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Q&A: Chris Artinian, Morton’s Restaurant Group

CEO discusses going private, expansion and pricing in improving market

Morton’s Restaurant Group Inc. is in the middle of a corporate strategic review, which may end in a sale of the public company with a market capitalization of $110 million. But a possible deal is not slowing the progress of the Chicago-based company’s turnaround plans, which include new restaurants, a focus on the private party business and altered menu pricing strategies.

Chris Artinian, chief executive of Chicago-based Morton’s, which operates 77 locations of Morton’s, the Steakhouse, said that whoever owns Morton’s, the concept is poised to grow again.

In a conversation with Nation’s Restaurant News, Artinian discusses a rebound in the overall economy and business travel, the steakhouse chain’s judicious pricing strategy, and expansion opportunities in the United States and Asia.

Why is this a potentially good time to go private? Are your current plans better suited for a private company?

Certainly, in the last couple of years, with the way the economy had been, it’s been a fight for anybody, not only the chains in our segment. But we were comping [positive] all four quarters in 2010, business travel is trending positive, and things are going in a positive direction. … Going private may provide a certain flexibility, but that’s what we’re trying to evaluate. We’ve withstood the test of time, and with the economy improving, we’re figuring out what’s the next best step for the company.

Just how important has the improvement in business travel and convention traffic been to Morton’s?

Roughly 80 percent of our dining business will end up on an expense account, and that’s where the Monday-through-Thursday piece comes into play. We’ve seen the biggest increases in our private-dining business, and the pharmaceutical and tech markets continue to be well supported in our boardrooms. The weekend business didn’t take quite the hit that Monday-to-Thursday traffic did because it wasn’t nearly as tied to the business traveler. Special-occasion dining also has maintained its levels and didn’t take that drastic of a dip.

From the middle of last year through January of 2011, Morton’s took price increases of more than 5 percent. Do you have room to maneuver further on pricing?

We took most of our pricing in 2010, and it was mostly to offset much higher commodity costs, dollar for dollar. We feel that, because we’re on the higher end, we have some elasticity. But we take a very deliberate approach. We’ve been fortunate to be able to take some pricing, and we don’t have any plans to take further increases. But we’ll have to in the future if commodity inflation continues to climb. We cross our fingers. It’s one of those tactics we take seriously.

If costs rise or business travel dips again, how did going through 2008 and 2009 prepare Morton’s to deal with threats to sales and traffic?

The biggest thing we learned throughout this experience is to not make any drastic changes in the operation. We adjusted some labor to appropriate business levels — you don’t need extra servers or line cooks at a time like that. But we left the business model 100-percent intact. We couldn’t risk changing the model of how guests receive hospitality, from their service to their greeting at the door. We didn’t touch anything that would affect the guest experience, and that’s what we can lever on today. When business travel came back, the guests didn’t know any different.

We never reduced portion sizes or offered different cuts of beef. We really learned to find efficiencies in managing our corporate office. That’s what took the lion’s share of our overhead reductions.

By opening one new U.S. unit this year and back-loading development to 2012, do you risk missing a window?

In 2009, development was brought to a halt. Midway through last year, we flipped the switch, because things were starting to turn, and we needed to get back in the game. What’s exciting for us in 2011 is that it’s about signing leases, which in the beginning of 2010 was a foreign thought.

Domestically, we’re focused on densely populated cities, so we’ll look in the Northeast and the West Coast, with some high-density markets in the Midwest.

China is a big deal for us. We opened up in Shanghai last year, and that was our fourth location in Asia, and our international growth has been narrowed to that market. It’s not unreasonable to think that over the next four or five years we could do two or more a year and double our restaurants there. With China booming, some people say we could do 40 units there. We know we have significant capacity, but we’re working a site list now between 10 and 20 places that are very realistic. And Beijing, Taipei [Taiwan], and South Korea continue to grow. It’s just a question of how fast they all become Westernized.

Contact Mark Brandau at [email protected].

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