Starscapes home-based business opportunity

FOOD FOR THOUGHT

FIESTA OF OPPORTUNITY

Restaurant’s 8 brands feast on sales of $250+ million a year.

Because the appeal of Mexican cuisine continues to grow in leaps and bounds among Americans, CRO has strong growth plans for both El Chico Café and Cantina Laredo and is looking to open about 20 units of each concept annually. El Chico, with an average per-person bill of $11, offers traditional Mexican favorites prepared fresh daily and made by hand and has proven to be a strong small-market performer while also working well in larger markets. Cantina Laredo, with an average per-person bill of $18, has proven to be extremely well-suited for larger metropolitan markets where there are simply few competitors serving Mexican cuisine in a sophisticated, contemporary, white table-cloth atmosphere.

As an example of the concepts’ appeal, an El Chico Café that opened in Granbury, Texas, in May 2005 established a franchise record for first-week sales volume, serving 7,000 customers in a community with 5,700 year-round residents, while Cantina Laredo has shown its versatility with 2005 openings planned for Dallas/Fort Worth International Airport and the first of five Cantina Laredo restaurants that are part of a multi-unit franchise development agreement in Egypt.

CRO, INC. AT A GLANCE
Consolidated Restaurant
Operations, Inc.
12200 Stemmons Freeway,
Suite 100
Dallas, TX 75234
972-241-5500
www.croinc.com

Concept:
Consolidated Restaurant Operations, Inc., (CRO) operates 98 company-owned and 38 franchised or joint venture-operated restaurants in 18 states and Canada. Its eight brands, which encompass the Mexican, Italian, American Grill and steakhouse segments, include: El Chico Café, Cantina Laredo, The Spaghetti Warehouse, Good Eats, Lucky’s Café, Silver Fox Steakhouse, III Forks Steakhouse and Cool River Café.

Franchise Facts:
The initial franchise fee for El Chico Café is $35,000 per restaurant. The total estimated initial investment ranges between $1,525,000 and $2,390,000. The continuing royalty fee is four percent of gross sales with a continuing marketing fee of one percent of gross sales. The ideal size of an El Chico Café is 5,200 to 6,000 square feet with dining for approximately 220 customers, plus a full-service bar. The initial franchise fee for Cantina Laredo is $50,000 per restaurant with the total estimated initial investment ranging between $1,550,000 and $2,720,000. The ideal size of a Cantina Laredo is 6,500 to 7,500 square feet with dining for approximately 230 customers, plus a full-service bar. Royalties and marketing fees are the same as El Chico Café and both concepts are suitable for either stand-alone, endcap or inline locations.

Training and Support:
A six-week management training program for both El Chico Café and Cantina Laredo is held at CRO’s management-training restaurants in Dallas. Hands-on training in all aspects of restaurant operations is provided in a corporate restaurant. During opening, a team of experienced crewmembers provides hands-on training one week prior to the opening and for two weeks afterward.

Franchisee Profile:
The target audience includes existing restaurant operators who are looking to expand or diversify into different casual dining concepts. Such prospective franchisees might be single unit or multi-unit owners of franchised or independent QSR, fast-casual or casual dining concepts. Other prospective franchisees include financial investors looking to diversify their holdings by investing in a restaurant concept with a compelling ROI and strong cash flow potential.

“With El Chico, we are certainly one of the larger players in a market that is dominated by a lot of taquerias and mom-and-pop establishments. I think there’s tremendous opportunity in the segment,” Harkey said. “In Cantina Laredo, the gourmet Mexican segment is a real niche market and there is simply no other player offering the same product.”

Both concepts provide a strong investment opportunity for existing restaurant operators who are already single unit or multi-unit owners of franchised or independent QSR, fast-casual or casual dining concepts and are looking to expand or diversify into different casual dining concepts.

“It’s a natural complement,” said Harkey. “Once franchisees became proficient in the delivery of the product, it’s a natural to have two brands that can fit the particular market they’re looking at. If you want to grow a second brand it’s an easier, natural transition to go from El Chico to Cantina Laredo or vice versa than it is to go, for example, from burgers to fish. It’s the same basic skill set and the franchisee has the opportunity for two product offerings. That’s pretty unique.”

As conveyed by its corporate moniker, CRO has become a lean-and-mean industry machine by consolidating the back-office functions of the chains it has acquired. As a result, administrative expenses that ate up 12 percent of every dollar in CRO’s early years were reduced to 5 percent. And because it can leverage its multiple brands, CRO has increased buying power with suppliers, among other benefits.

“Franchisees can take advantage of the systems, infrastructure and expertise we have to allow them to expand and be successful without having to recreate a lot of infrastructure,” said Harkey, who has assembled an experienced corporate team around him that includes President/COO Mark Lamm, CFO Paul Hargett, General Counsel and Vice President of Real Estate/Development James Snell, Vice President of Marketing Bill Watson and Director of Franchising Adam Mandel.

Numbers tell the story of CRO’s success. Sales in 2004 company-wide were up 4.4 percent over 2003 and sales for 2005 are up another 4.4% percent year to date. In 2004, Cantina Laredo enjoyed a sales increase of 42.3%, and in 2005 sales are up 34.6% year to date.

“We had the best year in our company’s history last year and this year is better than last year. I see steady growth and CRO continuing to expand,” said Harkey, who added that in addition to the growth for both Cantina Laredo and El Chico Café, CRO has plans to open 10 new steakhouse locations during the next two years.

Harkey attributes CRO’s success to three simple tenets that embody each of its brands:

Exceptional food. “You have to serve exceptional food that distinguishes yourself and creates the type of experience that creates a ‘wow’ factor for the guest,” said Harkey.

Service excellence. “We’re in an incredibly demanding market in the United States,” Harkey said. “We demand absolute service excellence. Guests expect to be greeted properly, seated quickly and expect certain things to happen during the course of the meal. Guests must know that we deeply care about their experience because excellent service makes for a memorable experience.”

Extraordinary people. “You have to hire people who already have the innate desire to be extraordinary,” Harkey said. “You can’t motivate someone through money or incentives to do a job right in the long run, but if you hire the right person they’re going to a great job regardless of what you ask them to do whether it’s sweeping the floor, organizing a binder or waiting on a guest.”

It’s readily apparent that the task of taking CRO to new heights is exhilarating for both Harkey and Street, especially after CRO put together a clever, humorous video spoof for its 2004 corporate conference that had its key management personnel portraying characters from the Tom Cruise classic “Top Gun” with the starring roles going to John “Maverick” Harkey and Gene “Pappy” Street. “I’ve been doing this for 34 years and I’m the youngest 64-year-old guy in the restaurant business,” said Street.

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