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Michael Hiltzik GOLDEN STATE

Sizzler Aims to Return to Its Heyday

October 24, 2005|Michael Hiltzik

What can you say about a 50-year-old restaurant chain that (almost) died?

You can say that in Sizzler's latest incarnation, it's trying to recapture a reputation for quality and value it last possessed two decades ago.

"Some people in the industry thought we went away," Ken Cole told me last week. Cole, 51, is a veteran restaurant executive with a salesman's self-confidence, a combination of skills that has served him well since becoming president and chief executive of Sherman Oaks-based Sizzler USA in 2001.

One of his tasks is to remind the world that Sizzler is still around, he told me from behind a table at the chain's Los Feliz location. "All they remember is the buffet, the bankruptcy, and the Milwaukee E. coli."

Painful memories all: an ill-advised move into buffet-style service, followed by bankruptcy in 1996 and every restaurateur's nightmare, a bacterial outbreak at two locations in 2000 that left a child dead and scores of customers sickened. (Sizzler blames a supplier.)

Cole, a veteran of restaurant managements from Ohio to Santa Clara, has wrought a thorough renovation of Sizzler's sites, modernizing the decor, upgrading the food and even planning a move into take-out. Every change has been focus-grouped to within an inch of its life. And scarcely for nought: When the company brightened the color scheme and decor of a prototype restaurant outside Sacramento, visitors remarked on the sudden improvement in the food, which actually had been upgraded the year before.

Cole aims to rebuild Sizzler's appeal to what he calls the "skip generation," a term that almost evokes the "lost generation" of American expatriates who sat out the Twenties in Paris. In this context it means people aged 25 to 40 who fondly remember eating at Sizzlers with their parents in the '70s, but who abandoned the chain during the dark buffet years. Cole figures that as they raise families of their own, they're primed to return to a sit-down restaurant where they can order a steak dinner for $9 to $12. Sizzler needs to hold this beachhead against competition from lower-tier chains like Denny's and Coco's, where the average entree check is about $8, and so-called casual chains like Chili's and Red Lobster, where entrees run $12 to $14.

Sizzler's very history reflects the evolution of family restaurants. The first Sizzler was opened in Culver City by Del and Helen Johnson in 1958. (Around the same time, Denny's was launched in Lakewood.) Sizzler went public in 1968, added a salad bar in 1978, and eventually boasted more than 600 mostly franchised locations. Its trademark was inexpensive steaks and a system in which customers ordered and paid for their meals at a cashier station, but awaited delivery of cooked-to-order steaks at their table.

The bankruptcy was the culmination of a series of bad strategic choices. Starting in the late 1980s, when the consumption of red meat became as socially unacceptable as public smoking, the chain built up its salad bar as an alternative to grilled entrees.

"Every time they added an item to the salad bar, sales shot up," Cole says. The addition of fresh fruit, hot soups, appetizers, and finally entrees like lasagna and fried chicken soon turned the salad bar into an all-you-can-eat buffet.

Buffets, however, work best in spacious restaurants of 10,000 to 12,000 square feet, which make up in seating area what they concede in per-check sales. Sizzler restaurants were half that size. The buffets' expanding girth made them seem even smaller -- reducing the average seating to 180 from 240.

The clientele changed, too. Cole, picking his words carefully but leaving little to the imagination, says that "quality-oriented" consumers, such as young families looking for value in a steak or chicken dinner, gave way to "people who like quantity."

With revenue and margins deteriorating, management further lowered the quality of the menu -- reducing the grade of steaks a notch from USDA "choice" to the tougher "select," for example. Shrimp got smaller and their breading thicker. Sizzler's reputation for value dissipated.

Before emerging from bankruptcy protection in 1997, the company shed about half its stores, including most in the Northeast and Midwest. It's now down to 226 in the United States (145 in California), of which 42 are company-owned and the rest franchised. Same-store sales have risen at better than 6% over the last three quarters, to an average of about $1.7 million per location.

Future growth, Cole says, will be almost entirely driven by franchisees, which relieves headquarters of the painful chore of raising capital, say by issuing stock to the public. Indeed, Sizzler has gone in the opposite direction: A buyout by the Sydney-based private investment firm Pacific Equity Partners, completed last month, ended the company's New York Stock Exchange listing.

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