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George & Teds EXCELLENT ADVENTURE

Concepts of Tomorrow
Growth Strategies For Emerging Full-Service Restaurants

LongHorn honcho George McKerrow and cable guy Ted Turner
hold a new ace in a winning hand: Ted’s Montana Grill.

George & Ted’s
EXCELLENT ADVENTURE

George McKerrow’s eyes dart to his watch. Four hours to go. The writer who was supposed to interview him is stuck in traffic. McKerrow shifts on the fly and pulls Patti Nash, his v.p. of human resources, into a window booth to sketch out formal staff training for the chain.

He checks his watch again. No matter how many restaurants he’s opened - from umpteen LongHorns to Aida and Canoe to this, the eighth Ted’s Montana Grill, and the second in Columbus, Ohio - he’s still antsy.

A white-shirted guy hurries in, looking for a copier. Damn this location. Sure, it’s right off a major freeway in a neat, upscale neighborhood with high-profile retail across the street. The problem is that mall property management wants a uniform façade, and McKerrow worries that the giant green neon "KINKO’s" sign next door will make his restaurant invisible. Three hours to go....

Kitchen staff are leaving for a break between set-up and tonight’s event; servers come in to check the schedule. Manager Nick Raucci thanks each personally, adding praise for small things done well.

The writer arrives. Deftly dealing instructions, answering questions, and arranging his pre-event schedule, McKerrow settles into a booth and plugs directly into the interview.

Like his partner, media mogul Ted Turner, George McKerrow is a master of focusing on the key issue in the context of the bigger picture. Their latest venture, Ted’s Montana Grill (TMG) is a prime example. "Whole generations have grown up on McDonald’s, quick service and casual dining, and they’re sick of it," explains McKerrow. "There are more working mothers and fathers, and their time is limited.

Kids are on a schedule that looks like your business schedule. Baby boomers are burned out on ‘almost-as-good’ food."

Hence, Ted’s Montana Grill. "We want to be a gathering place that’s comfortable for everybody," he says. "We’re quaint and comfortable, and we allow people to feel as if they’re going to somebody’s home."

It started with a flash of pure inspiration.

McKerrow, Ted Turner (both bison ranchers) and the Bison Cooperative had been struggling to introduce bison meat to the American public, with little success.

On the plane to a Culinary Institute of America board meeting, inspiration struck McKerrow. "It was a little like being a songwriter who writes a hit song. I started putting ideas down: This is what this place should be, this is how it should look, this is the menu, this is the décor, this is the target market, and this is the name."

He presented the concept to Turner. "He said, ‘Wow! Let’s do it!’, and we made a business deal and decided to open five restaurants."

Conventional wisdom dictates: Select a market, build a restaurant, and perfect it over a 2- to 3-year period. Expand in a similar market with a second restaurant, build a reputation, then assemble a management team. Replicate that pattern within a central market area. To grow faster, cultivate relationships with other top restaurateurs.

But the Turner-McKerrow team crafted a development strategy worthy of Napoleon. In July 2001, with an initial $5 million investment, they assembled an executive team with powerful casual dining sector credentials to plan and support explosive, yet controlled growth: CFO Susan Alvarez; Brian Lyman, v.p., operations development; human resources v.p. Patti Nash; Max Sheets, v.p., real estate; and v.p. of operations Joe Wieland. It hired Atlanta-based architect Thompson, Ventullet, Stainback and Associates.

The team identified target regions and selected test market cities in the regions that had a solid workforce, a strong economic environment and land for development: Columbus, Ohio, Denver, Colo., and Atlanta, Ga. Nashville, Tenn. became a test site for a smaller market.

TMG develops restaurants in increments of six units radiating from test market cities like spokes in a wheel. By the end of 2002, 10 restaurants were up and running with average volumes of $2 million each. The largest and busiest is in Colorado, with $2.5 million in sales for last year; the smallest, at 90 seats, logged $1 million. (Editor’s note: Revenues have not been annualized because the chain is so young.)

By the end of 2003, TMG will almost double in size. McKerrow projects 24 more units by the end of 2004 and another 36 by the close of 2005. His 10-year goal is to have 500 units opened and $1 billion in revenues.

FOR THE THEME, MCKERROW AND TURNER SETTLED ON the period from 1902 to 1910 and researched the food, music, and décor, logging thousands of air miles studying turn-of-the-century saloons throughout the Midwest and Great Plains. Why that period? "Clipper ships were sailing from New York to San Francisco in a matter of weeks. Trains were running from coast to coast. It was the first time that the European influence was cast aside from the east and west coasts and the focus came together in the middle of the country," McKerrow replies.

Ted’s Montana Grill re-creates the era with hardwood floors, a massive carved-and-mirrored mahogany bar, bentwood chairs, high-backed booths, punched tin ceilings, frosted pendant lighting, period art and music: ragtime, delta jazz, and the two-step.

Two floor plans dominate: with the open dining room abutting the bar area, or with the dining room flanking a bar island. To encourage the lively conversation and intimacy of family dining, tables seat no more than 8 or 9 people, and square tables convert to rounds. TMG eschews large parties: It reduces the efficiency of the service, clogs dining room traffic, prevents diners from talking easily, and raises the ambient noise level. Further, "because we cook all fresh food to order, we can’t handle a party of 20 because of all those tickets coming in at one time," McKerrow explains.

"Nobody else is doing what we’re doing at the level we’re doing it,’ he continues. "We hire kids trained at CIA and other culinary schools and they’re cooking totally fresh food. It’s not white tablecloth dining, but it is white tablecloth quality."

In true dinner-at-grandma’s style, the menu features fresh, simple, first-quality food, meticulously prepared. Sandwiches (ordered by 65% of the guests) predominate at lunch and dinner. Entrees run from $7 to $21. All items are pesticide, hormone, antibiotic, and steroid-free, and the company weeds out suppliers who don’t toe the line. A single menu covers lunch and dinner dayparts, but it can be adapted to seasonal trends. Insert cards tout featured items and flip to bison FAQs.

Brian Lyman takes over to explain the day-to-day mechanics of running TMG. If Lyman’s nervous about tonight’s opening, there’s no trace of it in the leisured tour he leads.

"We thought bison would be a loss leader. I figured 10 or 15% of the menu would be bison, and maybe one or two in 10 diners would try it," Lyman recalls. "When we opened in the arena district here in Columbus, 65% of our customers ordered bison. We were completely shocked." Bison occupies 70% of the menu, and it’s not just because McKerrow and Turner are bison ranchers. The beneficial qualities of the meat (see sidebar) encourage healthy dining, a concern of Turner’s. Currently, 75% of diners at Ted’s Montana Grill choose bison, and follow-up surveys show that 98% of diners will be back to eat bison, although beef versions of bison dishes are available. Chicken and pork offerings, 20 versions of burgers, entrée salads, and vegetarian burgers are augmented by soups and daily specials.

Every item, except roasted fare, is made from scratch and cooked in a glassed-in area off the dining room. Ingredients are visible to diners, assuring them that the brands they use at home are used in their dinners here. Diners can wash their meals down with shakes, malts, floats, fresh lemonade, small bottles of Coca-Cola, juice, coffee, tea, water, and milk. Only premium beer and wines are served. Lunch checks average $12; dinner checks average $15 per person.

TMG’s kitchens are spartan, ultra-efficient and surgery-clean. Lyman breezes through, stealing a review of the troops of unbaked cookies on racks and calling out a greeting to Chris, the chef on duty, and her assistant. Pointing proudly to the cookie mounds, he explains, "I want guests to see our chefs grab large, heaping portions and throw it together the way it was meant to be. Perfect portions convey the idea that the food’s been overly fabricated." Irregularly shaped burgers, tomato slices and cookies and slightly ragged slices of ham are perfectly acceptable. Skimpy portions aren’t. "Our chefs know what minimal

acceptable sizes are. Anything under that is thrown out," Lyman says.

While TMG is kid-friendly, it’s not kid-centric. The kids’ menu consists of mini-burgers, grilled cheese, chicken tenders, tiny hot dogs, and macaroni and cheese. Prices include a beverage. Instead of play areas and video games, children are occupied at the table with connect-the-dot cards and bright, flexible "Wicky Sticks".

Despite TMG’s meteoric growth, it avoids over-ambitiousness in the kitchen. TMG’s cautious about over-promoting its replacement meals capability. "There’s a tricky balance because, while you want the sales from take-out, if you don’t take care of the people inside the restaurant, what’s the point?" Lyman asks. Besides, he warns, "sometimes takeout food isn’t representative of the quality you’re trying to sell."

Turner’s commitment to the environment is everywhere evident, from the smoke-free policy to the recycled and the recyclable materials used in everything from the dinnerware and furnishings to impulse merchandise. You won’t find stir sticks, Styrofoam or plastic straws here. TMG scoured the industry for a paper straw manufacturer, finally turning up a 170-year-old operation that stopped making them 33 years ago. They persuaded the company to re-start paper straw production and worked with them to develop a method of coating the straws with beeswax so they’ll stand up to super-thick shakes.

Service is paramount in McKerrow’s priorities. "Ninety-five percent of all restaurants fail," he says, hinting that service is a big part of that. TMG’s managers follow the One-Minute Manager philosophy, setting an example of courtesy and respect, praising in public and reprimanding privately, correcting with an eye to improvement. McKerrow observes, "You have to acknowledge people’s efforts and ability to do things right so they understand that there are times when we need to reset their goals or criticize them constructively. Then you’re setting yourself up for success." Creating an environment of mutual respect, courtesy, and teamwork pays off in superior service, he says.

"If we say hello to guests at the door, we own them at the table. When they can settle in and relax, they’re more likely to tell us when we fail. If we don’t have a relationship with them and we fail, they’ll just leave and not come back," he adds. Thus, TMG servers routinely speak to, and assist, guests at other tables, and they make a point of saying goodbye to departing diners.

TMG’s commitment to training is big: chefs receive eight weeks of formal training, then another two weeks at their respective restaurants before they cook for their first guest. Servers currently receive two weeks of training, but a formal classroom program also is in the works. New restaurants hold three days of pre-opening practice with actual diners (the first two days are charity-related events; the third is for employees’ friends and families) to help the staff get up to speed and smooth out service. "Restaurants are difficult to operate, and people are pushed to be able to do everything right, every time," McKerrow says. "We’re training all the time."

THE SAME ATTENTION THAT GOES INTO THE FOOD, THE training and the service goes into TMG’s marketing. Just because bobblehead bison aren’t leering from TV ads doesn’t mean Turner and McKerrow don’t have acutely accurate research and demographic data. Intensive media relations activity precedes every opening, and four to six weeks after the opening, TMG conducts a telephone awareness study and interviews 200 guests about their experience and intention to return. McKerrow says, "We have no marketing budget and no plans for a marketing budget," but he salts his conversation with statistics and peppers it with financial data that leaves no doubt of his intimate knowledge of his enterprise and the casual dining sector. He knows where every cent of the partners’ $25 million investment (to date) went. And, lest its competitors get lulled into complacency by TMG’s low-key marketing approach, McKerrow promises that a major marketing initiative by a top-flight agency will be launched "when we get a significant number of restaurants in the marketplace".

Right now, TMG’s mantra consists of a few significant words: Straightforward. Fresh. Real. Reasonable. Fair. Courtesy. Service. But not simple.

Says Brian Lyman, "I’ll be honest with you. We thought it would be a little more simple. We said, ‘We just want to be a burger joint,’ but it’s evolved into a little bit more. We have more moving parts than we realized, but our pride is such that everyone wants to step forward and execute. We’ve been well received. We feel blessed for that. We’re real happy."

McKerrow has left the building. He’ll reappear in an hour after returning phone calls, wrangling e-mail, conferring with Turner, confirming his flight to Atlanta, showering and dressing. Then the doors to the restaurant will open to diners, and a new episode of George and Ted’s Excellent Adventure will begin.

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