Skip navigation

McCormick & Schmick’s looking for an upscale-casual acquisition

Chipotle, Morton's also share plans at ICR investor conference

McCormick & Schmick’s Seafood Restaurants Inc. is looking for a premium-casual chain to acquire; Chipotle Mexican Grill Inc. is upping the nutritional profile of its dishes; and Morton’s Restaurant Group Inc. is raising prices for the third time in a year.

Those were a few of the topics that emerged during the 13th annual ICR XChange investor conference on Wednesday.

It was literally a day in the sun for Wall Street analysts and industry observers who gathered in Dana Point, Calif., to hear presentations from dozens of public restaurant and retail companies over two days. Hosted by ICR, a corporate and financial communications firm, the event followed the Cowen & Co. investor conference in New York City earlier this week, where some of the same restaurant companies presented.

Reports from restaurant companies at this year’s ICR XChange were noticeably more optimistic than in past years, with several restaurant brands offering anecdotal indications that consumers were spending again and that sales upswings were expected to continue.

“The consumer is coming back,” said Ron DiNella, senior vice president and chief financial officer of Morton’s Restaurant Group. “The general mood seems very positive.”

McCormick & Schmick's, Chipotle and Morton's were among the restaurant companies that shared their outlooks and plans for the year ahead:

• Armed with a strong balance sheet, McCormick & Schmick’s is looking to acquire a premium-casual concept that is somewhat seafood focused and doing well in more than one market. The Portland, Ore.-based company currently operates 96 upscale seafood restaurants, including 86 in the United States and seven in Canada under The Boathouse brand.

Bill Freeman, McCormick & Schmick’s chief executive, said the company is not looking for a fast-casual concept, which he feels would not fit with the brand’s established expertise in premium seafood.

However, he added, “Fast casual is very interesting for seafood right now because it’s the next frontier that hasn’t been attacked.”

Seafood prices in general are expected to increase about 1 percent to 2 percent in 2011, Freeman said, a much more modest trend than the 10 percent to 14 percent jumps seen during 2010, which were largely a result of the Gulf oil crisis.

When asked about the increased stake in McCormick & Schmick recently purchased by Tilman Fertitta — the president and chairman of Landry’s Restaurants Inc. who has bought a number of restaurant companies in the past year — Freeman said the investment still appears passive.

“He’s made no calls, no inquiries,” Freeman said.

• Continuing its focus on "food with integrity," the fast-casual Chipotle chain this year will start using dairy products only from pasture-raised animals, said Steve Ells, the Denver-based chain’s founder, chairman and co-chief executive.

In addition, Chipotle will continue to expand its use of local produce, which is supplied by thousands of small and medium-sized farms across the country, he said.

The 1,023-unit chain also is slowly adding the amount of whole wheat flour used to make Chipotle’s tortillas. Over the next two years, Ells said, whole wheat flour will be fully integrated into Chipotle’s tortillas.

This year the chain will also roll out the option of brown rice as an alternative to the traditional white rice currently offered, Ells said.

“The response has been incredible,” he said, noting that in some stores about half of customers now choose brown rice.

Ells said the menu tweaks were part of the company’s ongoing commitment to quality ingredients.

“When I was growing up in the 1970s, fast food was a treat,” he said. “Today’s it’s something people eat every day and a lot of it will kill you.”

After expanding internationally into Canada and last year opening in London, Chipotle will debut its first restaurant in Paris this year.

After finishing the current fiscal year with 120 to 130 new units, Chipotle is expecting to add 135 to 145 in 2011. Officials project same-store sales for 2011 to be up in the low single digit range.

• Morton’s raised prices twice in 2010 for a cumulative increase of 5 percent, and another smaller increase is planned for this month to offset increasing commodity costs, officials said.

Beef costs, which were up 4 percent to 5 percent in 2010, are expected to increase as much as 10 percent this year, chief financial officer DiNella said.

“We believe that our guests understand that the quality of our product costs money and we don’t want to compromise on quality,” he said.

“We’re not being cavalier or reckless about it,” he added. “I assume everyone else in the marketplace is going to have to do it.”

The 77-unit upscale steakhouse chain, which is based in Chicago, saw no pushback from customers after the earlier price increases, he added.

Morton’s has seen a return of business travelers, especially in markets with restaurants near convention centers, including New Orleans, Atlanta and Chicago. Las Vegas is improving, DiNella said, but “it’ll be a while.”

Morton’s customers also are starting to trade up to a better bottle of wine or more premium menu for parties, DiNella added. “People have more of a wealth effect.”

The steakhouse chain has had success rolling out its Bar 12-21 format, an expanded bar program with a more casual limited menu. Another 29 units are scheduled to be remodeled to include Bar 12-21.

Morton’s is focusing international growth on Asia, where the chain currently has units in Shanghai, Macau and Singapore and more to come.

Contact Lisa Jennings at [email protected].

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.