SCOTT BARNETT, President, Rusty Pelican Restaurants Inc.

Faced with changing customer demand, Scott Barnett is looking for ways to broaden the appeal of the upscale Rusty Pelican restaurants. The 38-year-old president of the San Juan Capistrano-based chain of 27 restaurants has launched experiments that include dividing restaurants in Brea and San Bruno into two eateries under one roof. He converted the company’s Ancient Mariner restaurant in Newport Beach into the a-la-carte-only Sand Dancer Grill. He was interviewed recently by Times Staff Writer Chris Woodyard.

What is the state of the restaurant industry these days?

The industry is searching for direction and there are a lot of exciting things going on. People are trying to shape a direction for their company or their restaurant.

How about in your segment of the industry?

We’re in the full-service segment of the industry, almost fine dining. The fine-dining segment is really hurting the most because people are looking for very strong price-value relationships; they are looking for convenience, and they want a more casual experience.

How do you deliver a good value when restaurants in your segment typically would have higher fixed costs?

It’s difficult to deliver strong price value . . . no matter what the segment--from fast food operators on up. If you look at Taco Bell, CEO John Martin was the first to introduce value pricing. That’s where you saw the 59-cent tacos. Value equals experience over price.

You’re talking like a finance man. What do you mean?

Lower prices while improving the overall experience. What Taco Bell has done has put a lot of money into service, a lot of money into streamlining their operation, more focus on their counter help. In our part of the business, you have people with high expectations about what they expect to get. If you fail to deliver, it’s suicide.

How often are customers coming to restaurants in your category?

Only about 9% of all eating out is in fine dining. The rest of it is in fast food or informal service. The frequency of visits for a fast-food restaurant compared to someone in our category is very different.

What do you look for in locations?

We’ve located in areas where we think we’ll do a strong dinner business and business lunch. We draw from the hotels, the office buildings. All Rusty Pelicans are consistent in that way.

More companies are cutting back on employee expenses, lunches included. What kind of impact has that had on the industry?

It has impacted the industry to some degree, but we don’t have any figures on how much it has hurt us.

What about the cutback in alcohol consumption?

What we try to do is offer an array of nonalcoholic options, which believe it or not are selling pretty well. Sharp’s (a nonalcoholic beer) has overtaken a number of beers on our list. We have a significant amount of nonalcoholic wine. In order to build your check, you have to try to get people to move into drinks. We can’t change the world. People aren’t drinking as much and they are not going to drink as much again for a long time.

Baby boomers, as they grow older, have this ‘I don’t want to age’ attitude that includes less drinking. You see people trading from hard liquor into beer or wine, and trading from beer or wine into nonalcoholic drinks.

What do you think of restaurants like the Sizzler chain, specializing in meat entrees but having since branched out into other foods?

What they did is put themselves into that salad bar, food court kind of thing. They are having trouble. They created a monster with these bars--salad bars, taco bars and what have you. They put so much food in front of customers that they have figured out, ‘Hey, this is really good value’ and it was really too good a value. And that’s a trap you can get into. What they are doing now is trying to get back to a steak orientation.

What do you think of the concept of the soup and salad buffet restaurants like Souplantation? Are they a good idea?

It appeals very strongly to women. It’s very healthy. It delivers value. I think there’s a point where you have to say, ‘I can deliver value, but at what price?’ There’s a very delicate line you have to walk where you get value and price in a relationship where the customer says, ‘Yep. It’s right. I should be there.’

How important are desserts to sales?

Right now, very important. I think dessert trays have gone up about 1,000% in terms of the frequency in which they are offered in the last couple years. Full service restaurants are offering desserts to build the check. The growth in average check, which used to go up fairly steadily, started to stop by 1989. Customers chose to spend less money.

Are restaurants in your segment just trying to hang on to their present units, or is there growth?

There’s growth going on. In fact, we’re actively seeking sites. But we’re not looking to build from the ground up. We’re looking for conversions of other restaurants. And a lot of restaurants are turning over.

What do you think of theme restaurants, such as Planet Hollywood or Hard Rock Cafe?

Themes come and go. . . . They will have to stand upon their own. I think Ruby’s Diner is an example of a restaurant that is high quality and will stand on its own. I think Planet Hollywood, Hard Rock, Hot Rod Cafe and all the other knockoffs of Hard Rock, if they provide a high level and consistently stay moving with the trends and are anticipating customer’s needs, they will succeed.

On the difficulty of reaching new customers. . .

“It’s essential for a company to continue to change and react to customers’ preference. You have to lead, rather than just be another me-too.”

On the renewed popularity of beef. . .

“I won’t say beef is difficult to prepare at home, but it’s kind of a hassle. You’ve got to set up the barbecue or do the roast. If you look at beef-based restaurants, they’re doing real well.”

On change. . .

“If you sit back on your laurels, and you don’t stay ahead of the game, you’ll be in trouble. In this business, change has to be your friend. You’re putting on a Broadway show every night and sometimes you have to just break tent and start all over.”

On delivering value. . .

“People have less disposable income. You need to give a better positive experience for the amount of money spent.”