Back Bay Restaurant Group, Inc.

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Back Bay Restaurant Group, Inc.

284 Newbury Street
Boston, Massachusetts 02115
U.S.A.
(617) 536-2800
Fax: (617) 236-4175
Web site: http://www.great-food.com

Public Company
Founded: 1983
Employees: 2,600
Sales: $87.8 million (1996)
Stock Exchanges: NASDAQ
SICs: 5812 Eating Places

Back Bay Restaurant Group, Inc. owns and operates full-service, upscale restaurants in Massachusetts, Connecticut, New Hampshire, New York, New Jersey, and Washington, D.C. Of the 34 locations operating as of mid-1997, 14 served Northern Italian cuisine under the Papa.Razzi name. The remaining 20 restaurants offered American-style menus under various names including Charley’s Eating & Drinking Saloon, J.C. Hillary’s, Joe’s American Bar & Grill, Famous Atlantic Fish Company, and Hillary’s. By using different restaurant concepts with similar menus, Back Bay is able to operate several locations in popular restaurant markets.

Early History, 1965-75

From the opening of his first restaurant, Boraschi’s Cafe, in 1965, Charles Sarkis wanted to make dining out attractive and exciting, and he wanted to reach the young, upscale customer. “Our aim has always been to put out great food, quality service, and a great environment at a very reasonable check average,” he explained in a 1991 Restaurant Business article.

By 1968, Sarkis had decided on the concept he thought would attract that clientele: American food served in a “saloon” setting. That year he opened the first Charley’s Eating and Drinking Saloon on Newbury Street in Boston’s Back Bay area. The restaurant was decorated with lots of dark wood, etched glass, brass, and fabrics of burgundy and hunter green. The menu had five sandwiches, a salad, four entrees, two soups, and two appetizers. As he told Kevin Farrell in a 1988 article, “We did a lot of things first that are taken for granted now. In the late 1960s, we served shrimp by the piece. We prepped french fries from scratch. We put top-grade mustard on the tables. We offered gourmet hamburgers. And we had waiters introduce themselves to their customers using their first names.” That practice was so important that a waiter who did not introduce himself stood to be disciplined.

New Concepts, 1975-89

Charley’s became the flagship concept of The Westwood Group, Sarkis’s company. But it was not the only concept. In 1975, Sarkis introduced a Victorian-themed dining room, which he named J.C. Hillary’s Ltd. He opened three of these that fall, two in Boston (including Back Bay) and one in Dedham, Massachusetts, joining the Charley’s in the region. That step was to become a Sarkis trademark, adding an entirely new restaurant concept, not just opening another location.

In 1983, Sarkis expanded outside of his base, buying five restaurants in Florida and opening them as J.C. Hillary’s locations. He also incorporated the restaurants business, naming it the Westwood Restaurant Group, Inc.

The next years were busy ones for Sarkis as he updated menus and introduced new restaurant concepts. In 1984, he opened Joe’s American Bar & Grill in Back Bay, five blocks from the original Charley’s on Newbury Street. The new location was an urban, upscale restaurant with a club atmosphere and a menu that featured grilled fish and meats, pasta, and seafood. It also offered a lighter menu in a separate dining room.

In 1985, he introduced The Famous Atlantic Fish Company, a concept that combined a bistro and raw bar and featured a wide variety of fresh seafood. Westwood Restaurant owned the restaurant’s name and expansion rights, but Sarkis retained the original bistro separately, as he did with J.C. Hillary’s. In 1986, Hillary’s opened in Wayland, Massachusetts, a more formal, upscale version of J.C. Hillary’s.

But while business was doing well in New England, the company was having problems with its locations in Florida. Those five sites had never done as well as Westwood Restaurant expected them to, and it put most of the restaurants up for sale. Despite that problem the company, with 19 restaurants, had annual sales in 1987 of $30 million. At the end of the year Sarkis sold the privately-held restaurant business to the West-wood Group, of which he was the majority shareholder. In addition to the restaurant business, the Westwood Group owned and operated Wonderland Dog Track, a greyhound racing facility in Massachusetts. The merger was viewed as a means of helping to infuse money into the track, which had seen its revenues fall.

By 1988 there were eight Charley’s in Massachusetts, New Hampshire, and Connecticut. With seating for 108 people, the average per-person check was $10.50, and each unit averaged $3 million in volume a year. The menu had been expanded over the years, and while still the narrowest among the five concepts, it included nine appetizers, four salads, 24 entrees, four hamburgers, deli sandwiches, individual pizzas, and a variety of desserts.

The three J.C. Hillary’s remaining in the company had checks averaging $8 at lunch and $12 at dinner. The sole Hillary’s unit was slightly more expensive, $8.50 for lunch and $15 in the evening. The prices were similar at the three Famous American Fish Company bistros. Meals at the two Joe’s American Bar & Grill were the most expensive of the concepts with lunches averaging $9 and dinners $17. Each of the units served liquor and had a bar, and all were open seven days a week for lunch and dinner. Four of the restaurants were within a five-block radius of each other in Boston’s Back Bay. The others were located in regional shopping malls.

Despite the problems experienced in Florida, Sarkis was still interested in expanding beyond the New England region. He recognized he needed some help to do that, and went outside the organization to hire people with experience operating larger chains. He also began developing a new dining concept in response to the growing demand for moderately priced, light, healthy Italian food.

Introducing Papa.Razzi, 1989-93

Papa.Razzi, the company’s Northern Italian bistro concept, was unveiled in Back Bay in November 1989, during the depths of Massachusetts’ economic depression. As he had in building a new management team, Sarkis went outside the company in developing his new concept. The menu was more sophisticated than those of the other concepts and required more skill in the kitchen. Along with veal chops, chicken dishes, and roast beef tenderloin, dinner customers could select pastas that ranged from spiral tubes with roasted egg plant, smoked mozzarella, tomatoes, basil, and romano to hollow straws with Italian bacon, hot peppers, onions, and tomato sauce. Or they could select the seafood pasta of the day. Among its more than a dozen pizzas, which ranged in price from $6.75 to $10.95, customers could choose one with fresh tomatoes, eggplant, smoked mozzarella, and basil, or with ham, mushrooms, artichoke hearts, mozzarella, orgeano, and tomato sauce instead. Lunch customers could also order individual pizzas and Italian-style sandwiches with a salad. The restaurant was decorated in earth colors with marble and light wood accents. The first location featured a wood-burning pizza oven and a food display case, to emphasize the importance of food preparation at the restaurant. This was a shift from the earlier concepts, where the decorating emphasis had been on the dining room.

The concept was a hit from the beginning and the company had two more operating in Massachusetts by the end of 1991 and four more, including one outside New England in White Plains, New York, in 1992. The second location reached the original’s $3 million plus annual sales level after being open only three weeks. The Papa.Razzi locations tended to be larger than the Westwood’s other restaurants, from 4,000 to 12,000 square feet, with seating for between 200 and 350 people. By the end of 1994, there were 13 units, with two located as far south as New Jersey.

Sarkis was not satisfied with just one new concept, however. In 1990, he renovated a Florida location and reopened it as Rayz Riverside Cafe. Funkier and more casual than the other concepts, Rayz was decorated in a nauticaMbeach style, complete with menus shaped like suntanning reflectors. The menu included many of the dishes from the other restaurants, but also offered its own specialties: soft shell crabs in season, Maryland crab cakes, and rotisserie-grilled ribs and chicken. That November he opened the second Rayz in Cambridge, Massachusetts. At the end of 1990, the restaurant division had 21 units, with total annual sales of $50 million.

In April 1991, Sarkis reincorporated the Westwood Restaurant Group, Inc. as the Back Bay Restaurant Group, Inc., a wholly owned subsidiary of The Westwood Group. For the first time, Westwood began publicizing that its various restaurant brands had a common ownership. As Sarkis told Restaurant Business, “I used to think people might have negative associations if they saw us as a chain. But since 90 percent of our customers have a good experience, why shouldn’t we want to let them know about our other restaurants?” The concept of clustering the different concepts together had worked well in the Back Bay area, with the company reporting doing $15 million worth of business from its five different units there, compared to $5 million by a single-location competitor. Back Bay expected to follow that strategy as it expanded beyond New England.

Company Perspectives:

To provide each guest the “Perfect Guest Experience,” which we define as fine food and drink, artful service and remarkable hospitality.

In March 1992, Back Bay went public. The company, with 26 locations, ended the year with sales of $59.6 million and net income of $2.6 million.

Even as the company grew, Back Bay continued to stress its traditional standard of quality. Management trainees had to complete a 10-week course, during which they learned about the operations of the entire restaurant (kitchen, bar, and dining room) as well as food quality, customer service, employee relations, and issues related to liquor liability. The training made it relatively easy for managers to move among what the company was now calling its American concept restaurants or from one Papa.Razzi location to another.

In 1993, Back Bay sold the remaining Florida property to the U.S. Department of Transportation for $4.7 million and formally separated from the Westwood Group. More units were opened, bringing the total number of locations by the end of the year to 31. Sales reached over $74 million, with profits of nearly $3.5 million. But trouble signs were developing. Average sales in the units had dropped slightly and same-store sales rose less than one percent compared with their revenues the year before.

1994 to the Present

The company continued to expand, reaching a peak of 37 restaurants at the end of 1994, with a total customer count of 5.3 million people. But that growth and increased competition took their toll as profits fell 86 percent from 1993, even though sales were up 16 percent, to nearly $86 million. David Loeb, a restaurant analyst with The Chicago Corp. in Chicago, put it succinctly to Robin Lee Allen of Nation’s Restaurant News in a 1995 article, “As someone at Shoney’s said to me, ’In casual dining, the seats are growing faster than the fannies to fill them.”

To attract customers, Back Bay initiated a Preferred Guest Program in September. Under the program, a customer received a $20 certificate good at any of the company’s restaurants each time their account reflected $200 in food and drink purchases. By March 1997, the program numbered some 18,000 members.

The company also closed several older sites and slowed its development plans. It did open new Joe’s American Bar & Grill units, in towns where a Papa.Razzi already existed, and, in February 1995, opened a Papa.Razzi in Georgetown in the District of Columbia.

Despite these efforts, same-store sales, particularly for the 17 Papa.Razzi units, continued to drop during 1995 and by mid-year the company was reporting a net loss. Back Bay countered by starting a summer radio campaign for Papa.Razzi in the Boston area, a break with the company’s traditional dependence on word-of-mouth publicity. The company also sent its Papa.Razzi concept chef to Italy where he spent nine weeks studying regional cuisine. In September, the trattoria’s five-year-old menu was expanded with the addition of dishes from southern Italy. The restaurants began using fresh pasta instead of dried, and new entrees ranged from a broiled veal chop served with linguine tossed with wild mushrooms in a Marsala wine sauce to whole-wheat pasta with sausage, roma tomatoes, arugula garlic, and fresh parsley. Olives, capers, and artichokes appeared in more dishes as well. The total customer count increased 8 percent during the year, and the company had record sales of over $93 million. However, Back Bay and its 33 units operated at a loss for the year due to charges against closed restaurants and abandoned projects.

The new year did not begin well, as the Blizzard of 1996 dropped more than 100 inches of snow in Back Bay’s major market. However, as the year passed, each fiscal quarter showed year-to-year earnings improvement. In September the company opened its first new restaurant in more than a year, a Joe’s American Bar & Grill in Braintree, Massachusetts.

The financial picture improved during 1997, with the company reporting net income of just over one-half million dollars for the first six months, compared to a net loss for the period in 1996. In January, Back Bay announced it had purchased the Cornucopia restaurant, located atop pilings in Boston Harbor. The company’s eighth Joe’s opened on the site in May, offering “American fare with a distinct seaside flair.” During the summer the last Rayz closed, but customers could still get a taste of the sun as some of the concept’s specialties were added to the menu of the nearby Papa.Razzi. And Sarkis had not run out of concepts. The company announced on its new web site, the introduction of Waldo’s, a rhythm and blues club, offering music and food three nights a week above the J.C. Hillary’s in Back Bay.