Small Business: Sizzler Steers Comeback Through Local Area
Sizzler USA Restaurants Inc. is staking part of its latest recovery plan on the Bay Area.
The closely held company plans to open five new restaurants in the region, with the first new location to open in the next two years, and the last opening within six.
Sizzler is targeting high population areas that also have daytime workers nearby, such as Fremont, San Jose, Union City, Milpitas, Pleasanton and Livermore, though it hasn’t made final decisions on where the restaurants will be. The chain is also remodeling existing restaurants in Santa Clara, Hayward, Pinole, Auburn and Sacramento.
Once popular for its low-price meals and bottomless salad bar, the Culver City-based restaurant chain has been squeezed by higher-end and lower-end competitors, while a trend toward healthier food has driven some patrons elsewhere.
In 1996, Sizzler filed for Chapter 11 bankruptcy, closing more than a hundred stores in the process. The company has since mounted several turnaround efforts. Last year, a management-led group that included a former Sizzler owner bought the franchise for an undisclosed sum from an equity firm that had owned the franchise since 2005.
The local expansion is the latest phase of Sizzler’s broader comeback plan, which started roughly a year ago. Nationally, Sizzler is aiming to attract customers by remodeling restaurant interiors, including fresh paint, new finishes and automated ordering kiosks. It is also playing up freshly cut and ground meat, and even a food truck, called the “ZZ-Truck,” that serves fare such as sandwiches, salads and ice cream around Los Angeles and Orange counties.
“If I would have invited you to Sizzler four years ago, I would have said, ‘It’s great food but don’t pay attention to the building,’ ” says Kerry Kramp, Sizzler’s chief executive, who announced the new Bay Area restaurant openings in February.
While Sizzler is also targeting other urban areas such as Minneapolis and Denver for its revival, the Bay Area is a particular focus because it has historically been a strong market for the company. Overall, Sizzler will have 17 Bay Area locations after the openings and refurbishments, making it the region with the second-most Sizzlers, just behind the 18 planned for Chicago.
Focusing its potential new restaurants on Bay Area cities such as Fremont and Milpitas will likely offer opportunities for the chain, says Darren Tristano, an analyst at research firm Technomic, which has no financial ties to the restaurant. Those areas don’t have much in the way of competition for Sizzler, he says.
“Sizzler is factoring in ways that make them more relevant,” Mr. Tristano says, adding that the restaurant’s expansion is coming as the rest of the industry retrenches. “This is the right time to try to grow against other restaurants’ poor performance,” he says.
Sizzler plans to open new restaurants and refurbish others in the Bay Area, part of a national strategy. Some locals have already been won over. Janice Visaya, a 21-year-old student in San Francisco, first went to an older Sizzler restaurant about two years ago with her boyfriend’s family, primarily because it was the closest American buffet in the area. “I always seem to keep going back for their steak and baked potato,” she says.
Sizzler’s wider efforts to attract customers by emphasizing its fresh food and new look helped boost sales in restaurants open at least a year to $298 million in 2011, up 1.5% from 2010.
Still, the once-iconic 53-year-old company, which is down to 170 stores from more than 600 in the ’80s, faces steep challenges in its attempted comeback.
Analysts say the restaurant industry has changed since Sizzler was the go-to place for a good, inexpensive steak—a 12 ouncer at a Sizzler outside San Francisco costs $12.99. Fast-food outlets have eaten into Sizzler’s typical market, while higher-end restaurants have lowered their prices to stay competitive. In addition, the latest data from market researcher NPD Group show that Americans are eating at home more often.
Despite this, Rob Black, executive director of the Golden Gate Restaurant Association trade group, notes that the Bay Area doesn’t have many restaurants catering to families. That could be an opportunity for Sizzler.
“Sizzler is family-focused and there’s an important role for those restaurants in the Bay Area,” he says.