 38 this year. Doc Green’s is to boost its store count from seven to 32.

Collectively, LaMastra anticipates a portfolio of about 1,000 stores by the close of 2008. “But we’d like to have 2,500 to 4,000 by the time we’re through,” he said.

One of the reasons Raving Brands has been able to expand at such a rate is the flexibility with which it can go about acquiring space, LaMastra says. “We can be especially competitive, because a lot of people want to come in and take 1,500 square feet, and we’re willing to take 10,000 feet,” he said. “That gives us a tremendous advantage, because we can drive a much better deal for ourselves and for our franchises. We want owners and landlords to think of us first.” Even so, Raving Brands generally does not like to open its stores next to each other, he says, but prefers to scatter them within a center.

Ideal sites are often snapped up months and even years before a center opens, sources say. This lag time can discourage new, would-be franchisees from getting into the business at all. But Raving Brands overcomes this by leasing prime space as soon as it becomes available, often before there is even a franchisee ready to purchase.

Raving Brands has built a solid foundation for future profits with its unusual, franchisee-friendly business model, says Paul G.W. Fetscher, president of Great American Brokerage, a Long Beach, N.Y., company that specializes in restaurant and retail site selection and is soliciting business with Raving Brands. Furthermore, he says, its executives are reinvesting profits back into the company rather than into their own pockets. “Nobody — not even the CEO — takes a salary of more than $50,000, which is crazy, because most assistant managers in restaurants make that much,” said Fetscher. “They’re building a model to make money for their tenants, then money for themselves. It’s an appropriate, unorthodox rewards base.”

With the varying concepts in its portfolio, Raving Brands has a tremendous lead, Fetscher says, because it can that much more easily select the appropriate eatery to fit the market. “It’s wise to have more than one horse to ride,” he said. “Urban success doesn’t always translate into suburban success, and vice versa. Au Bon Pain has learned that. Rather than wait for the perfect space that’s right for them, Raving Brands can look at an open location, and say, ‘Do we put in one, two, or three of our brands?’ They have a much broader pallet with which to paint success.”

Fetscher points to the finite number of regional malls in America as the major impediment to many food court tenants. But though LaMastra says he is looking at malls as one potential area of expansion, his primary focus remains outdoor centers.

“There are only 3,000 malls in the U.S.,” Fetscher said. “Half have food courts, and half of those have good food courts. Raving Brands isn’t married to the food court. They’re making sure they know how to run their businesses in strip centers. This model will be hugely successful, because when it comes to expansion, do you want to go fishing with just 750 food courts, or 30,000 strip centers?”

Doc Green’s, Moe’s, and Shane’s Rib Shack are examples of the exciting names that would draw traffic to Coconut Point, a Bonita Springs, Fla.-based master-planned community, says Paul Adjaharian, a senior leasing representative for Simon Property Group, which is developing the project. The 500-acre project, which contains 400 residential units and 1.4 million square feet of retail space, is set to open this fall.

“Their stores are impressive looking, and they’re constantly changing their menus to stay fresh,” said Adjaharian. “I’m always looking for a tenant’s ability to perform, and these three stores going into Coconut Point are very appealing retailers.”

Adjaharian cites Raving Brands’ diverse cuisine offerings, from Doc Green’s made-to-order salads to Moe’s “Homewrecker” burrito, as major selling points. “Different customers want different things,” said Adjaharian. “Their unique combination of food and concepts sets them apart.”

LaMastra says Doc Green’s healthy salads typically resonate in residential areas, and Moe’s Southwest Grill “works just about anywhere,” while Shane’s Rib Shack appeals to two-income families without the time to cook. “Shane’s is one move away from a fast-food joint,” said LaMastra. “So it would do well where traditional fast-food burger places exist, for people on the go.”

LaMastra says his company wants to turn Doc Green’s and Shane’s in particular into national brands. He also mentioned plans to expand Moe’s internationally over the next six to 12 months, though he declined to name specific destinations.

Raving Brands also plans to expand by acquiring other brands (up to now the company has developed all its own concepts). Fetscher says he thinks acquisitions are a good move. “If you’re a carpenter and the only tool you have is a hammer, than everything looks like a nail,” he said. “They’re accumulating all the right tools for success.”