Fili Enterprises, Inc.

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Fili Enterprises, Inc.

7578 Trade Street
San Diego, California 92121
U.S.A.
Telephone: (858) 831-0334
Toll Free: (888) 414-7335
Fax: (858) 831-0411
Web site: http://daphnesgreekcafe.com

Private Company
Incorporated: 1991
Employees: 500
Sales: $40.0 million (2004)
NAIC: 722211 Limited-Service Eating Restaurants

Fili Enterprises, Inc., operates a chain of more than 50 fast-casual Greek restaurants called Daphne's Greek Café. The restaurants are located in California, offering a selection of ka-bobs, gyros, pita sandwiches, and spanakopita. The majority of the chain's restaurants are located in southern California and situated in strip malls and shopping centers. Per-person check averages are between $6.50 and $7 during lunch and between $8 and $9 during dinner.

Origins

Daphne's Greek Café's founder, president, and chief executive officer, George Katakalidis, entered the restaurant business to start his second career. He was unemployed, unable to continue with his chosen profession, that of a professional athlete. Born in Greece, but raised in Canada, Katakalidis showed early promise as a soccer player, not only earning a place on Canada's National Youth Team but picked to captain the side. While attending high school in Toronto, Katakalidis attracted the attention of scouts for the New York Arrows, four-time champions of the Major Indoor Soccer League (MISL). Katakalidis joined the professional ranks, playing in two of North America's professional leagues in existence during the 1980s, the North American Soccer League (NASL) and the MISL. He played for the Arrows and the NASL's Golden Bay Earthquakes, ending his career with the MISL's San Diego Sockers. While playing for the Sockers, Katakalidis broke his toe, an injury that ended his career at the end of the 1980s.

Katakalidis' tour of cities left him in San Diego with nothing to do. He noticed that his new hometown lacked any substantial enclave of Greek culture or cuisine. San Diego, unlike Toronto, could not claim to have a flourishing Greek town. "I thought someone should open a really good Greek place," Katakalidis reflected in a January 31, 2005 interview with Nation's Restaurant News, recalling his thoughts at the beginning of the 1990s. "I was unemployed, so maybe that someone was me," he added.

From the start, Katakalidis envisioned a dining destination that the restaurant industry defined as "quick-casual." Quick-casual establishments occupied the middle ground separating full-service restaurants and fast-food restaurants such as Burger King and McDonald's, offering limited service, sit-down dining. Katakalidis came to dominate this niche of the Greek dining market, but his path toward dominance followed a conservative, methodical course. Katakalidis did not begin by opening dozens of restaurants annually; he took his time, carefully honing his concept before considering ambitious expansion plans.

Katakalidis turned to his family for help in starting his career as a restaurateur. He asked for recipes from his aunts and uncles and from his mother, upon whom he conferred the title of executive chef. He used the recipes to develop a menu, but he altered the various recipes in the same way he had while playing soccer professionally. He cut back on the oil and spices used in the traditional Greek dishes, making them less robust—a change he felt was necessary to attract American diners.

For a name for his restaurant, Katakalidis turned to Greek mythology. He, like the Apollo of lore, was attracted to Daphne, a woman whose unrivaled beauty and grace captured the hearts of all who saw her, none more so than Zeus' son, Apollo. Weary of checking Apollo's endless advances, Daphne asked her father, the River God, to intervene. The River God turned Daphne into a laurel tree, which Apollo used to create a wreath in her memory—a wreath that came to symbolize the pursuit of perfection, worn by Olympic athletes and world leaders.

The first Daphne's Greek Café opened north of San Diego, in Del Mar, in 1991. Like his changes with traditional Greek recipes, Katakalidis chose to stray away from convention with the décor of his restaurants. He avoided the typical blue-and-white color scheme of Greek restaurants in favor of designs that lessened the ethnicity of his establishments. The reasoning behind the decision, like the reasoning behind altering his family's recipes, was to broaden the appeal of his restaurants. Katakalidis was compelled to start Daphne's Greek Café because of his love of Greek cuisine and his pride in being Greek, but he discovered that greater success was achieved by toning down the taste of his food and the look of his restaurants. "When we open our units, they have a tough time in the beginning," Katakalidis explained in his January 31, 2005 interview with Nation's Restaurant News. "It's still ethnic, and there is still a huge learning curve associated with it. It's not burgers. It's not Mexican food." Accordingly, the décor of Daphne's Greek Cafés, which changed several times during the company's first 15 years in business, tended to project a less distinctive look, designed in a contemporary, European style.

Slow Expansion During the 1990s

The opening of the Del Mar Daphne's Greek Café was followed by the debut of other restaurants, but at a slow pace. Katakalidis' limited cash reserves and the need to accustom each market to Greek cuisine dictated a measured pace of expansion. Katakalidis added no more than several new units annually and never risked a great geographic leap. The company's 2,000-square-foot restaurants, which offered seating for 50 patrons and employed between 15 and 20 workers, slowly crept out of San Diego County during the 1990s. Daphne's Greek Café expanded in neighboring counties, moving north into Los Angeles, Orange, and Riverside counties during the decade.

As Daphne's Greek Café gradually developed into a chain, Katakalidis fine-tuned his concept. Changes were made in the menu and in design, making the company a pioneer in fashioning a quick-casual Greek restaurant chain. What emerged was a popular but small group of restaurants that cultivated a loyal following. Patrons were greeted at the door and asked if they had frequented a Daphne's Greek Café before. If a customer responded in the negative, he or she was offered a brief tutorial on the menu. Orders were placed at a central cash register and the selection, prepared in an open kitchen, was brought to the customer's table. Service was quick, with most patrons finishing their meal within a half-hour of entering one of Katakalidis' establishments.

Once a market was introduced to Daphne's Greek Café food selections, the reception generally was positive—although as Katakalidis pointed out, it often took some time for a new unit to draw in a steady stream of customers. Those patrons who came and returned chose from a menu that included the staples of Greek cooking. Among the offerings on a Daphne's Greek Café menu were: chicken-and-steak ka-bobs, featuring flame-broiled skewers marinated in lemon, herbs, and spices; gyros; a variety of pita sandwiches; hummus; Greek salads; spanakopita; rice pilaf; avgolemono (egg lemon) soup; and tzatziki sauce. The most distinctive of the items offered was something Katakalidis dubbed "Fire Feta," a creamy feta cheese with four varieties of peppers and 14 seasonings. Fire Feta was offered as a side order and as an addition to salads, sandwiches, and combination plates. The selections on the menu were moderately priced, with the average lunchtime ticket ranging between $6.50 and $7 per person and the average dinnertime ticket ranging between $8 and $9 per person. Most of the chain's restaurants offered a selection of wine and beer. The dessert menu consisted of "Daphne's Baklava," cinnamon and crushed walnuts in layers of fillo.

Expansion Accelerating at the Dawn of the 21st Century

After nearly a decade of moderately paced expansion, Katakalidis shifted into a higher gear in 1999. For the ensuing six years, Daphne's Greek Café recorded annual revenue growth of 30 percent as the chain expanded. By 2002, the chain had developed into a $17 million-in-sales enterprise, a total generated by the nearly 30 restaurants in operation by the year's end. Katakalidis slipped past the 30-unit mark in 2003, but the year's most noteworthy event was the geographic leap completed in the summer. For more than a decade, Katakalidis had restricted his expansion to southern California, fleshing out the presence of the chain in San Diego, Los Angeles, Orange, and Riverside counties. In July 2003, he ventured into the northern reaches of the state, opening a Daphne's Greek Café in Roseville, a suburb of Sacramento. The Roseville restaurant served as a test unit to determine whether additional restaurants would be established outside southern California. Katakalidis monitored the results of the Roseville unit for several months before approving further expansion. Within two years, four additional restaurants were opened in northern California.

The opening of the Roseville restaurant reflected Katakalidis' growing confidence in his concept. At around the time the Roseville unit opened, Katakalidis hired two executives to help him ramp up expansion and fully express his confidence. Ed Huban was hired as director of real estate, bringing with him years of experience gained while working for Pick Up Stix, a chain of Asian restaurants owned by Texas-based Carlson Restaurants Worldwide, Inc. Katakalidis also hired Julie Lanthier Brady, a marketer at Karl Strauss Brewery, as Daphne's Greek Café's senior marketing manager. Together, the trio began expanding the chain at a record pace, opening ten restaurants in 2003 and 17 new units in 2004, more than doubling the size of the company during the two-year period.

Company Perspectives:

Daphne's Greek Café is dedicated to serving the fresh, bold flavors of contemporary Greek cuisine in a warm and friendly atmosphere at reasonable prices.

As the chain expanded, each unit added close to $1 million in sales to its parent company's revenue volume. To draw in customers, the company usually staged what it called a "Big Fat Greek Fundraiser," an event inspired by the popular motion picture, My Big Fat Greek Wedding. Donations from invited guests at such events were given to a local charity in the community in which the restaurant was located. These grand opening celebrations typified the company's marketing strategy, which relied little on paying for advertising. "We market mostly by reaching out to the community," Brady remarked in a January 31, 2005, interview with Nation's Restaurant News. When a new store opened, employees frequently visited neighboring businesses, offering free appetizers. Occasionally, the addition of a new unit to the chain was advertised through a direct-mail campaign that targeted residences and businesses near the new restaurant.

With 50 restaurants in operation by the end of 2004, Daphne's Greek Café ranked as the leading quick-casual Greek food chain in the country. Daphne's Greek Café's nearest rivals operated thousands of miles away from the company's stronghold in southern California and operated far fewer restaurants. The chain closest in size to Katakalidis' enterprise was a Calgary, Alberta-based chain called Opa! Souvlaki, which operated 27 restaurants. In the United States, Daphne's Greek Café dwarfed the country's only other contender, a group of four restaurants called Louis Pappas Market Café, which was based in Tarpon Springs, Florida. "Daphne's has no comparable [quick-casual restaurants] to equate them with," the president of a restaurant consulting firm said in the January 31, 2005 issue of Nation's Restaurant News. "They are setting the barometer for what quick-casual Greek should be."

As Katakalidis prepared for the future, his expansion plans promised to widen the gap separating his San Diego-based company from others competing in the quick-casual Greek niche. He planned to open at least 20 new restaurants in 2005, the most ambitious undertaking in the company's history. Katakalidis' boldest move of 2005 was his first step outside California's borders, a move that opened up numerous new markets for Daphne's Greek Café. In early 2005, the company was building a restaurant in Scottsdale, Arizona, with its success, like that of the Roseville restaurant, promising the establishment of additional units in surrounding markets. In the future, the evolution of Daphne's Greek Cafe into a southwestern chain appeared likely, provided Katakalidis continued to record success in the quick-casual segment he dominated.

Principal Subsidiaries

Daphne's Greek Café.

Principal Competitors

Garden Fresh Restaurant Corporation; Panera Bread Company; Rubio's Restaurants, Inc.

Key Dates:

1991:: George Katakalidis opens his first Daphne's Greek Café in Del Mar, California.
1999:: The pace of expansion accelerates, fueling an annual growth rate of 30 percent.
2003:: A Daphne's Greek Café opens in Roseville, California, the first in the northern half of the state.
2004:: The chain is expanded by 17 restaurants, the most grand openings in a single year in the company's history.
2005:: Daphne's Greek Café begins construction of a restaurant in Scottsdale, Arizona, the first unit outside California.