The two Wilson brothers weren’t always big on health food. Before they arrived in Southern California, they were among the world’s largest independent bottlers of sugar-laden Pepsi-Cola, with exclusive rights in parts of Mexico and all of South Africa.
One brother, Sheldon, also was owner and president of Rheingold, a New York brewer.
Now, however, Erwin and Sheldon Wilson are taking a different tack. They say that last month, through one of their Encino companies, they paid General Mills “several million dollars” for exclusive franchising rights to the Good Earth health-food restaurant chain, which they hope to expand nationwide.
General Mills, which acquired Good Earth in 1980, has been closing or converting its roughly 20 company-owned outlets into Olive Garden Italian-style restaurants or Red Lobster seafood houses. The other 24 restaurants in the Good Earth chain will continue to be operated by franchisees.
Appeal Too Narrow
General Mills got out of health-food restaurants because the chain, although profitable, didn’t have broad enough appeal to support several restaurants in most major metropolitan areas, company spokesman Anne Powell said. That sort of concentration is necessary to cover the cost of television advertising, she said.
Analysts said the chain probably wasn’t profitable enough for the big Minneapolis food products company and noted that General Mills already had been shedding assets and restructuring over the last year.
Most of the Good Earth restaurants are in California. As of June, there will be 17 in this state and seven in Arizona, Florida, Michigan, Minnesota and Oregon.
“Good Earth is probably the most prominent chain example of a health-food concept,” said Richard Martin, West Coast editor of Nation’s Restaurant News, a trade journal.
The Wilsons are already Good Earth franchisees, owners of eight Good Earth outlets in metropolitan Los Angeles through their Hewcal Corp. of Encino. Erwin Wilson, spokesman for the two brothers, said the restaurants are profitable.
15% Annual Net Profit
Good Earth’s average annual gross per outlet is about $2 million, he said, only a quarter of which is consumed by food costs. As a result, the outlets show a net profit of up to 15%, or as much as $300,000 annually.
“It’s very lucrative,” Wilson said. “We’re not serving steaks here.”
The restaurants also don’t sell much liquor, traditionally a major source of income in the business but one that isn’t quite in keeping with the Good Earth concept. Besides vegetarian food, the Good Earth offers meat, fish and chicken dishes.
Despite the Wilsons’ optimism, some observers doubt that there is enough demand for the 200 restaurants they plan to build nationwide within five years. William Maguire, an analyst with Merrill Lynch in New York, said that’s why General Mills decided to sell in the first place.
“The general aura of the health-related aspect of the chain was not transferable outside Southern California, except for a few isolated places,” he said. “It just couldn’t be expanded nationally very quickly.”
Wilson scoffs at that. He is sure that Good Earth can take advantage of Americans’ increased awareness of health and fitness by purveying its low-cholesterol menu. All it takes, he said, is marketing.
“People have the idea that this is hippie stuff,” said the 64-year-old Wilson, an affable, conservative-looking entrepreneur who would never be mistaken for Abbie Hoffman. “We had to convince people you could use a knife in here.”
The Wilsons, native New Yorkers, made their fortunes in the beverage business, but their entrepreneurial roots appear to go way back: Wilson claims that the brothers are direct descendants of Haym Salomon, the colonial financier who helped underwrite the American Revolution.
In 1978, the Wilsons joined Good Earth. They now have restaurants in Encino, Glendale, Marina del Rey, Northridge, Pasadena, Westwood (where they have two) and Woodland Hills.
Wilson wouldn’t say how much he plans to charge as a franchising fee but said it would take about $750,000 to start a new Good Earth, including the franchising fee and other expenses.
The Good Earth chain was founded in Reno by William Galt, who says he helped Col. Harland Sanders start the Kentucky Fried Chicken chain in the 1950s. But Galt says that both he and the late colonel were health-conscious all along.