Dick Clark Tries Theme Variation for Restaurants

These are tough times in the theme restaurant business, but Dick Clark Restaurants Inc. thinks it still has a formula for success despite fierce competition and the financial missteps of some other themed chains, notably struggling Planet Hollywood.

Clark’s eight-restaurant chain of American Bandstand Grills has recently beefed up its staff with the hiring of a director of culinary operations and a director of restaurant operations, both new positions.

The chain, a wholly owned subsidiary of Burbank-based Dick Clark Productions Inc., operates the eight restaurants primarily in the Midwest, the East and Texas. A ninth location, scheduled to open soon in the Chicago suburb of Schaumburg, Ill., will be called Dick Clark’s AB Diner.

Paul R. Cyr, the new culinary chief, said the company has already revamped the menus at five of its eight restaurants and is moving quickly to change the others.

The chain hadn’t kept up with modern trends in the restaurant world and hadn’t focused on presenting the food as attractively as it might have, Cyr said.

Just one example: Roasted garlic has been a popular ingredient in mashed potatoes and other dishes for a few years now, but wasn’t being used at the Clark restaurants. The new menu includes roasted garlic in a number of dishes.

The revamped menu includes seven new items and changes to 24 of the 44 existing entrees, as well as more appealing presentations of existing dishes and a snazzier design for the menu itself.

The chain, which began in 1990, is based on the “American Bandstand” television show and the music industry, featuring vintage photos, gold and platinum albums, original stage costumes, concert programs, rock stars’ musical instruments, rare posters and other memorabilia, as well as American Bandstand Grill merchandise customers can buy.

Michael F. Hoffer, president and chief operating officer of Dick Clark Restaurants, said the company plans two other new restaurants this year and from four to six next year. Plans call for concentrations of locations in other markets before opening in California, where the company has no restaurants. “We’ll get here, but I’m not sure when,” he said.

While its restaurant business has grown steadily as a percentage of parent company’s sales, representing 27% of the Clark company’s revenue for the latest fiscal year ended June 30, 1998, Dick Clark’s Restaurants has been less profitable than the company’s entertainment operations.

In the third quarter quarter ended March 31, the parent company said, revenue and profits both declined in the restaurant subsidiary, including lower year-to-year sales at existing restaurants.

The figures are telling because the challenge for theme restaurant chains, analysts say, is to boost sales and profits on a year-to-year basis at existing locations. It’s relatively easy to increase overall company revenue by opening new restaurants, but so-called “same-store” sales and profits are considered a better barometer of how a chain is performing, they say.

To reinvigorate its restaurants, the Dick Clark chain in early May also hired Brad W. Lutz, director of restaurant operations.

Cyr said that while competition is fierce in the restaurant industry, the improved selection and quality of the food, along with reasonable prices, will bring customers back for repeat visits. Entrees range from $8.50 to $14.95, he said. “We still have a half-pound hamburger for under $6,” he said.

The price of a hamburger can be crucial to the success of a theme restaurant, according to restaurant industry analyst Allan F. Hickok of Piper Jaffray in Minneapolis.

“Consumers are smart. They’ll go once to see the celebrity memorabilia hanging on the wall, but they won’t go back if the restaurant doesn’t give them good value for their money,” Hickok said. “They don’t want to feel that they paid $10 for just a hamburger and a pickle. There has to be something, either food or entertainment, that keeps the consumer coming back.”

That’s not to say theme restaurants can’t work, but analysts say they are an even-tougher segment of a highly competitive industry.

“Theme restaurants can be very difficult. Themes can have very short life spans,” said David L. Rose, a restaurant industry analyst with Jefferies & Co. in Los Angeles. “Consumers are looking for a ‘Wow!’ factor when they go to a theme restaurant. Each time they go back to a theme restaurant, there is less of that ‘Wow!’ factor, so there has to be something else that brings them back.”

If consumers have a limited appetite for overpriced meals, Hickok said, investors have an even more limited taste for theme restaurants that don’t deliver profits. Also, investors have become wary of theme restaurants after some of the highly publicized problems of Florida-based Planet Hollywood, which is struggling to meet debt payments, and the lackluster stock prices of other chains, such as Rainforest Cafe, which is languishing near $5 a share after trading much higher in its early days.

The stock of Dick Clark Productions Inc. has remained relatively stable through the years and currently is trading at just under $14 a share, compared with a 52-week high of $23 and a low of $9. It closed Monday at $12.75. The company reported revenue of $28.7 million and a profit of $4.2 million for the third quarter, down from record quarterly revenue of $36.2 million and profit of $5.7 million for the comparable quarter last year.

Restaurant operations would be unlikely to have a big impact on the stock of the parent company, because restaurants remain a comparatively small portion of the overall business, Hickok said.

Nonetheless, with restaurant revenues and income both having declined for the latest quarter, Dick Clark Productions Inc. is hoping the recent changes will enable its restaurants to contribute more to the bottom line.