Riding the Wave

Rubios_Exterior_NEW_2014-08-06_08.50.55_web_r100x80Lou Hirsh
© 2014 San Diego Business Journal. Provided by ProQuest Information and Learning. All Rights Reserved.

Leaders of Rubio’s Restaurants Inc. are taking steps to ensure that the look and feel of its eateries carry elements of the Carlsbad-based company’s DNA.

That includes its 31-year history as a California coastal company that became best known for the Mexican-style fish tacos served at its first restaurant in Pacific Beach back in 1983.

The company recently announced plans for a redesign of 60 of its California restaurants – about a third of the nearly 200 it now operates in five states – with a rebranding of the remodeled locations under the name Rubio’s Coastal Grill.

The first wave of remodelings is underway and set for completion by the end of 2015, with more updates planned for 2016. The first remodel was recently completed at the Rubio’s in Carmel Mountain Ranch, with ocean-themed artwork on the walls and seating areas decorated in beach-oriented colors like cobalt, green and brown, designed to evoke the ocean, sand and coral.

Officials said the first redesign has boosted customer traffic, and those results will inform the upcoming remodelings. In a recent interview, CEO Marc Simon said Rubio’s will likely invest more than $20 million in the first 60 renovations, and depending on the feedback in California, the “Coastal Grill” label may also be applied to the company’s restaurants outside of Calfornia – in places like Nevada, Colorado and Arizona.

The remodelings align with Rubio’s recent ocean-themed marketing campaigns, as the company looks to set itself apart from numerous fresh-Mexican competitors that have arisen in recent years, including local, regional and national chains.

Simon said the company is looking to capitalize on the “health halo” of the seafood, salads and other lighter items that it has been adding to its menu over the past few years. For instance, it will be adding more selections with salmon to its existing offerings like the original fish taco, developed by company founder and Chairman Ralph Rubio.

The CEO said the company is also conscious of serving the large number of consumers who are still budget-conscious and strapped for time, seeking something better than fast food but priced lower than the offerings of fine-dining establishments.

“People don’t want to deal with making reservations, then standing in a line and then paying a 20 percent tip on top of all that,” said Simon, who joined Rubio’s in 2008 and became CEO in 2011.

Rubio’s also plans to open seven new locations by the end of 2015, which will push its total from its current 197 to 204 restaurants, employing more than 4,000. Simon said the growth strategy for the foreseeable future will remain slow and steady.

Right now, 99 percent of Rubio’s locations are company-owned, and while it is exploring future partnerships with already-successful franchisees in places like the Las Vegas market, Simon said the company is in no rush to turn itself into a national player.

“I don’t feel at this point that we need to become a national company in order to be successful,” said Simon, a restaurant industry veteran whose earlier work included executive stints at McDonald’s Corp. and Chipotle Mexican Grill Inc.

The privately held Rubio’s, owned since 2010 by Connecticut-based Mill Road Capital LP, does not disclose revenue or other financial performance figures.

Rubio’s ranked at No. 32, with an estimated $200.9 million in 2013 sales – up 4.1 percent from 2012 – on a recent list of the nation’s top 150 fast-casual chains, published by restaurant industry consulting firm Technomic Inc.

Technomic Executive Vice President Darren Tristano said Rubio’s has generally been careful and prudent about the pace of its location growth, adjusting when necessary to shifts in the economy. By keeping the majority of its restaurants company-owned rather than franchised, it has also been able to focus more attention on improving product and service quality at individual locations.

“They’ve done a pretty good job of differentiating themselves from some of the other fresh-Mexican restaurant chains,” Tristano said.

Technomic’s list shows that 22 of the largest fast-casual chains are in the Mexican-style category. Most are smaller than Rubio’s, though its competitors include several larger chains, including No. 2 Chipotle Mexican Grill, No. 8 Qdoba Mexican Grill, owned by San Diego-based Jack in the Box Inc., No. 9 El Polio Loco and No. 12 Moe’s Southwest Grill.

Fast-casual chains generally do not have drive-through or full table service, with meal tabs averaging around $10 per person. The nation’s top fast-casual chain in 2013 was St. Louis-based Panera Bread, with more than $4.1 billion in sales at 1,700 locations.

The U.S. restaurant industry registered $448.8 billion in sales during 2013, up 3.2 percent from the prior year, with the fast-casual segment accounting for $34.5 billion – an increase of 11.3 percent, Technomic reported.

Researchers at consulting firm NPD Group noted that sales at fast-food restaurants, with an average check size of $5, were flat for the year ending in June 2014, while visits to fine-dining establishments, with an average check size of $40, were up 3 percent from the prior year. Total industry traffic was generally flat over the past year.

Experts said the midpriced fast-casual restaurants may hold appeal to diners looking to trade up from fast food, but still unable to eat at the upscale fine-dining restaurants on a regular basis.

“Consumer attitudes and behaviors have changed since the Great Recession began and may well have changed for the good,” said Bonnie Riggs, NPD Group’s restaurant industry analyst, in a recent report. “However, offering a good product at a fair price is no longer good enough. To attract them will take a deeper understanding of what they want when dining out.”

RUBIO’S RESTAURANTS INC.

CEO: Marc Simon

Sales: $200.9 million in 2013, according to Technomic Inc.

No. of local employees: Approximately 1,300

Investor: Mill Road Capital LP

Headquarters: Carlsbad

Year Founded: 1983

Company description: Operates 197 Mexican-style restaurants in five states, with seven openings planned for 2015

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