McCormick & Schmick’s Growth Strategy
After completing its acquisition of five-unit Canadian chain The Boathouse this spring, Portland, Ore.-based McCormick & Schmick’s is opening new locations in the Chicago suburbs of Schaumburg and Oak Brook, Ill. Co-founder Doug Schmick talked to R&I about where both brands are headed and the company’s recipe for their success.
By Derek Gale, Associate Editor -- Restaurants & Institutions, 8/6/2007
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Q: You have new restaurants opening this month in the Chicago suburbs of Schaumburg and Oak Brook, Ill. Are suburban markets central to McCormick & Schmick’s future growth plans?
A: We also will open restaurants in Skokie, Ill., in November, and Rosemont, Ill., around the middle of 2008. Chicago is one of the best suburban markets in America. But there’s a lot of competition, so we have to offer strong hospitality and a good price/value equation.
We have about a 50/50 split nationally between urban and suburban locations. The suburbs have gone through lots of changes—with lifestyle centers, suburban markets are now more accessible to high-end, fine-dining restaurants.
Our development strategy is to establish a core in downtown urban settings. That lets you get to understand the marketplace, and get to know the suburbs, the neighborhood.
When we go to the suburbs, we modulate to that [setting]: more open décor, lighter woods. We want to be an unpretentious addition to the community.
The real trick [to suburban success] is to keep value as a major part of what you do. So having a range of menu offerings, being more sensitive to the female customer, offering lighter entrées & salads, making families comfortable. You also must be conscious of pretentiousness, both in service and décor. That’s why people live in the suburbs: they don’t want that pretentiousness.
Q: What other markets offer attractive suburban opportunities?
A: We have 11 restaurants in the Washington, D.C./Virginia area, and we will have two to three more in the next year and a half. Other markets with suburban opportunities are Portland, Seattle, Southern California, Boston. We have very little presence in Florida—no restaurants in Miami. We have one restaurant in Houston, one in Dallas, one in New York, two in New Jersey. So there is room to grow in major markets. We will start building out from downtown locations.
Even in cities like Kansas City (where we have two locations), additional opportunities are available. We have proven this will work in smaller markets—like Columbus, Dayton or Cincinnati, Ohio. Any mid-size city will work for our urban/suburban strategy.
We feel [the brand can have] a minimum of 250 units. So there’s a lot of runway ahead of us. That will be 50/50 urban/suburban growth, and about 50/50 infill versus new markets.
Q: Why was the Vancouver, B.C.-based The Boathouse concept a good fit for you? What other markets are attractive for that brand?
A: This was a good opportunity—we shared the same customers and similar systems, and we were able to buy [the chain] at 5.5x EBITDA. The Boathouse has become iconic in the Vancouver market. Their management team was excited about working with us, and all of them are doing so.
The restaurants continue to be operated under the Boathouse name, and that concept will continue to grow. We have one under construction now and we will look to grow 13% to 15% per year in Canada. That is consistent with our growth in the United States. Toronto, Victoria, Montreal--there are several markets where this concept is applicable.
Q: You’ve said in the past that the most difficult thing over the years has been for the brand to change with the times while staying true to its roots. How do you keep it up-to-date and relevant without losing the formula for your success?
A: For me, the primary element of keeping [our success] in place is to be able to drill down to the core elements that should never change: our commitment to fresh, quality food; having various price points and broad-based appeal; and our commitment to a quality bar, offering fresh juices and hand-shaken cocktails using classic mixology.
We’re not trying to be avant-garde with design. We do it based on fundamentals, so we don’t have to re-image even some of our older restaurants.
From Day 1 we have had daily printed menus. So everything evolves with the customer—we’re not adding new things once a year. We have the same attitude about adapting to change throughout our culture—we have to somewhat reinvent ourselves on a day-to-day basis. That’s what keeps us relevant.
Also, with all our stores, we try to make them look and feel like a strong local, independent operator. That’s why 75% of marketing spend is local. You have to know your market—I can’t give away fried food in California, but I’m not going to sell California cuisine in Houston.
Q: Talk a bit about your frequent-diner loyalty program. Hotels are committed to this tactic, but fine-dining restaurants haven’t embraced it as strongly.
Our loyalty program is a little over one year old, and we have 17,000 to 18,000 people involved.
The restaurant industry will embrace loyalty programs. With today’s technology, these programs not only provide guests perks like preferred reservations and points, [more importantly they] allow for recognition of regular customers.
They also offer a cost-effective way to communicate with the guest and get important messages out. People who sign up for these things are already in love with the concept. It’s [maintaining a relationship] with that repeat customer
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