Bob Evans Farms, Inc.

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Bob Evans Farms, Inc.

3776 South High Street
P.O. Box 07863
Columbus, Ohio 43207-0863
U.S.A.
(614) 491-2225
Fax: (614) 492-4949

Public Company
Incorporated: October 28, 1953 as Bob Evans Farm Sales, Inc.
Employees: 19,000
Sales: $653.2 million
Stock Exchanges: NASDAQ
SICs: 5812 Eating Places; 2013 Sausages and Other Prepared Meat Products

Bob Evans Farms, Inc. owns and operates nearly 300 full service, family restaurants in 19 states. The company also operates 11 plants across the Midwest, Southwest, and Southeast, which produce and distribute fresh and fully cooked sausage products, as well as fresh deli-style salads, to consumers throughout the United States. At the heart of its distribution system are Bob Evans Farms driver-salespersons who deliver many varieties of food products, including: roll sausage, Italian casing, dinner links, Brown ‘n’ Serve sausage, Smoked and Kielbasa sausage, Sausage and Ham Burritos, and fully cooked Sausage ‘n’ Biscuits and Ham V Cheese ‘n’ Biscuits.

Bob Evans Farms got its start when founder Bob Evans began preparing farm fresh sausages for the 12-seat, 24-hour restaurant—the Bob Evans Steak House—he opened in 1946 in Gallipolis, Ohio. While the restaurant was a success, the difficulty Evans experienced in obtaining high quality sausage prompted him to start making his own from hogs raised on the farm. Favorable reports from his customers, many of whom were truck drivers who bought 10-pound tubs of the sausage to take home to their families and friends, prompted Evans to take some time away from his restaurant and concentrate on building a business to distribute the sausage products. He delivered the product himself and operated his sausage business only during the cool months of the year when storage was possible. Eventually distribution was expanded to grocery stores, and, as the popularity of his sausage grew, Evans invited grocery store managers to come to the family farm, known as the Homestead, in Gallia County to witness the sausage-making process.

The Homestead, where Evans and his wife Jewell raised their six children, was once an inn and stagecoach stop and is now on the National Register of Historic Places. Visitors may hike or ride horses on the farm’s 1,100 acres of rolling hills or visit the farm’s museum and authentic log cabin village. Craft fairs and other special events are held at the farm on many weekends during the tourist season, which runs from Memorial Day weekend through Labor Day weekend.

In 1953, a group of friends and family recognized the growing demand for Bob Evans Farms Sausage and became business partners. When a packing plant in Xenia, Ohio, came up for sale, the partners, led by founding chairperson Emerson E. Evans, bought it and went into the sausage business on a larger scale. Sausage distribution was expanded into southwestern Ohio. The Xenia plant not only allowed for increased production of Bob Evans Farms Sausage, but also gave many of the company’s current top management their start in the business.

By 1957, 14 delivery trucks delivered fresh Bob Evans Farms Sausage overnight to central and southern Ohio outlets, and by 1963, when the company went public, the sales territory covered most of Ohio. The first move out of Ohio was into Michigan in 1964. In conjunction with that year’s introduction of sausage into Detroit, the company opened a third sausage plant in nearby Hillsdale, Michigan. As the company expanded west, Galva, Illinois—a concentrated hog producing area—became the site of Bob Evans Farms’ fourth sausage production plant in 1974.

As the reputation of Bob Evans Farms Sausage grew, and more people began coming to his farm, Evans built another restaurant in the area in 1962. The success of the Sausage Shop encouraged the company to open the first of what would become the Bob Evans restaurant chain in 1968. A further incentive to opening a restaurant was to maintain consistent returns for shareholders amid the ups and downs of the sausage business. Located in Chillicothe, Ohio, the pilot restaurant featured a design reminiscent of the farm, including a red exterior with white trim, which would eventually serve as the model colors for the entire Bob Evans chain. The restaurant’s first menu, however, was not quite as successful as the building design. The Chillicothe restaurant was initially intended as a fast-food outlet featuring sausage sandwiches, hamburgers, french fries, and milk shakes. When business started to decline, a team of employees, including top management, closed the restaurant for one weekend, redesigned the interior as a sit-down, full service facility, hired waitresses, put in a new menu, and reopened with great success.

Bob Evans Restaurants were initially known for their hearty breakfasts, available at the restaurants at all hours of the day. However, the company’s reputation for high quality breakfasts began to overshadow the lunch and dinner hours, and some restaurants were so slow after two o’clock p.m. that they had trouble keeping staff. In response to this problem, management sought to develop and refine its menu to meet changing consumer tastes and lifestyles. To build the dinner business, platters of charbroiled ribs, chicken, and catfish were added, nightly dinner specials were offered, and advertising targeted both adults and families with children. Moreover, a greater variety was eventually introduced into the Bob Evans dinner menu, including such dishes as veal parmesan, spaghetti with meat sauce, and the Mexican-inspired Skillet Breakfasts and taco salad. Bob Evans was also active in promoting healthier menus by introducing a new summer menu with lighter, health-oriented foods such as grilled chicken salad, egg substitutes, and a new skillet breakfast line.

In June 1991, the company established Bob Evans foodservice division, which sold food products directly to distributors and institutions. Items such as gravies, burritos, sausage and biscuit sandwiches, soups, ham, and specialty sausages were sold to convenience stores, restaurants, and non-commercial foodservice segments. In fiscal 1993, the food products segment made up 30 percent of sales for Bob Evans Farms. Bob Evans had established a position of market leadership in sausage products and a major competitive advantage based on the direct-store delivery system. The company distributed many types of sausage produced at its manufacturing plants, and its products gained a reputation for premium quality based on whole-hog ingredients, proprietary recipes, and unparalleled freshness. With a fleet of trucks making deliveries to over 14,000 grocery stores each week, Bob Evans had a unique ability to place refrigerated products on grocery store shelves within 24 hours of making the products, circumventing the distributors and chain warehouses.

In order to maintain its market share and market success, the food products segment introduced many new items. For customers looking for products lower in fat, Country Lite Sausage was test marketed in Chicago, St. Louis, Buffalo, Houston, and Dallas in the early 1990s, and was soon available in much of the company’s marketing territory. Plans were also underway to enter the gourmet food market as several new items were in development and were slated for testing in the mid-1990s.

Several other new products included bratwurst, Italian dinner links, and smoked sausage. Moreover, Bob Evans Harvest Salads were targeted to consumers looking for a high-quality prepared item. The Harvest Salad line included tuna salad, macaroni salad, Italian pasta salad, and others. Testing has been expanded into the Pittsburgh and Buffalo/Rochester, New York markets. This salad line complemented the sausage business, since sausage volumes were highest in the fall, while the salad business was at its best in the spring and summer.

The Bob Evans Farms food products division grew not only through new products but also through acquisitions. Owens Country Sausage, based in Richardson, Texas, was purchased by Bob Evans Farms on January 16, 1987, in a stock transaction worth nearly $16 million. Bob Evans Farms acquired all O wens’s outstanding common stock in exchange for shares of Bob Evans Farms stock. Until the Bob Evans Farms acquisition, Owens was a privately held company.

Owens Country Sausage was founded in 1928 by the late Clifford Boyce Owens, and was chaired by his son, Jerry Owens, in the early 1990s. Selling a variety of food products in the Southwest, Owens offered a new market for Bob Evans Farms and provided the company with a wealth of opportunities for restaurant expansion. The first Owens Family Restaurant, in Irving, Texas, retained the Owens name, but resembled the Bob Evans design and menu concept. In 1993 there were thirteen Owens Family Restaurants in the Dallas/Fort Worth area and plans called for more sites in the future.

Bob Evans Farms acquired Mrs. Giles Country Kitchens—a food production company operating in Lynchburg, Virginia— on September 13, 1991 from an affiliate of the Campbell Soup Company. Mrs. Giles, founded by Zena Giles in 1933, produced refrigerated deli salads and distributed most of its products in bulk, unbranded, to delicatessens around the United States. In May 1992, Bob Evans Farms upgraded several of the Mrs. Giles recipes and marketed them under the Bob Evans brand in Columbus and Cincinnati, Ohio.

Another acquisition occurred in March 1992, when Bob Evans Farms bought Hickory Specialties, Inc. Hickory specialized in charcoal products, grills, liquid smoke seasonings, and application systems. The company had two major divisions, Nature-Glo Charcoal and Zesti Smoke Flavor. Nature-Glo produced several lines of grills (under the Champion brand) as well as charcoal, hickory, and mesquite wood smoking chips. The charcoal and smoking chips were sold under the Mr. Quick, Old Hickory, and Mountain Hardwood names. The company also manufactured the Jack Daniel’s line of charcoal and smoking chips. The company patented technology to produce a new line of gas grill briquets that provide a hickory or mesquite flavor. The Zesti Smoke Flavor division produced liquid smoke flavorings to the meat-packing and the processed food industries. Major customers included Nabisco, Kraft, Carnation, and Heinz. The commercial flavor products were used in the manufacture of such items as potato chips, pet foods, nuts, pharma-ceuticals, smoked hams, and barbecue sauces.

Bob Evans continued its growth in foodservice sales as it increased its product line and marketed its products to more schools, hotels, convenience stores, and other foodservice customers. Regarding this area as one of great growth opportunity, the company has been committed to actively pursuing such additional sales. Management’s long-term goal remains for the food products division to generate 40 percent of total revenues.

In the early 1990s, Bob Evans Farms management realized that in order to enhance future growth while retaining the commitment to quality, the company had to diversify. Although it developed a strong network of restaurant and sausage operations through a coordinated marketing and expansion strategy, the company needed to minimize dependence on the breakfast business and sausage products. The sausage business remained subject to volatile hog costs and, due to health concerns, continual declines in U.S. pork consumption. For this reason the company increasingly emphasized new developments in its restaurant business. Consequently, the restaurant segment generated approximately 70 percent of total revenues in fiscal 1993, up from approximately 52 percent in 1982.

In April 1992, Bob Evans opened its first Cantina del Rio, a Mexican-style restaurant and bar, in Columbus, Ohio. Bob Evans’s entry into the Mexican food market was well planned. The Mexican food business was the fastest growing segment in the restaurant industry in 1991 at 18.3 percent. In order to create a quality restaurant and menu, Bob Evans chose Phillip Torres, the owner of the successful Guadalajaran Mexican Grille and Bar (located in Houston, Texas) to head the operations. Management was pleased with the initial results and anticipated further success because of the restaurant’s atmosphere and recipes. Six more Cantina del Rios were scheduled to open in the Midwest in fiscal 1994.

Further expansion of the restaurant business included the development of Bob Evans General Store and Restaurants. Designed to recall the country stores of the mid-1800s, the stores were constructed of red oak and wooden pegs and featured ceiling-high shelves displaying country crafts and homemade goods. The adjacent restaurants featured gift shops that sold pottery and other craft goods, a restaurant with a new country-style menu, and an in-house bakery. The first General Store and Restaurant opened in April 1991 near Kings Island Amusement Park in Mason, Ohio, and over the next three years seven more went into operation. Intended for high-traffic sites near tourist attractions, resorts, and junctions of interstate highways, the Restaurants and General Stores were in direct competition with Cracker Barrel Old Country Stores, another restaurant and gift shop chain whose territory Bob Evans attempted to break into.

Another development in the restaurant segment was the launching of the Bob Evans “Smalltown” Restaurants. “Smalltown” outlets were smaller versions of the traditional Bob Evans family restaurants, featuring 90 percent of the chain’s traditional menu and targeting locals in cities of 15,000 to 30,000 residents, many of whom used to travel up to 50 miles to enjoy a Bob Evans meal. The first unit was opened in Bellefontaine, Ohio, in spring 1993. This 3,200-square-foot, 96-seat version of the traditional restaurant was expected to provide a boost to the company as it was less expensive to build and operate than traditional Bob Evans Restaurants and should allow the company to expand to smaller towns where building a traditional restaurant would not have been feasible. Targeting sites near Wal-Mart discount stores, prime areas of small town traffic, Bob Evans expects to open ten of these restaurants in fiscal 1994.

While the new restaurant concepts were certainly in the spotlight during the early 1990s, Bob Evans realized that the traditional Bob Evans and Owens Family Restaurants were the strength of the company. These restaurants generated average unit sales of $1.6 million annually, and all were company owned, with no plans to franchise. Bob Evans owned the buildings and equipment at every location and owned the land for nearly all sites. For these reasons the company focused on several strategies to improve these restaurants.

First, as part of its long-term strategy, Bob Evans was involved in a continual remodeling, renovating, and redesigning plan. All existing units, on a three-year basis, were given new coats of paint and were furnished with new carpeting and drapes. About every eight years the company purchased new furniture as well as new kitchen equipment. Renovation or remodeling costs per unit run approximately $50,000 to $75,000.

Beginning March 4, 1991, a new Bob Evans prototype restaurant was unveiled, from a design featured in an Indianapolis restaurant. The new design was larger, consisting of 5,500 square feet, compared with 5,000 square feet in the original building. The dining room had more than half of the 150 seats designed for non-smoking customers, a large foyer was added, and the restrooms were moved to the front of the building for the customers’ convenience. While the new prototype featured an interior decorated in oak wood and light country colors, the Bob Evans style of food and logo remained the same.

Another pivotal change at Bob Evans was the enhancement of the restaurant manager position. As a result of the 1990 management restructuring, managers received higher compensation, stock options, and better training. Unit managers were given greater autonomy and increased accountability for the performance of their individual units. Managers were encouraged to localize their operations—from menu items to service strategies and in-store decorative accents—reflecting the taste of the community served, and were asked to send new product ideas and management approaches on to headquarters.

These company innovations resulted in a sharp decline in management turnover and an improvement in customer satisfaction. Bob Evans continually strove to enhance its benefit packages, providing medical coverage and paid holidays and vacations. Consequently, hourly employee turnover in 1993 was about half of the 300 percent industry average. In return, the company expected a commitment from its employees. Each new management employee underwent comprehensive training, including a 14-week program for new Bob Evans Restaurant managers, which helped to ensure that Bob Evans’s standards of quality were upheld.

Another strategy aimed at enhancing the profitability of the restaurant segment and heightening customer satisfaction was the development of a point-of-sale (POS) computer system which increases accuracy and efficiency in the restaurants. This highly specialized computer program handled customer orders and inventory, tracked sales trends, monitored buying patterns by region and unit, and kept a tally of store costs. In 1993, the POS system was operational in approximately 60 Bob Evans Restaurants and all of the Cantina del Rios. The company planned to eventually install the system in all of its restaurants.

Furthermore, Bob Evans implemented a silent shopper program, in which anonymous shoppers visited each restaurant four times a month, evaluating the stores’ employees, service, food, value perception, and cleanliness. The results of the evaluations were reviewed by the company’s operations management and then communicated back to each restaurant’s management team.

An internal task force was also organized to supervise the emendation of nutritional labels on all packages to meet new FDA regulations. A costly undertaking, the task force should help ensure that the project is completed in the most efficient and cost-effective manner.

A final strategy designed to improve the profitability of the restaurant segment concerns branding, or highlighting a food manufacturer’s brand name product on a menu. According to Roger Williams, senior vice president of marketing for Bob Evans Farms in 1993, branding had a two-fold function—it made a quality statement about the restaurant, and it provided a service for the manufacturer. William noted that extensive branding at Bob Evans was “absolutely positive.” Bob Evans menu’s featured Quaker oatmeal, Smucker’s jelly, Fleischmann’s Egg Beaters egg substitute, 100% Pure Florida Orange Juice, in addition to the company’s own branded Bob Evans Farms sausages.

Analysts expected Bob Evans Farms to remain at the high end of the midscale restaurant segment and to hold as a market leader in the sausage business. Although the company has grown extensively over the years, its commitment to quality and “down on the farm” hospitality remained a top priority.