« July 2006 Table of Contents 
As casual seafood grows, competition heats up
Up the Creek, McGrath's and Fish City expand at a
steady but manageable rate
By Steven Hedlund
July 01, 2006
Applebee's co-founder Bill Palmer scoured the country in the
late 1990s searching for an underdeveloped niche in which to
launch a new casual-dining concept.
He determined that the casual-seafood scene, dominated by
Red Lobster and mom-and-pop seafood shacks, was perhaps the
most underdeveloped niche in foodservice. So Palmer, now an
Applebee's franchisee, created Up the Creek Fish Camp &
Grill.
He opened the first restaurant in Gainesville, Ga., in 2000,
and the concept has expanded steadily since then; the 13th unit
came in February and the 14th is due to open in September.
Palmer wasn't alone in recognizing casual seafood's
potential. Now several small but growing concepts are vying for
position in the increasingly competitive casual-seafood
arena.
Seafood outperformed all other niches in Technomic's annual
report on the nation's 500 largest restaurant chains (see
Newsline this issue, p. 8). Sales at full-service seafood
chains increased 12 percent, to more than $4.6 billion, from
2004 to 2005, exceeding Asian (10.5 percent), mixed menu (8.7
percent), Mexican (8.3 percent), steak (7.6 percent) and
Italian (6.6 percent), according to the Chicago research and
consulting firm.
For our annual Buyer Focus, which this year looks at casual
dining, SeaFood Business salutes three up-and-coming
casual-seafood concepts - Up the Creek, McGrath's Fish House
and Fish City Grill - that stand out from the crowd.
They are maturing from regional to national players by
either opening new restaurants in underdeveloped markets at a
steady but manageable rate or partnering with experienced,
trustworthy franchisees, or both.
At the same time, they're maintaining the variety and
quality of their seafood offerings while keeping their
per-guest check averages under $13 at lunch and $18 at dinner,
despite rising seafood prices.
And they're doing it without the financial backing of
casual-dining powerhouses, such as OSI Restaurant Partners
(Outback Steakhouse), Darden Restaurants and Brinker
International.
That's not easy, given the rapid pace at which the
competition is growing.
T ake OSI's Bonefish Grill. The casual-seafood chain's sales
increased 66.7 percent, to $235 million, from 2004 to 2005,
a
greater percentage increase than any other full- or
limited-service chain with annual sales exceeding $200 million,
reports Technomic.
The sharp increase was due primarily to the 27 Bonefish
Grill units that opened last year. At 34, only Smokey Bones
BBQ, a Darden concept, tallied more restaurant openings
in
2005.
The first Bonefish Grill opened in St. Petersburg, Fla., six
years ago, and the chain now has a whopping 108 locations in 26
states.
Then there's Darden's perennial stalwart, Red Lobster.
Although the 39-year-old chain's growth has slowed considerably
in recent years in terms of new units, it still posted 2005
sales of more than $2.4 billion, up 1.7 percent from 2004,
reports Technomic. Red Lobster is still by far the country's
largest casual-seafood chain, with 647 units nationwide.
"It's difficult to compete with Red Lobster, given its
marketing strength, brand awareness and customer loyalty," says
Darren Tristano, managing director of Technomic Information
Services. But Red Lobster "doesn't seem to be aggressively
expanding. Landry's (which operates several concepts, including
the 149-unit Joe's Crab Shack) has also been flat on unit
development. So there is opportunity to fill in some
markets."
And that's just what Up the Creek, McGrath's and Fish City
are doing. The first Up the Creek restaurant outside the
Southeast and 14th overall is scheduled to open in Minot, N.D.,
in September.
The first Fish City locations outside Texas are due to open
in Baton Rouge, La., and the Oklahoma City suburb of Edmond in
the coming months. The third McGrath's restaurant in the
Phoenix area and 19th
overall opened in Goodyear in March.
Small, landlocked markets like Minot and Oklahoma City may
provide few options when it comes to casual seafood, but
they're likely home to a plethora of casual dinnerhouses, such
as Applebee's, Chili's, T.G.I. Friday's, Ruby Tuesday and the
Cheesecake Factory.
Collectively, those five chains operate 4,200-plus
restaurants nationwide and recorded 2005 sales of nearly $12
billion, according to Technomic. And they're adding seafood
dishes to their menus and promoting them with their mammoth
marketing budgets.
For example, Applebee's, the nation's largest casual chain
with more than 1,730 restaurants and 2005 sales of $4.2
billion, in February launched a network-TV ad campaign to
coincide with its Shrimp Sensations promotion.
Casual dinnerhouses are adding farmed shrimp, salmon and
tilapia to their menus because the relatively inexpensive
species are available year-round.
According to Datassentials, a Chicago research firm that
tracks the menus of the nation's 500 largest restaurant chains,
mentions of "salmon" on
casual-dining menus jumped from 206 in
the second half of 2004 to 240 in the second half of 2005,
while "tilapia" mentions more than doubled, to 29.
While seafood sales are expanding at casual dinnerhouses,
there are three seafood chains that have set themselves apart
from the competition. The following profiles show how.
Up The Creek Fish Camp & Grill
When the 11th Up the Creek restaurant opened in The
Villages, Fla., last August, Gary Cockerill, the company's
director of marketing, told SeaFood Business: "We're very
confident that this concept has legs. We're not a regional
concept by any means."
He wasn't kidding.
Since then, Up the Creek Restaurants of America, based in
Duluth, Ga., has opened two restaurants in the Atlanta area and
signed deals with franchisees Seafood Ventures LLC in the
Dakotas and Reel America LLC in the Tampa, Fort Myers and
Naples, Fla., areas. Four to six Up the Creek restaurants,
including the Minot unit, are expected to open in the next 12
months, says Cockerill.
That's in addition to seven company-owned restaurants in the
Atlanta area and six franchised units, two each in Alabama and
Tennessee and one each in Mississippi and Florida, to Without a
Paddle LLC.
Up the Creek is also "very close" to inking deals with two
other franchisees, notes Cockerill, declining to elaborate.
"We think the concept can work anywhere," he says. "We're
even talking to people in New York City. We're looking for the
right partners to franchise with. Who'd have thought we'd end
up in Minot?"
Approximately 85 percent of the menu is seafood. The most
popular entrées are two of five Up the Creek Combinations: the
Mixed Seafood Grill (broiled grouper, Jim Beam Atlantic salmon
and lemon-lime shrimp) and the Shrimp Trio (hand-breaded fried
shrimp, shrimp scampi pasta and charbroiled lemon-lime
shrimp).
In late June, Up the Creek unveiled a new segment to the
menu called "You're the Chef," where by diners choose one of
six fish (tilapia, grouper, Atlantic salmon, trout, mahimahi
and ahi tuna) cooked one of two ways (charbroiled or blackened)
and topped with one of six sauces (Creole Alfredo lobster,
citrus pesto butter, wasabi plum, chile hollandaise, seasonal
fruit salsa and Jim Beam Kentucky bourbon).
"This gives the guests the opportunity to be creative and
have fun," says Cockerill.
Technomic's Tristano agrees: "I think the concept is a
little more fun, and the décor seems to be targeting a younger
audience."
Another popular entrée introduced last year is the Blackened
Tilapia Alfredo, which is served over a bed of Cajun wild rice
and topped with a Creole Alfredo lobster sauce.
Cockerill hopes two new entrées debuting this summer receive
similar feedback: the Cedar Planked Salmon (Atlantic) and
Tilapia in Parchment.
The tilapia is "tender, it's moist, it's got a lot of
flavor, and it's lighter," says Cockerill.
Up the Creek's atmosphere screams casual. The
6,500-square-foot, 200-seat restaurants (there's also
6,000-square-foot prototype) features a rustic, lodge-style
look and a full bar.
The menu prices also fit the casual bill: per-person check
average is $9 to $10 at lunch and $13 to $14 at dinner.
"Our strategy isn't discounting," explains Cockerill. "We
want our guests to be able to afford to eat here on a regular
basis."
And they do. Per-restaurant sales average $2.8 million a
year. By comparison, Applebee's per-restaurant sales average
$2.5 million a year.
McGrath's Fish House
Living in Salem, Ore., in the late 1970s, John McGrath was
perplexed by the void of casual-seafood restaurants in the
area, just an hour's drive from the Pacific Ocean.
So he borrowed $125,000 from his family and the bank and put
his background in hotel-and-restaurant management to work,
opening McGrath's Fish House underneath a downtown Salem
parking garage in 1980.
"And it just kind of boomed," says McGrath. "There wasn't a
lot of competition" at the time.
Now McGrath's boasts 19 company-owned restaurants across the
West Coast: eight in Oregon, four in Utah, three in Arizona,
two in Washington and one each in California and Idaho.
The 20th and 21st units are due to open in the Denver suburb
of Lakewood and the Seattle-Tacoma suburb of Federal Way in the
coming months.
McGrath is tight-lipped about his expansion plans, other
than to say it's been "pretty aggressive" to date. He doesn't
intend to partner with franchisees for fear he'll lose control
of the concept.
"McGrath's and Up the Creek appear to be targeting cities
with population growth and increased tourism. [I think they]
will be successful in growing their units," says Technomic's
Tristano.
McGrath says the keys to his concept's success are providing
quality seafood at a reasonable price in a comfortable setting
(mahogany booths, Douglas firs and high ceilings highlight the
new 7,500-square-foot, 200-seat restaurants).
"Put our seafood side by side with seafood from any [upscale
restaurant], and it's hard to tell the difference," he
says.
At the same time, the chain is maintaining a per-person
check average of $10 at lunch and $18 at dinner. And that's
difficult to do, since the menu is predominately wild seafood,
for which prices are constantly fluctuating.
"It's a real challenge," he says. "For example, it's
difficult to keep halibut under $10 [per entrée]. But it's so
popular." (Halibut and wild salmon are the concept's top two
sellers.)
McGrath alleviates the uncertainty by menuing a "Fresh
Sheet" of several fresh fish that each chef, with the help of
Executive Chef Alan Brines, selects daily. That gives the chefs
the freedom to be creative and avoid temporarily overpriced
fish.
"Consumers have a lot of places to go out to eat," says
McGrath. "So I try to keep menu prices as reasonable as I
can."
Labor is also a challenge, notes McGrath, who was forced to
fly cooks and servers from Seattle to staff the Goodyear,
Ariz., opening. He also spent $15,000 advertising for local
help.
Despite rising seafood prices and labor shortages, McGrath
expects his business will grow to $60 million next year, thanks
to seafood's healthy profile.
Fish City Grill
Inside most cookie-cutter chain restaurants, it's difficult
to tell whether you're in Concord, Calif., Concord, N.C., or
Concord, N.H.
Monotony is exactly what Bill Bayne is trying to avoid as he
takes his concept, Fish City Grill, well beyond its home market
of Dallas-Ft. Worth. His cozy, café-style restaurants vary in
size, layout and design; the smallest units are 1,200 square
feet and seat 48 guests, the largest are 2,400 square feet and
seat 110 guests. A 2,800-square-foot prototype is also in the
works.
Bayne's Dallas company, Neighborhood Ventures, has
attracted several big-name franchisees to help it expand Fish
City from nine restaurants to 50 in four to five years.
They include Dave Schmille, former COO of Macaroni Grill;
Dave Garner, former international director of franchise
development for Macaroni Grill; Robert Marshall, former VP of
operations for a 30-unit Applebee's franchisee; Vic Smith,
former VP of international franchises for Chili's; Scott
Nietsch-mann, former COO of Chili's International; and Brian
Edwards, former senior VP of operations for Brinker.
Five Fish City restaurants opened in the past year; the
ninth came in Houston in June. Six units are on the way in the
coming months: four in Texas and one each in Louisiana and
Oklahoma, the concept's first locations outside Texas.
Additionally, Neighborhood Ventures is negotiating with
several franchisees to open units in Jacksonville and
Tallahassee, Fla., Savannah and Augusta, Ga., and Charleston,
S.C.
Bayne and his wife, Lovett, opened their first restaurant,
Shell's Oyster Bar & Grill (now Half Shells), in Dallas in
1995.
"We're going to continue to grow as long as our culture is
strong," says Bayne. "The idea of 'neighborhood' is crucial.
It's a commitment my wife and I made when we opened our first
restaurant - to stay neighborhood friendly. It's what brought
us to the dance."
The concept's bestseller is Serafin's Fish Tacos for $8.99,
and its signature dish is the Oyster Nachos, tortilla chips
topped with fried oysters and pico do gallo and served with
chipotle tartar sauce, for $6.29. Fish City also menus
chalkboard specials of five to six fresh fish that "are of the
same quality as the fish at, say, Oceanaire [Seafood Room], but
cheaper," says Bayne. The chalkboard specials represent about
40 percent of sales,
he adds.
"Our menu prices are very reasonable," says Bayne.
Entrée prices range from $6.99 to $12.99 at lunch and $9.99
to $18.99 at dinner, and the per-person check average is $12 to
$13 at lunch and $16 to $18 at dinner.
Per-restaurant sales average
$1 million a year at the
1,200-square-foot units and more than $2 million a year at the
2,400-square-foot units.
What's more, Neighborhood Ventures donates 15 percent of
each restaurant's sales to a local charity on the first Tuesday
of each month, a tradition that will remain as the chain grows.
The company has contributed nearly $100,000 since 2002.
"Great food, great variety, great culture, great values,
friendly staff - that's what makes us successful," says
Bayne.
Associate Editor Steven Hedlund can be e-mailed at
shedlund@divcom.com