BUSINESS TOP DOG AT CHILI’S

Norman Brinker stakes out new turf

DALLAS RESTAURATEUR Norman Brinker raised a few eyebrows and more than a few questions last June when he left his positions as both executive vice president of Minneapolis-based Pillsbury Company and president of its restaurant operations to take on the chairmanship of Dallas-based Chili’s Inc.

For those who measure success in terms of numbers and size, the change was akin to trading a Corvette for a Corvair. At Pillsbury, Brinker was in charge of 3,700 restaurants nationwide that employ 160,000 people in that $3 billion company’s restaurant group alone. In contrast, his new Chili’s province encompasses 26 restaurants in six states, employs 1,800 and is expected to gross from $40 to $50 million this year.

The anomalies for the switchover are obvious. Why would Dallas’ “Distinguished Entrepreneur of the Year” (as named by SMU’s Business School and former dean C. Jackson Grayson in 1974) align himself with a restaurant chain started by another entrepreneur, Larry Dale Lavine? Why would the founder of the Steak and Ale and Bennigan’s Taverns operations trade those-plus the supervision of 3,300 Burger Kings-for a management role in a comparative “mom-and-pop” burger chain?

And why would Lavine-who had courted and then spurned the billion-dollar Saga Corp. -let his second thoughts about being taken over bring him to Brinker, a takeover specialist? In fact, Brinker had courted Chili’s in Pillsbury’s behalf for 18 months before May 3, when Lavine gave the nod (since nayed) to Saga of Menlo Park, California.

After reading about the Saga-Chili’s deal in the newspapers, Brinker says he telephoned Lavine to offer his congratulations. Some congratulatory call that was. A month later, Lavine announced that he was withdrawing from the lash-up with Saga, which was to have been consummated by the first of August. A week later, Brinker announced his resignation from Pillsbury to become chairman, chief executive officer and a major equity investor in Chili’s.

Asked why he made the move, Brinker offers a challenge-and-change response: “I moved because things were going absolutely great at Steak and Ale. I had been there 17 years, and those people were needing the chance to grow within their own company.”

Brinker founded the Steak and Ale chain with Harold Deem during the mid-Sixties and continued as its chairman and chief executive after Pillsbury bought it for $105 million seven years ago. At that time, Blinker’s chain encompassed 102 units in 28 states.

Brinker says that “it was really exciting” being a part of Steak and Ale and subsequent Pillsbury involvements, but that he saw a fresh challenge at Chili’s: “I saw a company in a certain segment of the market-limited menu, upscale, hamburger-oriented-that I thought was going to become important. And I saw a company that knew who they were, knew what business they were in and had real integrity.”

Brinker began to form this impression during the aforementioned Pillsbury acquisition talks, which, Lavine says, were broken off because “they didn’t want to pay enough money for us.” Impressed with the way Lavine didn’t mince words, Brinker says he came away from the talks with a high regard for a man who was willing to sell his company in order to save it.

“Larry was intellectually honest enough to look at the facts and say that it was his responsibility to this company’s future and its growth . . . to set aside his personal interests for the interests of the company,” Brinker says. “He was being very objective about a subjective issue.”

Not that Chili’s was in any kind of financial trouble. Far from it. The chain, which includes the two local Charley’s seafood restaurants, has grown from one unit in 1975 to the present 26, with three more to be completed by the end of the year. Next year’s plans call for the addition of another 12 to 15 units, to be financed out of internal working capital and bank lines.

But Lavine was concerned that Chili’s lacked the financial power and management depth necessary to wrest key markets from an increasing number of competitors and imitators, some of which were expanding their own organizations through affiliation with larger ones. In fact, at the same time that Lavine was talking with Saga, Lewisville-based Grandy’s (a 52-restaurant chain) was hungrily eyeing a merger with the same corporation as its gateway to expand to 280 restaurants by 1986.

Lavine perceived that his company was at the point at which to either stand still or do a slow shuffle was to die. He and his management team (drawn largely from bartenders and waiters at the first Chili’s on Greenville Avenue) had grown as large as they dared without benefit of advertising, marketing and formal site research. Seat-of-the-pants flying was out. Management by specialists was in. That meant the gut-wrenching decision that faces every entrepreneur who gets big enough to make waves: whether to spread one’s personal time and talents out like hammered gold leaf or to sacrifice a measure of management control in return for 24-karat solidity.

Bravely-some might say “coldly’-Lavine chose the latter, after examining the options of going public through a stock offering, merging with a bigger company or sharing power with an entrepreneur who had done both.

“We had watched Steak and Ale build a fine organization, and we tried to take from that observation those parts we would find useful to Chili’s,” Lavine says. “But Norman was not going to come here and show us how to cook hamburgers. He was going to show us how to build an organization.”

While Brinker was building his own organization during the mid-Sixties, Lavine, then 21, was just beginning to learn the peaks and pitfalls of catering to the public. He opened a no-liquor, live-band, rock ’n’ roll hangout called the Studio Club in Preston Center, which attracted then-quarterback Don Meredith and other fledgling Cowboys. It also caught the current Confetti’s crowd at the cusp of its teeny-bopper years and earned $50,000 a year for Lavine, even though it was open for just eight hours a week (four hours each on Friday and Saturday nights).

Lavine says, “The kids kept busy destroying the building. We ran the Studio for four or five years. Then, clubs die, like they always do, and we got out.”

The next Lavine possession was LouAnn’s, a now legendary teen-age danceland on Greenville. Dining and drinking establishments near LouAnn’s sprouted like mushrooms after a rain, thanks to a 1971 state liquor-by-the-drink referendum, and LouAnn’s was razed to make way for the next Lavine venture: Kitty Hawk.

Kitty Hawk, a restaurant/bar that grew up with the Village apartment complex and gave Dallas its first taste of char-broiled shrimp, grossed $1 million its first year. This came largely from the teen-age-turned-young-singles crew, who in 1973 and 1974 came to see Kitty Hawk’s full-scale replica of the Wright brothers’ plane (which was suspended from the ceiling) and to enjoy the food.

“Then, I hired managers who knew less about the restaurant business than I did, which was not much,” Lavine says. “We had good food but less service. I sold it three times before I got rid of it.”

Lavine decided his next venture should avoid the vagaries of a nightclub existence, yet serve alcohol. He wanted to avoid the management pitfalls of a multi-item menu (including hard-to-get, difficult-to-prepare dishes), yet still serve food.

Lavine determined his target audience: “If people were breathing and could walk in the door, they were our demographics.” He selected a novel cuisine item: “We tried to build a really good homemade hamburger.” Then, he and a committee of co-investors picked out a name that would indelibly etch that menu item in the public’s mind: Chili’s. They selected a location where the traffic was admittedly heavy and where a fickle apartment populace picked up and discarded new ventures like used Bic lighters: upper Greenville Avenue.

And they watched the money start to pour-well, trickle-in. “We grossed $100 the first day [an average day’s tips for a bar back or waiter in some Texas tippling establishments] and I thought that was pretty good,” Lavine says.

Opening day was in March 1975. Today, Lavine does his marveling from a spacious suite in a garden office building overlooking the site of the first of Chili’s 26 units, which were subsequently installed throughout the Dallas area, in other Texas cities and in Florida, Colorado, Kansas, California and Georgia. With few exceptions, all the units mirror what goes on at Number One, located a hundred yards away from Lavine’s office: “Over a two- or three-month period, the volume there picked up every week,” Lavine says. “In six months, we had lines day and night, and we still do.”

That tiresome waiting in line has been alleviated somewhat by the installation of a 30-to 40-foot-long bar, where patrons can sip frozen margaritas, beer or whatever while waiting for seating. Crowd consistency has made the floor plan similar in all units.

“We went out of our way not to be a bar, because during the mid-Seventies, it was easy to become a hot bar and a month later no longer be in business,” Lavine says. “But that touch is there to occupy the customers while they’re waiting for the food.”

“The food” is basically several varieties of half-pound hamburgers, moderately priced, accompanied by menu choices including tostado chips and chili con carne. But chili is not just an also-ran at Chili’s. Lavine has been a judge at the Terlingua World Championship Chili Cook-offs since 1974 and at its upstart Los Angeles challenger, as well. His father-in-law, Chrysler executive Carroll Shelby (remembered for the memorable Shelby Cobra race car), once owned the Terlingua ranch where the Texas chili competition has been held.

“Our chili is pretty basic: chili powder, cumin, onion,” Lavine says. “We buy meat that’s been hand-worked, trim it and cook the chili the day before it’s to be served. We make 40 gallons of it a day [per store]-sometimes 60 gallons in the winter.”

It works, Lavine says, because it’s simple and of good quality. He’s tasted some pretty disgusting alternatives: “Some of the worst chili in the world is served at a chili cook-off,” he says.

He built his second Chili’s in Houston because he didn’t think Dallas could sustain a twin and because there was too much capital at risk. “It took $90,000 to start the first one. Our kitchens alone now cost $90,000.”

Both Houston and Dallas now have at least a half-dozen Chili’s units each (plus a Charley’s in Las Colinas and in Arlington), and Lavine has found his assumptions changing almost as fast as his company. He’s tried to keep the burden of that change off the staff.

“We’ve put in 80- and 90-hour weeks in the past, but we don’t have to do that anymore. Instead of having one person do 10 jobs, we’ve got the work divided so that people don’t get disenchanted and leave not only our company but the industry. At the home office, we put in five days and take weekends off so that our personnel won’t get burned out on the restaurant business. It’s important that people have enough time for their families.”

Ironically, that observation (made last year) no longer includes Lavine. Brinker, too, (who has said he didn’t mind trading 16-hour work days and three trips a week to the Florida headquarters of Pillsbury’s Burger King operations) has entered the Chili’s scene with the pace of a workaholic. Famed for meeting with solicitors at 6 a.m. breakfasts, Brinker says he has slowed down and mellowed. But at age 52, he still plays polo, a strenuous and potentially dangerous sport; and a game running leg has not prevented him from presenting a tenacious tennis match.

“I believe that physical fitness is for everyone . . . energy is for everyone,” he says. He laments that he’s 21 pounds over the weight he was in the 1954 Budapest Pentathalon (run, ride, fence, swim and shoot) and the 1952 Olympic Games, when he was a member of the U.S. equestrian team. Those feats are history now, but Brinker’s competitive spirit is not.

“Larry took a risk when he decided not to sell out,” Brinker says. “There’s more competition than ever. There’s more market research and more dollars being spent hunting customers. It seemed like a very exciting challenge to take on. The only reason to leave a Pillsbury and come here is one of risk-reward. People who started out with Larry took that risk and will enjoy that reward.”

Presumably, so will Brinker, who gave Dallas and the nation their first taste of salad bars and the conversation to go along with them: “Hi. My name is Marty/Mary, and I’ll be your waiter/waitress for the evening. Have you tried our salad bar?” If that evokes a little d坢j? vu, remember that Brink’s Restaurant on Gaston Avenue isn’t named after the famed Chicago armored car service. Brinker started its forerunner on Lemmon Avenue when he arrived in Dallas in 1964, after he had separated himself from San Diego and his partnership in the then seven-store Jack-In-The-Box chain.

Is Brinker bitter about the turn of events that propelled “Jack” into the fourth largest (behind McDonald’s, Burger King and Wendy’s) burger chain in the nation? Not in the least. Money, he says, is no longer a concern, although he stands to make a lot of it when Chili’s comes public within, say, five years. (The rumor in some business circles says one.) Challenge is Brinker’s game.

“Business is like a game to me,” he says. “You play by the rules, you lay out a team, you change it if it’s not working and you constantly improve on what is working. People who like the restaurant business are people who like to interact with people. The greatest thrill I have is watching a young person come along and develop into a first-class individual and manager.”

Brinker says his talent and new responsibility in the Chili’s organization lie in the areas of policy, direction and strategy. Lavine, who now is titled president and chief operating officer, brings the strengths of working knowledge, operational responsibility and implementation of policy, Brinker says. The two are becoming accustomed to their new power-sharing relationship.

“Relationships make such a difference, and if the chemistry is right, you’ve got a good deal,” says Brinker.

Adds Lavine: “This deal might not have been right three years ago, and it may not be right three years from now. But for this time, it’s right.”

And both men know exactly where they want it to lead. Says Brinker, “I want to grow. Larry wants to grow. And we’re getting an organization up to speed to justify getting that growth. We’re building a company of quality and stature that we can really be proud of.”

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