Smokey Bones eyes turnaround under new owner: Sun Capital, after buy from Darden, focuses revamp plan on beverages, barbecue

Nation's Restaurant News,  Dec 17, 2007  by Catherine R. Cobb

Tags: beverage, Sun Microsystems Inc.

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ORLANDO, FLA. -- Under the new ownership of multichain powerhouse Sun Capital Partners Inc., the Smokey Bones casual-dining system plans to "dial up its barbecue experience," introduce more adult beverages, capitalize on more upscaled environments and grow beyond its current 73 branches, according to Ian Baines, the brand's chief executive.

Boca Raton, Fla.-based Sun Capital purchased the struggling Smokey Bones BBQ & Grill chain this month from Orlando-based Darden Restaurants Inc. for $80 million through a newly formed affiliate called Barbecue Integrated Inc.

The deal, expected to close in January, would make Sun the owner of all or part of 34 concepts operated or franchised by Boston Market Corp., Bruegger's Enterprises, Fazoli's Restaurants, Friendly Ice Cream Corp., Garden Fresh Restaurant Corp., Real Mex Restaurants, Restaurants Unlimited and Souper Salad. Sun, which has more than $10 billion under management, has numerous investments outside of the restaurant industry.

The deal had been expected since Darden disclosed Nov. 7 that it was narrowing the field of bidders to a Sun Capital affiliate in an attempt to forge a sales agreement within 30 days.

Darden, which owns the Red Lobster and Olive Garden chains, recently completed a $1.4 billion acquisition of Rare Hospitality International Inc., parent of The Capital Grille and LongHorn steakhouse brands. Darden's other casual-dining holdings are the Bahama Breeze and Seasons 52 chains.

"Darden will be involved during the transition period and support the Smokey Bones business and team every step of the way," Drew Madsen, Darden's president and chief operating officer, said. "We are extremely appreciative of the contributions of our friends and colleagues at Smokey Bones, and we wish them well."

The sale gives Smokey Bones, which will remain based in Orlando, an opportunity to put the sizzle back in the eight-year-old brand at a time when barbecue is growing more popular, Baines said. Under Darden, the clarity of the concept had been muddied by multiple management teams and overly aggressive growth, he said.

"I feel that with the unique combination we have in capitalizing on the barbecue platform and the expertise of Sun, we have the long-term potential to go national and on the way become the best barbecue chain in casual dining," Baines said.

That strategy varies greatly from the one Darden began to pursue earlier this year. In May, it closed 54 of the chain's restaurants and announced that it was putting the remaining 73 up for sale. Clarence Otis, Darden's chief executive, who earlier had served as president of Smokey Bones, said at the time that while guests continued to give the Smokey Bones' experience solid marks and a core of restaurants had good sales and earnings levels, the concept was no longer a meaningful growth vehicle. Darden also began distancing the concept from its barbecue orientation, noting that regional taste preferences posed challenges for a large-scale barbecue chain.

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Observers say that Baines has his work cut out for him.

"First the challenge in the next two years is to get it right," said Craig T. Weichmann, a veteran restaurant analyst who now operates a boutique banking firm bearing his name. "The reason it is in this condition is because the volumes weren't right and margins weren't expanding. Expanding would be the last thing on my list, and I would think the last thing on the new owner's list."

Weichmann noted that one of Darden's problems with the concept was unit size. With sizes of about 7,000 square feet, average unit volumes of $3 million were insufficient, he said.

Weichmann noted that Sun's financial muscle is considerable.

"If anyone has the capability of turning it around, it would be Sun," he said. "Culturally, Baines is now with an owner that knows how to shepherd a problem child."

Sun Capital said it intends to expand Smokey Bones beyond its current 73 units in 17 states. Anthony Polazzi, vice president of the holding company, said the concept has "the right ingredients for future growth: high average sales per restaurant, strong restaurant management teams, established operating systems and a unique barbecue flavor platform that is growing in popularity."

For now, Baines said officials would concentrate on creating new barbecue flavors and adding new beers and frozen drinks.

"We ... will continue to expose our consumers to new barbecue flavor profiles with limited-time offers, and we recently launched 'chill time' drink specials, our name for happy hour," he said.

Baines said one of the key elements to the Smokey Bones' experience is the centrally located horseshoe-shaped bar featuring numerous television screens for sports fans.

"We see this as a center where unity can build from in the whole restaurant, where people can watch sports, though it is not a sports bar," he said.