Rusty Pelican Restaurants Rebound : Dining: Under a new chief executive officer, the 31-unit chain--which lost two-thirds of its customers between 1987 and 1990--is regrouping with lower prices and an expanded menu.

Until recently, comparing Rusty Pelican restaurants to Carl’s Jr. would have been like saying you should shop Gucci for bargains.

But Gregory Dollarhyde, chief executive officer of Rusty Pelican Restaurants Inc., doesn’t mind making that comparison after a yearlong effort to reshape the 31-unit seafood chain. The San Juan Capistrano-based restaurant operator who was once too stuffy to serve fried shrimp--it wasn’t healthy enough--now compares prices for its quick-service lunches to those at the Carl’s Jr. hamburger chain.

The low-priced lunches are just one of the changes Dollarhyde has made since he was called on to help save a company that was drowning in losses and suffering from the disappearance of two-thirds of its customers between 1987 and 1990.

“We got lackadaisical,” said Dollarhyde, a former financial executive at Rusty Pelican who left in 1987 after an ownership change and rejoined the firm last year. “We thought, ‘We sell great fish. We can keep raising prices, and people will keep coming back.’ But they weren’t coming back.”

A new advertising campaign, a revised menu and new management are putting the seafood chain back on course. This holiday season, Dollarhyde said, Rusty Pelican restaurants served more meals than last year, despite having two fewer restaurants in the chain. And comparable store sales--which compare current to year-ago sales at restaurants--rose in mid-February for the first time in four years.

“We’re recuperating now,” Dollarhyde said. “We’re out of intensive care.”

If the trend holds, Rusty Pelican will have succeeded in repositioning itself during a difficult period for the nation’s table-service restaurants. Those restaurants lost 0.4% of their sales in 1990, according to National Restaurant Assn. figures, as people responded to hard economic times by switching to less-expensive fast food and home-cooked meals.

But Rusty Pelican’s problems began long before the current recession. In 1984, the company spent heavily to open restaurants in distant locations like Dallas, Seattle, Kansas City and Chicago, putting a squeeze on profits. In 1986, the last year Rusty Pelican was a public company, it had losses of $300,000. The company refused to provide more recent financial information.

The chain continues to be burdened by a $25.6-million debt load incurred in a 1987 leveraged buyout by Paragon Restaurant Group in San Diego. Paragon, renamed Green Leaf Ventures Inc., also owns the 19-unit Carlos Murphy’s restaurant chain and has an interest in Pacific Basin Foods, a San Diego food-buying consortium.

Since the ownership change, Rusty Pelican has grown from 21 to 31 restaurants, about half of which are in Southern California, including four in Orange County. The company also manages six Pedro’s Mexican-style restaurants in Northern California.

Rusty Pelican was conceived as a fancy fish house and bar, the type of place where you’d take a potential client or a first date. The restaurants’ menus featured as many as 20 fresh-fish offerings daily. So serious was Rusty Pelican about serving only the freshest seafood that it sometimes had swordfish flown in from the Gulf of Oman when no Pacific Ocean swordfish was available.

Such extravagance didn’t come cheaply, and the restaurants’ menu prices reflected that.

Then, in 1988, a new rival came ashore offering much lower prices than Rusty Pelican. Red Lobster opened 28 restaurants in Southern California, just as the tide was turning in favor of the more casual dining experience Red Lobster offered.

Customers defected, and Rusty Pelican management was forced to act by offering lower-priced pasta and poultry dishes and by broadening its menu to please more people, with, for example, prime rib and a baked potato.

“The perception by the public was that the (Rusty Pelican) menu was becoming almost unaffordable,” said Forrest Hunt, a former financial officer for Rusty Pelican who now works as a restaurant consultant with the Deloitte & Touche accounting firm in Irvine. “They have certainly addressed that” perception.

At the same time, Dollarhyde has kept fish at the center of the menu, to trade on Rusty Pelican’s 23-year-old reputation for fresh seafood.

He is also trying an “equatorial” menu theme. The idea is to add dishes from countries like Mexico, Thailand and China that use light, spicy sauces.

Such dishes as blackened calamari tacos and Egyptian chicken in curry marinade have been a hit. But one customer in Brea didn’t like a North African crushed-grain side dish and advised Dollarhyde to “lose, lose the couscous.”

Dollarhyde has also moved to make the restaurants more visible. The company has hired a public relations firm and developed an advertising campaign at a cost in “the low six figures.” One success was direct-mail marketing of the restaurants’ $9.95 Sunset Dinners, which had been around for years but weren’t promoted. Rusty Pelican is now serving about 8,000 of the early dinners a week, double the number it did last summer.

To attract business lunchers, Dollarhyde has introduced special lunches served in the restaurant bar. The restaurant promises to serve the meals within seven minutes or they’re free. With the lunches costing between $3.95 and $5.95, Dollarhyde compares the price and service to Carl’s Jr., which has an outlet just across the parking lot from a Rusty Pelican restaurant in Irvine.

Rusty Pelican has also turned to special promotions to boost sales, such as a recent “Ex-crab-a-gan-za” special--2 pounds of Alaskan crab legs for $14.99.

“I was in a couple of weeks ago and saw the new menu, and I was really impressed,” said Janet Lowder, a restaurant consultant based in Rancho Palos Verdes. “The prices were lower, and they seemed to be doing a good business.”

This is Dollarhyde’s second tour of duty at Rusty Pelican: From 1985 to 1987, he was chief financial officer. He engineered the sale to Paragon, which ended frequent shareholder complaints about the company’s falling stock price. Dollarhyde left Rusty Pelican when Paragon replaced top management after the sale.

He worked as a financial consultant for a year, handling some business for Paragon. Dollarhyde then went to work for Pizza Hut Inc., a Pepsico subsidiary, as vice president and general manager of new-concept development. He helped put together a deal announced in December, 1989, to have a large number of Winchell’s Donut Houses converted to Pizza Hut home-delivery outlets.

Early last year, amid rumors that Rusty Pelican would soon be bankrupt, Paragon officials asked Dollarhyde if he was interested in returning as chief executive. Intrigued by the challenge and autonomy, he accepted.

“When I left in 1987, the economy was different,” he said. “There were fewer competitors and more people spending money. When I came back, Rusty Pelican was running the risk of becoming an event house--a place you go twice a year on an anniversary or a birthday. You can make money as an event house, but you’d better be the only one in the neighborhood.”