Marie Callender’s Restaurant & Bakery, Inc.

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Marie Callender’s Restaurant & Bakery, Inc.

1100 Town and Country Road
Suite 1300
Orange, California 92668-4626
U.S.A.
(714)542-3355
Fax: (714) 542-8078
Web site: http://www.mcpies.com

Private Company
Incorporated :1964 as Marie Callender’s Pie Shops, Inc.
Employees :10,000
Sales :$270 million (1997 est.)
NAIC : 72211 Full-Service Restaurants; 722211 Limited-Service Restaurants

Marie Callender’s Restaurant & Bakery, Inc. is one of the largest restaurant and bakery chains in the western United States. Recognized as a premier pie making enterprise, the company’s 156 restaurants, 56 franchises, and several smaller operations are located in 13 states and Mexico, namely Arizona, California, Colorado, Idaho, Illinois, Minnesota, Nevada, New Mexico, Oregon, Texas, Utah, Washington, Wisconsin, and Mexico City. Marie Callender’s offers customers over 30 varieties of pies, which are baked fresh daily at each restaurant. The company stresses the high level of quality in their products, using real whipped cream, farm-fresh eggs, fruits, and chocolate. The company also offers full dining menus for breakfast (at limited locations), lunch, and dinner.

1948: All-American Pie

Marie Callender’s was founded in Long Beach, California, in 1948 when Marie Callender was encouraged by husband, Cal, and son, Don, to pursue the American dream and roll her prodigious pie-making skills into profits. Marie was a South Dakota native who had moved to southern California and married at the age of 17. She worked in the food service industry at a delicatessen prior to making the decision to sell the family car for $700, using the funds to rent a converted World War II Quonset hut that would become the site of the first Marie Callender’s bakery. The remaining cash funded a down payment on a small oven, refrigerator, rolling pin, and various baking utensils. Marie was soon in business, baking whole pies for wholesale customers. Seats were removed from a 1936 Ford sedan to make room for the stacks of pies that would be delivered to local restaurants. All three family members worked 13-hour shifts once orders that originally numbered ten per day soon swelled to 40 per day—and within two years, the business had grown to 200 pie requests per day, a volume which necessitated the purchase of a truck and a mixer.

Fifteen years later, the business had grown substantially to the extent that several thousand pies per day were created for several restaurants. Although production had grown considerably by 1963, profits were less than desirable, prompting Don Callender to begin formulating plans for the construction of a retail pie and coffee shop in Orange, California. In that same year the company incorporated and was renamed Marie Callender’s Pie Shop, Inc. The retail business at that time sold only whole pies that were made fresh daily, priced at 95 cents apiece. By offering free slices of pie and coffee the new restaurant enticed many new customers. The Marie Callender’s formula proved so successful that soon a second small retail shop was opened in La Habra, then another in Anaheim, California.

The company expanded into other menu items in 1969, beginning with hamburgers, ham stacked sandwiches, salads, chili and cornbread, and grew to include a wide variety of homestyle meals. A year later the family-owned business had grown to a chain of 26 restaurants located primarily in southern California. Then a franchise restaurant was opened in Houston and another in Las Vegas. Cal became the full-time financial manager, while Don continued with expansion plans. Don was concerned with creating a comfortable, homey image for the company, one in keeping with the associations people made with home-baked pie. Stylistically, the restaurant interiors imitated a cozy English country decor. Don expressed concern for the integrity of Marie Callender’s architectural design, emphasizing that their restaurants should not have a “cookie cutter” look or feel, and opted to build businesses that were varied in their architectural ambiance, reflecting a niche between the casual and family dining sector. Finally, in 1986, having fulfilled goals and imminent expansion plans, Don negotiated the sale of the family chain to Ramada International for over $80 million.

Investment Bankers Go for the Dough, 1989

According to Kelly Barron of the Orange County Register, following Ramada’s buyout of Marie Callender’s, “the hotel operator did little to build upon the chain’s homespun image and 25 varieties of fresh-baked pies.” Don Callender sued Ramada and the management at Marie Callender’s contending that “they breached a contract allowing him to stay in operations,” according to Barron. The suits were settled in 1994, ending Don Callender’s involvement in the chain. Following unsuccessful attempts to develop the company, Ramada sold its share of the debt-laden chain to the Wilshire Restaurant Group, a shell company made up of insurance companies and individuals, who added another $60 million to the debt load. The Wilshire Group prudently began to concentrate efforts on improving employee training and service. Despite their efforts, interest payments overwhelmed profits and the company defaulted on its loans. Management began courting investors to either buy or recapitalize it. In 1993 Saunders, Karp, and Megrue, LP, a New York-based firm, bought a majority interest (68 percent) in the company with an investment of $30 million. Existing management owned 15 percent, leaving a 17 percent ownership by other investors. The firm had other resources with additional holdings in Mimi’s Cafe and the apparel retailer Charlotte Russe. Marie Callender’s restructured its debt after obtaining a new $15 million credit line.

Under the new leadership, Leonard H. Dreyer was promoted to president and chief executive of Marie Callender’s, which at that time consisted of 145 units. Launching an effort to repair the damaged chain, Dreyer closed several underperforming stores and opened no new ones. According to Melinda Fulmer of the Orange County Business Journal, at the point when Wilshire Restaurant Group bought the chain from Ramada, industry onlookers commented that “Marie Callender’s had the smell of death” about it, due in part to bad franchisee relations, erratic store density, and heavy debt from the leveraged buyout. Streamlining operations, the new management sold its frozen food line to Conagra Inc. for about $140 million. Dreyer implemented ways to cut costs, tightened quality controls, and strengthened relations with franchisees. He focused on what made the restaurant work in the early days and added menu items to keep up with evolving tastes and trends. Under its newly focused direction, Marie Callender’s once again maintained its market share with reported 1993 revenues of $240 million.

In homage to the quality of products originated by “the” Marie Callender, Dreyer continued to endorse and use her original pie recipes for most of the 33 varieties of pies it made. Fulmer of the Orange County Business Journal reported that “Dreyer never met the lady who spawned the chain of restaurants, who died of cancer last year (1995) at age 88.” The company kept their core menu but added new items in an attempt to attract a broader customer base, recognizing that competitors were offering extensive menus, including specialty desserts. Marie Callender’s expanded its pie line in time for the 1994 holiday season, with the introduction of its superpremium pies, satin pies described by the company as “one up on silk pies.” Offering desserts not readily available at home or elsewhere, they unveiled a “superpremium” pumpkin version on a white chocolate base, and a peanut butter pie on a dark chocolate base. Sales heated up when the company began offering fresh-roasted and carved-to-order turkey, rather than the precooked turkey previously offered. The company attempted to offer something for everyone: veggie burgers for vegetarians, low-fat items for the weight-conscious, and traditional fare for average consumers. They added sliced turkey breast sandwiches with choices including roasted sweet peppers, romaine lettuce, and roasted garlic mayonnaise on focaccia; turkey Caesar salad; and turkey luncheon with apple-walnut stuffing, giblet gravy, mashed potatoes and vegetables.

The company continued to grow at a steady pace, boosted by customer loyalty and the home-cooked image. Fulmer reported in the Orange County Business Journal that “the chain comes closer to white tablecloth restaurants than competitors Coco’s, Carrows, and Denny’s, with their made-from-scratch foods and ambiance ... but customers are reluctant to pay the price associated with this quality.” The company found it difficult to exceed the $10 price point, though overhead costs, particularly real estate prices, continued to rise. As part of its new marketing strategy the company began to explore the advantages of building smaller units. Some of the larger flagship units were built 15,000 square feet in size, but the newer prototypes were designed at an average of 5,000 square feet. In addition to scaling down their regular formats, the company also began operating their even smaller format, Best of Marie’s concept in food courts which were typically located in malls and universities. The food court concept was an attempt to expand the market base to include 20-year-olds. Although the Best of Marie’s were not widely profitable, they functioned as a marketing tool for the larger restaurants.

Company Perspectives

Our dedication remains to deliver the freshest and best tasting pies this side of the Mississippi, to each and every customer that passes through our doors. A primary goal for the future is centered around the ongoing expansion of the chain and the gradual evolution of the menu and foods to meet the tastes of today’s customers while maintaining the commitment to made-from-scratch, high quality foods that has been the cornerstone of tradition for the past 50 years.

Expansion: A New Flavor for the 1990s

As part of their major expansion plan Wilshire Restaurant Group purchased the restaurant chain East Side Mario’s from PepsiCo in 1997. Gerald Tanaka, president of Mario’s, became senior vice-president of Marie Callender’s and helped implement a restaurant concept he termed as “lighter, brighter, more casual than our traditional dining rooms,” according to Don Nichols of Restaurant Business. Attempting to attract younger clientele, the company modernized its “look” and opened ten new locations in California, Nevada, Oregon, and Texas. The newer units could seat approximately 175 people, with one-third of the space sectioned in a cafe setting. Geographic locations in smaller markets with less competition, such as Waco, Texas, were considered. Also, in addition to the regular Calender’s menu items, the cafes served beer, wine, gourmet coffees, and espresso. A food-to-go counter was expanded to attract young double-income families, which immediately produced an average 20 percent of revenue, including pie takeouts. Tanaka told Don Nichols of Restaurant Business that “East Side Mario’s is newer and sexier, but it wouldn’t make sense for us to focus all of our attention on it.” He added that “Marie Callender’s is a stable concept with a long history of success that we can grow nationally and internationally.”

Marie Callender’s unexpectedly came into the limelight in connection with a sensationalist news story. It was discovered that prior to their mass suicide, members of the San Diego-based Heaven’s Gate cult had apparently eaten their last meal at a Carlsbad, California Marie Callender’s, which landed the company on popular national television shows such as “Jenny Jones” and “Extra.” The national coverage coincided with the largest expansion undertaken by Marie Callender’s in a decade.

Management continued to assess the company’s position and the reasons for its steady but relatively slow growth of five to ten percent since 1995, despite the fact that surveys showed that 85 percent of consumers recognized the Marie Callender’s name. One of the internal challenges facing the chain involved the lack of an advertising agreement among its franchisees, making funding and approval for advertisements unnecessarily difficult. Also, the differing designs in restaurant layout complicated the uniformity of menu presentation, especially in locations with counter seating, which limited menu options. Dreyer began spending a great deal of time visiting restaurants and talking to employees in order to get a ground-level perspective. In order to remain competitive the company continued searching for smaller regional chains that could be converted to Marie Callender’s restaurants, particularly in the Midwest and Southeast.

Complementing his strategic financial aptitude, Dreyer’s unique personal style served as an inspiration to company employees. Dreyer told Fulmer of the Orange County Business Journal :“I believe that from the top down it’s got to be an environment that nurtures the employee,” adding, “If they’re not happy, the customer won’t be happy.” Known for his offbeat humor, Dreyer has built a reputation in the industry for his antics. He occasionally dresses up in strange outfits such as a serape and a sombrero for company sales contests. Once, while still working for Denny’s, he was given a camcorder at a finance managers conference and asked to film a commercial for the chain. He produced a “commercial” dealing with the unlikely theme: Why ax murderers like to eat at Denny’s, complete with props. Every Fourth of July, according to Fulmer, Dreyer wears a T-shirt decorated like a Marine Corps uniform and marches from his home, leading his neighbors in a parade down the street to the tune of “The Halls of Montezuma,” which he blasts from his home stereo. Distasteful or not, he became a company icon of energy, leading the chain from stagnation into a new era. The company celebrated its 50th anniversary in 1998, while planning for 12 more full-service stores in the Pacific Northwest, Texas, and in the Southeast. Adapting to the times, Marie Callender’s developed homestyle takeout meals targeting busy two-job families. For the future, Dreyer has indicated the possibility of raising additional capital by taking the company public. The company would like to see annual revenue growth rise to the ten to 15 percent level. According to Fulmer, Dreyer said that an offering “would be the exit strategy majority-owner Saunders, Karp & Megrue, L.P. eventually is looking for. If they could find a buyer out there that would make sense to buy Marie Callender’s, they might,” he continued, “But the more likely strategy would be an initial public offering. We realize that the public marketplace is where you get the most value out of the company.”