SWH Corporation

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SWH Corporation

17852 17th Street
South Building, Suite 108
Tustin, California 92780-2142
U.S.A.

Telephone: (714) 544-4826
Toll Free: (866) 566-4647
Fax: (714) 544-7663
Web site: http:www.mimiscafe.com

Wholly Owned Subsidiary of Bob Evans Farms Inc.

Founded: 1978

Employees: 7,695

Sales: $240.5 million (2003)
NAIC: 722110 Full-Service Restaurants

A subsidiary of Bob Evans Farms Inc., SWH Corporation is a Tustin, California-based company that operates the Mimi's Café chain of more than 90 full-service restaurants. Mimi's Café combines a New Orleans-style French bistro with a family-friendly casual-dining concept. Although units are found in 13 states, spread from the West Coast to Florida, most Mimi's Cafés are found in California, where the first restaurant opened in 1978. Mimi Café has rarely spent money on advertising or promotions, preferring instead to devote resources to offering quality food and relying on repeat business and strong word of mouth. The restaurants, opened for breakfast, lunch, and dinner, feature a menu of some 100 items, with an emphasis on such American fare as meat loaf, pot roast, pork chops, pot pies, and hamburgers. Steaks and pastas are also available, as well as some Creole-inspired dishes. In addition, the chain offers a lengthy children's menu, while also serving beer and wine.

Origins in the 1940s

SWH was founded by Arthur J. Simms and his son, Thomas Simms. The elder Simms served as a bombardier and navigator in the European theater during World War II. After the war, he became involved in the restaurant business, an area in which he had some familiarity. His own father ran small hotels and cafés in Chicago during the 1920s and 1930s. Simms moved to Los Angeles, where he ran the commissary at MGM Studios. A dashing and somewhat flamboyant man given to wearing pink sport coats, Simms was well suited for Hollywood. He opened his first restaurant in 1952 with partner Bob Ehrman, a coffee shop called Ben Frank's which would form the basis of SWH. Two more Ben Frank's would open in the Los Angeles area, and Simms also ran another coffee shop chain called the Wooden Shoes. Thomas Simms had no intention of following his father into the restaurant business. Rather, he earned an aeronautical engineering degree from the University of California at Santa Barbara in 1970. However, he graduated during poor economic conditions, and, unable to find an engineering job, he opted to join his father. Among their ventures was a sidewalk café called the French Quarter, which they opened in West Hollywood in 1974. Two years later, SWH acquired an upscale coffee shop, The Kettle, located in Manhattan Beach. Unfortunately for the father-son enterprise, the prosperous days for coffee shops were beginning to fade, primarily due to higher rents that resulted in the need for a higher level of sales.

Arthur and Tom Simms, along with partners Brian Taylor and Paul Kurz, recognized that there was an opening in the market for a restaurant that was part coffee shop and part dinner house, combining the atmosphere of the latter with the value of the former, a niche that would one day be classified as casual dining. They turned to their French Quarter restaurant as a starting point for creating an eatery that essentially Americanized the European café. For a name they chose Mimi's Café. According to company lore, Mimi was a French woman Arthur Simms met during World War II. Purportedly, he flew dangerous spy missions over occupied France, but near the end of the war he was on the ground with the troops liberating a small French town. Here Simms met Mimi, with whom he had a one-night love affair. Although they would never see each other again, he would never forget her, and naming the new restaurant after her was a tribute to their short-lived romance. In 1996, a reporter for the Orange County Register asked Simms about the tale: "He looked surprised, whistled twice like a parrot, waggled his white eyebrows. 'That's press stuff.' " He explained that while he was serving as a bombardier and navigator, hardly a spy, he was in France in 1944 because his plane had delivered a general there. At a hotel party in a newly liberated French town, he did have an affair with a woman named Mimi, but it was far from an all-consuming romance. "I had girls in London, too!" he said, "I had a girl in Chicago." As for paying homage to Mimi by naming the new restaurant after her, Simms recalled telling his son, " 'What're we gonna call it, Mimi's or Gigi's?' Flipped a coin and it was Mimi's."

Mimi's Café Launched in the Late 1970s

The first Mimi's Café opened in December 1978 in Anaheim, California, near Disneyland. The restaurant was a major success, leading SWH to open a second Mimi's Café in 1981 in Garden Grove, California, followed by others in 1982 and 1983. The company then accelerated the pace for the next several years, opening a new Mimi's Café every eight months. By 1989, SWH had 11 of the restaurants in Southern California generating close to $30 million in revenues. The company also continued to operate Ben Franks, French Quarter, and The Kettle, which combined accounted for another $8 million in sales. There was no desire to franchise the concept of Mimi's Café, the partners preferring instead to maintain tight control. Because Mimi's Café was not an easy concept to execute, in the early 1990s SWH implemented a training program called Mimi's University. The five-day program of lectures, books, and exams was geared toward new front-of-the-house employees. Not only did the program instill the chain's philosophy and provide detailed information about the menu and how dishes were prepared, it served to weed out people who were not likely to fit in with the culture. As a result, Mimi's Café dramatically decreased its staff turnover rate.

Mimi's Café reached 16 units in 1993, at which point SWH decided to accelerate the pace of expansion. The company took on debt and opened another five restaurants over the next two years. During this period, SWH also began to update its decor. When the chain was founded, marketing studies showed that women were the key decision makers on where to dine, and, in keeping with these findings, Mimi's Café featured a lot of pastel colors, which also worked well in the high-density areas where the early units operated. However, as the chain expanded into suburban and rural markets, the color scheme no longer worked as well, especially with men. As a result, the chain went for a mainstream look, opting for more earth tones and primary color accents. Pink tablecloths and floral curtains were now replaced with green-and-white checked tablecloths and white curtains featuring stripes of primary colors. The chain also went for an even more rustic exterior look.

With an accelerated expansion pace came a need to move beyond the Southern California market, where finding appropriate real estate became more difficult. SWH first looked to Arizona, opening a restaurant in Scottsdale, then made plans to open a Mimi's Café in northern California, in San Jose. By this stage, at the end of 1995, the Mimi's Café chain was posting sales of about $50 million. SWH began harboring plans to spread the concept even further, perhaps taking it nationally, but such aspirations required help. In 1996, SWH found a partner in Saundera Karp & Megrue, a Stamford, Connecticut-based private merchant bank that had previously owned the Marie Callender's chain and other restaurant companies and was known to take a supportive, yet hands-off approach with its assets. SKM bought about 65 percent of SWH, allowing the elder Simms, Kurz, and Taylor to cash out. Thomas Simms, on the other hand, retained his 35 percent stake and continued to run the operation.

Over the next five years, the Mimi's Café chain more than doubled in size, entering 2001 with 49 stores, as sales topped $141 million. In addition to entering the northern California market, the chain spread to Nevada, Texas, and Colorado. In targeting new markets, SWH looked for family-oriented suburban areas with a high density of 35- to 64-year olds, markets where the company could potentially build a cluster of restaurants. Management continued to eschew the idea of franchising, instead securing partners with extensive restaurant experience in the area who were given incentives for growing the business.

New Owners and New Leadership in the 2000s

In October 2000, Arthur Simms died at the age of 82, marking the end of an era. By this point, his son Thomas was reaching the limit of his ability to manage a chain exceeding 50 units with national aspirations. Simms told Nation's Restaurant News in 2003 that the business exceeded his operational expertise "when the brand pushed into Texas in 1999, opening four restaurants in 13 months. 'Texas was my Waterloo," he admits, explaining, "My capabilities ended when we got out of the Southwestern region." He now sought out the services of an executive able to take the Mimi's Café chain to the next level. In 2001, he recruited and hired Russ Bendel to serve as president and chief executive officer, while he stayed on as chairman of the board.

Company Perspectives:

The Mimi's Café dining experience is more than just good food. It's friendly, helpful people and the warm, comfortable atmosphere of home. We serve you classic American dishes, made from scratch, in a colorful, French New Orleans-inspired atmosphere.

Bendel first worked in restaurants when he was just 15. A native of Philadelphia, Pennsylvania, he earned a degree in accounting from Florida International University and gave that field a try before deciding to return to the food service industry. He moved back to the North, where he became a manager at the Copper Door restaurant in Rockville, Maryland, and then for four years managed several restaurants in Philadelphia owned by an investment group. Next, he spent 12 years working for Marriott Corporation, becoming involved in a number of acquisitions and mergers and gaining a nationwide familiarity with the restaurant industry. After W.R. Grace Company acquired Marriott, he took a position with one of the owner's restaurant operations, in 1991 becoming vice-president of operations for El Torito Restaurants in Southern California. Bendel was then recruited by Outback Steakhouse in 1995 and helped the chain to establish a presence in the Southern California market. He next became involved in a joint venture between Outback and Roy's Restaurants in Hawaii, working in that capacity from 1999 to 2001. At this point, a former colleague at El Torito, Ed Bartholemy, who had become the chief financial officer for SWH, suggested that Simms meet with Bendel. The two men hit it off and Bendel was hired to shepherd Mimi's Café throughout he next stage of its development.

When Bendel took over in June 2001, the Mimi's Café chain numbered 53 units. Over the next three years, the company added another 27 units, moving into such new markets as Kansas City and St. Louis, Missouri; Tampa, Florida; Salt Lake City, Utah; Oklahoma City and Tulsa, Oklahoma; Albuquerque, New Mexico; and Colorado Springs, Colorado. For 2003, revenues grew to $240.5 million. To achieve this growth, SWH had to take on debt, which by 2004 had grown to more than $75 million. In May 2004, the company filed papers with the Securities and Exchange Commission to make an initial public offering of stock in the hopes of raising $85 million to pay down its debt. Piper Jaffray, CIBC World Markets, and Banc of America Securities were set to underwrite the offering, but it was not to be conducted.

In July 2004, SWH was sold to Columbus, Ohio-based Bob Evans Farms for $182 million, a price which included the assumption of the company's debt. The deal was considered a surprise development, but in truth Bob Evans' CEO, Stewart Owens, had been talking to Thomas Simms for three years. For Bob Evans, acquiring the Mimi's Café chain made sense because it occupied a different place in the market from that of the Bob Evans chain, plus it offered a unique concept that promised to be a strong growth vehicle while also being a good cultural fit. From the point of view of SWH, the sale to Bob Evans provided it with a deep-pocketed partner with a solid infrastructure, and it avoided the requirements and pressures that came with being a public company. The company would also be allowed to operate as an independent operation. Moreover, Mimi's Café's national aspirations were well served by its connection to Bob Evans, which was already operating in markets that the chain wanted to enter, in particular the eastern part of the country. In early 2005, the first Ohio unit opened. All told, the chain planed to open 15 restaurants in 2005.

Mimi's Café had achieved consistent growth for more than 25 years without the benefit of regular advertising. That situation was likely to change as the chain entered the next stage of its development as a subsidiary of Bob Evans. In December 2004, SWH hired Lowell Petrie to serve as its vice-president of marketing. Petrie had enjoyed tremendous success in raising the profile of the Denny's restaurant chain, which previously had been seen as little more than a breakfast joint. His immediate task at Mimi's Café, on the other hand, was to boost the breakfast business. Overall, he was likely to serve an essential role in building brand awareness for Mimi's Café as the chain entered new markets and continued to pursue its greater ambitions.

Principal Competitors

Applebee's International, Inc.; Brinker International, Inc.; Darden Restaurants, Inc.

Key Dates:

1978:: First Mimi's Café opens in Anaheim, California.
1981:: A second unit opens.
1996:: Investment bank Saunder Kapr & Megrue acquires a controlling stake in the company.
2000:: Company founder Arthur J. Simms dies.
2004:: Bob Evans Farms acquires the company.