By the end of the year, Hazem Ouf and his team at American Blue Ribbon Holdings will have poured about $15 million into revitalizing the O’Charley’s brand in Tennessee. And they will only be a quarter of the way through their renovations.
If that process is a slog, President and CEO Ouf isn’t showing the effects. With more than three decades of experience in the restaurant and hospitality sectors, Ouf has regularly been tasked with turning around struggling concepts. He has led American Blue Ribbon Holdings, which is majority-owned by Florida-based title insurer Fidelity National Financial, since 2008 and has built it via acquisition into a company with restaurants in 45 states, more than 33,000 employees and annual revenues of about $1.5 billion.
These days, Ouf’s charge is to breathe new life into O’Charley’s, a traditional family-dining concept that had been limping along for years as new entrants revitalized the restaurant scene, and consumers’ preferences and habits changed during the Great Recession. The most visible signs have been the construction work to revamp the exterior and interior of the chain’s restaurants and an overhaul of big parts of the menu. But there’s a limit to how far Ouf will go.
“We don’t want to change O’Charley’s, just evolve it,” Ouf (pictured) said. “The concept has a great soul.”
The early returns on Ouf’s investments have been promising. In the first three months of 2013, sales at the small number of renovated O’Charley’s rose 17 percent. Results since then — another update will come in early August, when Fidelity National reports its second-quarter numbers — have confirmed that trend.
“The loyal customers have been coming more often,” Ouf said. “Now we’re starting to see lapsed customers coming back.”
Just as with other parts of the economy, the dining sector began showing signs of growing strength this spring, giving a revitalized O’Charley’s a chance to take maximum advantage of more confident diners. The National Restaurant Association’s Restaurant Performance Index in May rose to a 14-month high, helped by 47 percent of responding restaurant operators saying they expect to have higher sales in the coming months. Conversely, only 8 percent thought their sales will drop by late 2013.
With renovations on track and a better handle on quality, Ouf is again taking a strategic look down the road. A big part of that means again being able to entertain ideas about his team’s next big buy.
“We’ve turned down numerous acquisitions since we bought O’Charley’s,” Ouf said. “Given the model on which we’ve grown over the years, we’re usually the first call.”
One thing that might change on the mergers and acquisitions front is the type of business American Blue Ribbon could add to its stable. Ouf said the company won’t confine itself to buying mature, struggling concepts. Newer, up- and-coming chains also would fit the bill.
Geographically, fast-growing Texas is high on the list of priorities, both through acquisitions and organic growth. American Blue Ribbon runs just a handful of locations in the El Paso market under its Village Inn brand, which has most of its stores in an arc from Arizona through the Mountain West to the Plains states.
Similarly, the O’Charley’s footprint pretty much ends at the Mississippi River. The company recently signed a franchisee agreement to add Texas locations. But given the size of the state, it’s likely Fidelity National’s fat wallet will fund a big deal or two in the coming years.
For Ouf, getting American Blue Ribbon there is about being patient, both in terms of keeping the O’Charley’s recovery on track and waiting for the right fit to deploy more of its parent company’s cash.
“By mid-2014,” he said, “I expect to feel really good about where we are.”
POSTDATA: WARRANTY DEEDS