Wahlburgers Goes for Burger Gold

June 12, 2015

pictureBy Joel Stein
http://www.bloomberg.com/news/articles/2015-05-28/wahlburgers-donnie-mark-paul-wahlberg-plot-fast-food-empire

Paul Wahlberg wanted to open a small restaurant in his hometown. Then his two famous brothers got involved

Paul Wahlberg can’t concentrate. He keeps looking around, fixating on a sticker stuck on a light and then a tiny carpet stain. Finally he can’t take it anymore and bolts up to correct the way an employee is changing a bulb. This isn’t a guy who should be starting a nationwide fast-food franchise. This is a man who should be placed gently back in his very small kitchen, with a limited number of things to stress about, as he has for decades as a cook at Boston restaurants including Alma Nove, an Italian restaurant he named after his sweet mother, Alma. After he comes back to the table, his eyes keep darting back and forth. “I got to touch up some paint,” he says. “I’m not telling you where.”

Paul’s two younger brothers are Mark (The Fighter, Marky Mark and the Funky Bunch) and Donnie (CBS’s Blue Bloods, New Kids on the Block), both charismatic, fast-moving celebrities with agents, managers, and—as seen on HBO—entourages. They’re also Paul’s business partners in Wahlburgers, which until earlier this year was one little mall burger joint in Hingham, a suburb 30 minutes from Boston. In 2015, Wahlburgers plans to open dozens of locations in Florida, Las Vegas, New York, the Middle East, and several airports. They marketed it through a cartoonish reality show on A&E called Wahlburgers that’s even less suited for serious, shy Paul, 50, with his gray sweater zipped up to the very top. It’s a show about a neurotic chef who is mocked and terrorized by his cooler, easygoing famous brothers.

“In a perfect world, Paul would have the one restaurant and in eight years possibly open a second restaurant,” says Mark, 43, calling from a golf course in Los Angeles. But once Paul invoked the family name, Mark decided to plan a full chain and pitch the reality show. “I said, ‘Paul, if you want to build a one-off, call it Paul’s Burger.’ I wanted to grow a real business that was passed on to future generations.” (Among them, the three brothers have eight kids.)

Donnie, 45, had to find a way to get Paul and Mark to compromise, slowing Mark down to assure quality and speeding Paul up to begin expansion. In 2014, Donnie took a train to Hingham every time he had a break from taping Blue Bloods in New York. Sometimes he’d write menu descriptions, but more often he’d try to convince Paul that Wahlburgers had to grow more quickly. “Paul’s so intense that everything gets heated. If one tomato is sliced wrong, he’d be on the verge of a nervous breakdown,” he says. There are nine siblings, and while Donnie and Mark share the fame thing, Donnie’s always been closest to Paul, so it fell on him to determine how to scale his older brother’s burgers. They cost $7.15 to $9.50 and are high-enough quality to satisfy fans who traveled for a special experience but not so expensive that they’re untrue to lower-class, Southie roots, the essence of the Wahlberg brand.

“What people generally think about Mark and Donnie Wahlberg is that they are hardworking people who are hustling and humble,” says Cory Isaacson, a partner at the marketing agency Walton Isaacson, which promoted Bethenny Frankel’s Skinnygirl brand when she was on The Real Housewives of New York. “If Katy Perry opened a burger joint, no one would think she’s actually affiliated with it.”

Mark said, “‘Paul, if you want to build a one-off, call it Paul’s Burger.’ I wanted to grow a real business.”

Based on that logic, the Wahlbergs believe they can win the ongoing burger war in the U.S. The battle kicked off a few years ago, when McDonald’s started teetering; earlier this year it fired its chief executive officer after its worst sales slump since 2001. In the meantime, the so-called better-burger category has stolen market share, with Five Guys growing from five stores in 2001 to 1,270, and Shake Shack doubling its market valuation during its first day of stock trading in January. It’s now worth more than $2.8 billion, with just 69 stores, or more than $41 million per stand. The category is saturated with its own fat: Smashburger (320 locations), Elevation Burger (52), the Counter (40), and Umami Burger (24) are growing at a fast clip nationally.

Wahlburgers is trying to differentiate itself by being both a restaurant like Umami and the Counter and a fast-food joint like Shake Shack and Smashburger. A third of each franchise is devoted to counter service, but there are also servers and a full bar. Paul was insistent about this concept, even as his brothers, outside investors, and their CEO—Rick Vanzura, former chief operating officer of Panera Bread, who first reached out on Facebook—pushed for the lower labor costs of self-service. “That’s not what I wanted to bring into the world,” Paul says. He wanted a place where older people are comfortable and bartenders sometimes dance to pop music, some of which is sung by his brothers.

One thing Vanzura brought with him from Panera was the belief that he could control quality by—unlike McDonald’s—having a large number of stores owned by a small number of franchisees, all of whom must have at least $5 million in net worth to be considered as partners. “People will say what we’re doing is unprecedented as far as growth from a single unit,” Vanzura brags as he eats a sweet potato tater tot. To get his job, he went to meet Donnie on the set of Blue Bloods, where NKOTB fans often lurk. (“I’m used to having a job interview in a job setting. A handler was walking me to his trailer, and I saw a sea of middle-aged women waiting there,” he says.) He met Mark at a Nobu, in New York, where they kept being interrupted by the waiter with special dishes the chef sent out. Mark in particular has been a good co-owner, Vanzura says: “When he calls franchisees and says, ‘I’m behind this and will make sure it gets a lot of exposure,’ that carries a lot of weight.”

None of this would’ve taken off without Mark’s TV idea. The original Wahlburgers had some pretty weak nights until the show began airing in 2014. Afterward, Paul had to start opening an hour earlier, at 11, once he saw people lined up outside. They did more than 400,000 checks in the tiny restaurant last year. The company is private, so Paul won’t reveal its annual revenue.

Despite seeming like more of a pun than a TV show, Wahlburgers is airing its third season. It averages 2 million viewers, according to Nielsen, and was nominated for an Emmy. Its success gives the chain a chance in a burger field that’s already pretty mature. “They’re expanding in Vegas, Miami,” says Sam Oches, the editor of QSR (quick-service restaurant) magazine. “This is what celebrity chefs do: move to very tourist-friendly places.”

But Darren Tristano, who covers food service for the market research company Technomic, thinks a split-service restaurant limits growth. “If you’re in a neighborhood looking for a place to sit down to eat, it’s going to work,” he says. “But when you look at the U.S. in terms of gross opportunities, there aren’t as many of those markets around.”

Hingham, a tony Boston suburb where New England Patriots coach Bill Belichick lives, certainly qualifies. It’s 11:30 a.m., and Wahlburgers is full of people essentially eating ground meat for breakfast. Alma walks around chatting with customers. She’s on the show, too, and has become a bona fide reality star, coming in on Saturdays to flit between the tables. After raising famous kids, she’s loving her own fame: “My friends said, ‘Doesn’t it drive you crazy?’ Are you kidding? People want to talk to me!” Paul nods sideways in disagreement. Sitting down for lunch, he looks flummoxed when a waitress brings him a hat to autograph for some customers. “It had always been, ‘Yo yo yo. You’re Mark and Donnie’s brother,’ ” he says. Paul liked it much better that way.


Sale Could Provide the Boost Frisch’s Has Been Searching For

June 12, 2015

http://www.bizjournals.com/cincinnati/news/2015/05/22/sale-could-provide-the-boost-frischs-has-been.html

bigboyface-750xx1739-2331-0-258Andy Brownfield
© 2015 American City Business Journals, Inc. All rights reserved.
Family-style restaurants like Cincinnati-based Frisch’s Restaurants Inc., which announced a planned sale to a private equity fund Friday, have been in decline for years. But an industry watcher says that segment is starting to turn around.

Chains like Frisch’s (NYSE: FRS) have been losing customers for 15 years to everything from fast casual concepts to fine dining to the growing a.m. eateries segment – restaurants like First Watch that stay open only for breakfast and lunch – Darren Tristano, executive vice president at Chicago food industry research firm Technomic, told me.

“Overall this segment has seen competition across the board,” he said. “Older consumers who are more traditional and grew up with these brands have shifted to other types of restaurants and aged out of spending. Younger consumers have seen the brands they grew up with, the fast casuals, become more of a preferred destination.”

That’s not to say it’s all bad news for the family-style restaurant segment. It has been growing as of late.

“The lower-middle income groups have been helped by improved employment, lower gas prices and higher disposable income,” Tristano said. “Because of that, this segment has done a little bit better.”

The segment grew 3 percent last year, up from no growth the previous year. However, that still pales in comparison to the 10 percent growth seen by the fast casual segment.

That slow growth or lack thereof put Frisch’s in a pickle, as outlined in the Courier’s Feb. 6 cover story.

In 2012, Frisch’s agreed to sell its 29 Golden Corral franchise restaurants in Cincinnati and six other cities to NRD Holdings LLC, which was led by Aziz Hashim. Golden Corral corporate exercised its right of refusal and purchased the restaurants itself. Hashim’s NRD Partners is set up to acquire Frisch’s for $175 million, or $34 per share, if shareholders approve the acquisition.

“At that point in time, the board started to say, ‘Where do we go from here in terms of creating shareholder value?'” recalled Mark Lanning, Frisch’s chief financial officer. “The board looked at various alternatives and finally looked upon the sale of the company. That process had been ongoing.”

The acquisition could be the shot in the arm Frisch’s needs, at least in terms of profitability. Private equity firms don’t try to revive brands but come in and try to make them profitable at the headquarters and corporate levels as well as more effective in advertising, Tristano said.

“When we look at Big Boy, it’s a very iconic brand,” he said. “It has strong opportunity to not only remain but increase relevance. I think with the right plan and right people, if they’re willing to invest into the brand to grow it, they could be on track.”