The Melting Pot Restaurants, Inc.

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The Melting Pot Restaurants, Inc.

8810 Twin Lakes Boulevard
Tampa, Florida 33614
U.S.A.
Telephone: (813) 881-0055
Toll Free: (800) 783-0867
Fax: (813) 889-9361
Web site: http://www.meltingpot.com

Private Company
Incorporated: 1985
Employees: 2,300
Sales: $115 million (2004 est.)
NAIC: 722110 Full-Service Restaurants

The Melting Pot Restaurants, Inc., is a Tampa, Florida-based private company that operates the largest fondue restaurant chain in the United States, comprising more than 85 units, most of which are franchised operations. While the chain is a player in the romantic dining niche, Melting Pot's upscale dining experience is also a popular choice for social gatherings and corporate dinner parties. Customers do their own cooking at the table using inset burners while the wait staff provides the ingredients, regulates the heat, and observes for customer safety. Because a full-course fondue meal is a time-consuming experience, lasting at least two hours, table turnover is limited. However, Melting Pot makes up for this disadvantage by saving on kitchen staff due to simple prep needs and by commanding an average check of around $40, aided in large part by the sale of a broad line of wines, cognacs, cordials, and specialty drinks. At some units, the chain is also adding late-night business for customers looking for dessert fondue and wine after a night out. Unlike the simple fondue offerings from an earlier era, Melting Pot offers a four-course meal: choice of a cheese fondue as an appetizer, choice of salad, an entree, and a chocolate fondue dessert with such dipping ingredients as strawberries, bananas, pineapple, cheesecake, marshmallows, and pound cake. Entrees include steak, chicken, duck, lobster, shrimp, and a vegetarian offering. They are paired with such dipping sauces as gorgonzola port, lemon pepper, Louisiana hot sauce, teriyaki glaze, curry, horseradish, and garlic Dijon butter. The chain has also upgraded the cooking medium, which was once limited to peanut oil. Entree cooking can now be done Coq au Vin, which relies on Burgundy wine, mushrooms, garlic, and fresh herbs; Court Bouillon, a seasoned vegetable broth low in salt and cholesterol free; Bourguignonne, which employs canola oil and fondue batters; Majo, a Caribbean broth flavored with citrus and garlic. Melting Pot is run by chief executive officer Mark Johnston and his brother Robert Johnston, president and chief operating officer.

Fondue's Popularity Peaks in the 1970s

A Swiss tradition, fondue began to gain exposure in the United States following World War II. In the mid-1950s, New York's Chalet Swiss restaurant began cooking meat cubes in hot oil in a communal pot creating Fondue Bourguignonne, making fondue dining a common pastime. It became even more popular during the 1960s when the restaurant introduced chocolate fondue. As a result, the fondue pot became a standard wedding gift, one which, after being used on one or two occasions, was generally relegated to the closet, primarily because using it involved laborious procedures, including the preparation of sauces to achieve a variety of flavors. Fondue restaurants cropped up to relieve diners of the tedious chores of fondue cooking, and they prospered into the 1970s before customers grew tired of the limited fare and the novelty of sharing a community pot wore off. Coming in at the tail end of the trend, businessmen Bruce Knoechel and Roy Nelson opened the first Melting Pot restaurant in Maitland, Florida, close to Orlando. It was a modest operation consisting of four tables and a two-course menu: Swiss cheese fondue and beef fondue done in the Bourguignonne style. The restaurant was successful enough to lead Knoechel and Nelson to open a second location in Orlando in 1976.

Mark Johnston, while working his way through college, was an employee at the Maitland restaurant. He became enamored with the fondue concept and convinced the owners to grant him a franchise. Using his savings, he tried to open restaurants in Orlando and Tampa, but he was unable to obtain a liquor license in Tampa and entering the Orlando market proved too expensive. It was not until 1979 that he was able to bring in his brothers, Mike and Bob, the latter still in high school, and, with $14,000 they scraped together, open the first Melting Pot franchise restaurant, located in the basement of a Tallahassee oyster bar. The fondue restaurant did well enough to enable the Johnston brothers to open their second Melting Pot two years later, in 1981, in a Tampa location.

Johnston Brothers Take Over Melting Pot in the Mid-1980s

Aside from the Johnston brothers franchise, Knoechel and Nelson franchised only one other unit, which opened in Gainesville, Florida, in 1984. The Johnston brothers wanted to add more restaurants, but they also wanted to be part of a franchise system set up and committed to growth, something that Knoechel and Nelson were not prepared to do. Thus, in 1985, the brothers bought out the Melting Pot founders, who then served as mentors to the young men, encouraging them to pursue their goals and buoying their belief in the Melting Pot concept. The Johnstons formed a franchise development company and quickly added two new company-owned stores, in Clearwater and St. Petersburg, Florida. Trying to run their restaurants while also acting as a franchiser proved difficult, resulting in slower growth than the brothers anticipated.

The next decade turned into a trial-and-error phase, as the brothers added franchised units (generally one or two a year, often awarded to regular Melting Pot customers) and refined the elements of the Melting Pot concept. In some respects, they reinvented the fondue niche, their goal being to create an upscale restaurant with a high check average. To support greater franchising, they beefed up their business structure, in particular the training program for franchisees. They also honed their marketing approach, which in the beginning was based almost solely on simplistic considerations of demographics and location and led to the establishment of Melting Pots in some areas that were either too seasonal or transient. In addition, the chain often settled for B sites in shopping centers that had limited visibility. These units were ultimately closed. The marketing message was also in need of fine tuning, originally positioning the restaurant as the kind of place to bring out-of-town friends who did not have a Melting Pot at home. The Johnstons conducted focus groups of loyal customers, first-time customers, and customers who had not dined at a Melting Pot recently. Out of the accumulated information, the company was able to determine the nature of Melting Pot's core customers, then employed more sophisticated demographic tools to locate markets with the highest concentrations of that customer profile. Melting Pot now gravitated to A sites that had more drive-by traffic and were located in high density bedroom communities with larger amounts of disposable income. As a result, sites fitting this new profile experienced much higher sales. The new marketing message portrayed Melting Pot as the kind of special restaurant that out-of-town friends would want to visit because their community had one and they liked the social experience. The Johnstons also wanted to portray Melting Pot as a place to go any night of the week, while at the same time maintaining the focus on the event-dining experience Melting Pot had to offer.

Another key element in refining the restaurant's business model involved the menu. In the early years, the chain added variety but made the mistake of offering combinations that allowed customers to sample every item on the menu, thus offering them little incentive to make a return visit in the near future. Melting Pot therefore reworked its offerings, which helped create repeat business. In the 1990s, when diners had become more health conscious, Melting Pot supplemented the menu with such items as pork, duck, lobster, and shrimp in the Bourguignonne style. The chain also added the other fondue styles of cooking meat cubes in broth.

By 1995, when the chain totaled 26 units, Melting Pot was ready to ramp up its franchising efforts. In that year, the company introduced a new training program for franchisees, and throughout the rest of the 1990s Melting Pot opened three to five new restaurants each year. After initially focusing on Florida, Melting Pot branched out to Georgia and the Carolinas before targeting the Midwest and Mid-Atlantic states as well as Arizona. Of the new restaurants that opened in 1996, for example, one was in Buffalo Grove, Illinois, and another in Columbus, Ohio. The chain enjoyed particular success attracting franchisees who did not have experience in restaurant ownership and management because their lack of expertise could be remedied by the company's strong training program. Furthermore, the Melting Pot concept was relatively simple and low in cost for an upscale dining operation. As one franchisee explained to Chain Leader in a 2003 company profile, "What was appealing is that overhead is low. There are no ovens, fryers or hood systems. And you don't have to hire a chef and give him 50 percent of the profits to develop great menu items."

Company Perspectives:

The Melting Pot provides a unique, upscale and intimate dining experience with its assortment of fondue, cooked at the table by the guests. It is the perfect location of a romantic evening, corporate dinner party or friendly gathering.

This mid-1990s expansion phase was supported by across-the-board upgrades. In 1997, a new logo was introduced as well as a new ad campaign that emphasized the refined message that Melting Pot was an out-of-the-ordinary dining experience not limited to a special occasion but perfect for any night of the week. The chain rolled out a revamped menu in the same year that added eight new entrees. In addition, the wine list was expanded. Consumer research also resulted in other changes: larger portions, better presentation, and front of the house staff was increased. A server assistant was introduced to cater to guests, making sure water glasses were refilled, serving coffee, and helping out as necessary. Moreover, the chain updated its look, which was intended to make the decor more attractive to male customers. All too often, women had come to a Melting Pot for a festive night with their friends, but they failed to return with boyfriends and husbands. The chain's earth tones were now replaced with bolder colors: purple, mustard, and gaucho green. Beige floor tiles gave way to carpeting, tables and booths were enlarged, and lighting made brighter. To keep the conversion costs to a minimum for franchisees, Melting Pot hired a Tampa company to build the tables, booths, and lights, which were then trucked to the restaurants and installed by representatives of the designer and builder. New restaurants also took advantage of the arrangement to reduce the time it took to open from 120 days to 90 days.

Accelerated Growth in the 2000s

In 2001, Melting Pot picked up the pace by adding new restaurants, opening ten to reach 46 units in size, only four of which were company owned. The chain opened another ten in both 2002 and 2003. To keep the concept fresh, in 2002 Melting Pot hired a new director of design, Amy Gil, who brought a new interior look to the restaurants, which now included artwork from local artists. "As for interior colors," in the words of Chain Leader, "the older deep purple, mustard yellow, dark olive and rust are being replaced with softer purples, light olive and burgundy. Ceilings are painted a mossy gold. . . . 'We want to have a feeling that makes a guest say, "It's all about me",' says Gil. 'They have to be comfortable enough to sit for several hours.' " One challenge she faced was creating intimate spaces for couples while accommodating large parties, since, unlike other restaurants, the electrical wiring at Melting Pot precluded moving tables together. The new interior design allowed Melting Pot to accommodate groups from eight to more than 40, while glass panels between booths provided the privacy couples desired.

Another part of the ongoing refinement of the Melting Pot concept involved the beverage program, with alcohol accounting for about 20 percent of sales. Wine rooms were added so that some of the restaurants were able to offer as many as 250 different wines. In addition to achieving greater variety, the chain helped to boost alcohol sales, and check averages, by pairing appropriate wines with entrees in the menu. Servers were also trained to make wine suggestions.

Melting Pot reached the $100 million mark in systemwide sales in 2002. The expansion pace again picked up in 2004 as the chain added 16 new locations, and in 2005 it planned to celebrate its 30th anniversary by opening its 100th restaurant. By 2010, the Johnstons hoped to reach 175 units, primarily taking advantage of opportunities in the Midwest and West, as well as some growth possibilities in the Northeast, in particular Long Island. The company was also exploring the possibility of taking the Melting Pot concept international.