After a failed attempt to expand out of state, Shells Seafood Restaurants has regrouped and rethought its menu and management. Its new chief executive talks about her plans for the Tampa chain.
By SCOTT BARANCIK
Published September 29, 2003
[Times photo: Stefanie Boyar]
Leslie Christon, the new CEO of Shells Seafood Restaurants, says she doesn't consider Outback's Bonefish Grill a competitor: "Shells is far more casual, where you could be comfortable coming in with your little league team."
TAMPA - The last CEO to try to fix Shells Seafood Restaurants brought a tough-love approach to the job . . . and a hatchet.
Eighteen troubled stores in the Midwest? Close 'em. Cluttered menu? Dump the bourbon street pasta and buffalo chicken salad. Management bloat at headquarters? Lay off a bunch. Money for TV advertising? Get real.
The Tampa seafood chain, now down to 28 locations, appears better for the bloodletting. The freefall in same-store sales has slowed, if not reversed. Cash flow is on the mend.
In 2002, Shells earned $677,000 on revenues of $47.2-million, compared with a $3-million loss on revenues of $57.3-million a year earlier.
But when CEO David Head quit Shells for rib chain Tony Roma's in June, he left to his successor the second and much more elusive part of any turnaround effort: the rebuilding.
What Shells needs now is someone who can revive its menu, boost staff morale and bring more customers in the door. It also needs a leader who can invent a new future for a chain badly scarred by a disastrous attempt in the late 1990s to expand outside its native Florida.
Reviving Shells won't be easy. But new chief executive Leslie Christon says she's up to the task.
Christon, 49, comes to the job after stints with Red Lobster, On the Border Cantina & Grill, Steak & Ale and a high-end grocery chain she says refined her palate, Sutton Place Gourmet of Bethesda, Md.
In an interview with the St. Petersburg Times, Christon talked about her plans for new dishes, new flavors and better service. She also said that although Wall Street may be watching, she's not going to use sleight of hand to levitate Shells' puny stock price.
Fix the dining experience, Christon said, and the rest will follow.The seafood business
Q. During the mid 1990s, you oversaw more than 100 Red Lobster restaurants as a regional senior vice president of operations. What's changed in the seafood business since then?
The consumers have become so much better educated about seafood, particularly about what is quality, what are endangered species, what you should never order, what's the difference between sushi-grade tuna and regular tuna. Ten years ago, you never saw that in a seafood restaurant. Back then, we had crab and lobster and thought, "Well, that's pretty much all we need to do on seafood." Plus, I think that a lot more people realize the health benefits of eating seafood.
Q. Times readers may have been surprised by a recent report that although commercial fisheries in the bay area catch millions of pounds of grouper each year, many local restaurateurs are selling frozen fish, often purchased from foreign suppliers. Shells, for example, uses fresh grouper in its entrees but frozen grouper in its sandwiches. Can consumers tell the difference?
When you taste fresh fish vs. frozen fish side by side, and you see how much moister and more tender a fresh fish is, you get kind of spoiled. So when our guests find fresh fish, they tend not to go back to where they got frozen fish before.
Q. What's the status of consumer demand for seafood?
Demand for seafood is on the rise, particularly because of the concern over mad cow disease over in Europe and the hoof-and-mouth scare a couple of years ago. That's great for our business. I also think the aging of the baby boom generation is good for us.
Menu changes
Q. Are you planning any menu changes?
We think that our menu is very good but that we have opportunities to expand the breadth and variety that we offer customers. That includes people who say, "Well, I never grew up eating a lot of seafood. Do you have a good steak?" Or, "Do you have a boiled chicken breast, because I'm on a particular diet." We're also looking at the variety of both fin-fish and shellfish products and at adding steak-and-seafood combinations.
Q. What else?
We're getting ready to implement a lobster trio that has three different methods of preparation: lobster scampi, coconut lobster and broiled lobster tails. I think that we can offer a better variety of shellfish than we have today, and we can offer a better variety of fin-fish.
Q. Who's developing your new dishes?
We have an R&D (research and development) chef whom we use on an outsource basis who's extremely knowledgeable about seafood. He works with us probably at least 10 days a month in terms of additional salads, new pasta dishes, different spreads.
Competition
Q. Who are your top competitors?
Probably the very best competitors are the mom-and-pops who operate in the locales where we have our restaurants; and of course, the very good competitor, the 800-pound gorilla down the road, Red Lobster (a unit of Darden Restaurants Inc. of Orlando).
Q. Do you have anything over Red Lobster?
We are small and therefore adept. We don't have to train 500 restaurants on how to prepare a new recipe; we just have to train 28 restaurants. So we are able to effect change, whether it's the menu, whether it's a service procedure, much more quickly.
Q. Do you consider Outback's Bonefish Grill a competitor?
Shells is far more casual, where you could be comfortable coming in with your little league team. Bonefish is somewhat of a more upscale experience. They do a great job, and I love their food.
Q. Besides size, what are Shells' competitive advantages?
Bigger restaurant companies rely on outsourced products that are manufactured off-site and then brought in and heated up in the saucepan or microwave. We're making our sauces daily from scratch, we're preparing our pasta dishes daily from scratch. People also expect to have great value when they come to a Shells restaurant. They can come in and get a dinner for $8 or $12, depending on what they're looking for.
Q. What are your competitive disadvantages?
Shells is a small company, and we don't do national advertising. So the name is not as familiar to people who are just moving into the Florida market. Our biggest opportunity is to reach out to new customers and say, "Come in, try some great seafood."
Growth
Q. During his two years as CEO, David Head closed the 18 Shells restaurants in the Midwest and several underperforming stores in Florida. Do you plan to resume growing again in the next year or two?
The biggest priority we have right now is food. When customers choose a particular restaurant, the first three reasons are food-related: quality, variety and perceived value. It's important that we make sure that whatever they order, it is delicious and more than they expected in terms of quality, as well as value. So food is our No. 1 priority. Warm and friendly service is our second-highest priority. Third is making sure that they're comfortable with the furniture they're sitting in, the temperature of the dining room, the sound level of the music, the aromas of the food coming out of the kitchen.
Q. So growth is a low priority in the short-term?
We think there are tremendous opportunities to grow, particularly in our existing Florida markets as well as new Florida markets. But we are going to address our food and service and atmosphere first in the existing restaurants before we go down that road.
Q. Any out-of-state restaurants planned?
No.
Q. Have you overseen expansions in previous jobs?
Before coming to Shells, I was president of Brinker's On the Border Mexican Grill & Cantina chain. When I joined in 1996, we had about 17 restaurants. When I left in 2000, we had about 100.
Wall Street
Q. How important is it to boost Shells' stock price?
Every shareholder deserves to get value for the money they've invested in Shells. Our main focus is to improve the guest experience so significantly that we're able to effectively drive sales and internal cash flow, thereby improving shareholder value.
Q. You're not trying to attract analyst coverage on Wall Street, for example?
I think at this point we need to have a great story to tell. The fundamentals we're working on will be a great story. When we start to see the expected kind of results, then we'll have a story to go out and tell people.
Marketing
Q. Do you plan to modify Shells' marketing strategy?
We have done television in some markets where we are media-efficient, and we think that television and radio is great. We continue to evaluate free-standing inserts and postcards and newspaper inserts to see what works well in different markets.
Q. What's your marketing budget?
We generally spend between 3.5 and 4 percent of sales.
Q. Who's your typical customer?
You see families with kids, you see young, unmarried singles out on date nights on weekends, you see older people who live in the area year-round.
Cash flow
Q. Are you looking for outside investors these days?
We always like to fund our growth internally by driving our revenue and cash flow. That's not to say we would never look for any additional cash infusion. But at this point, we're not.
Q. How tight is the cash flow? Might Shells have to close some underperforming restaurants?
We always want to evaluate underperforming restaurants. But at the same time, I'll say that we never want to close a restaurant without opening another one so we can continue to maintain the cash stream. We may have some potential relocations depending on lease renegotiations.
Background
Q. What was your first job in the restaurant industry?
I started as a hostess at a Steak & Ale in Independence, Mo., while I was in college, and stayed there for nine years. I think I went through just about every position. When I got out of school, I got the chance to be a mobile trainer with them, travel to different parts of the country and open restaurants.
Q. Did working at Sutton Place Gourmet help prepare you in any way for Shells?
When I joined Sutton Place, I had been in the restaurant industry a long, long time, and I thought I knew a lot about food. It was the best food education I can imagine anyone ever getting: prime beef and dry aged beef and imported cheeses from all over Europe and terrific wines, and the finest, fresh seafood that you could buy from anywhere in the world.
The future
Q. Several of the bay area's smaller public companies have recently gone private. Is that an idea you'd entertain?
Not currently, it's not anywhere on the drawing board. It's something that we may evaluate if we think there's an opportunity or an advantage to the company.
Q. According to the most recent proxy statement, Shells' directors and officers would own 67.9 percent of the company's stock if they exercised certain warrants and options. Wouldn't a management buyout be the most likely scenario?
It's not anything that we're discussing at this time.
