EATZI'S OPTIMISTIC DESPITE NEW YORK TROUBLES

ROSEANNE HARPER

DALLAS -- EatZi's, the hybrid market-restaurant concept that has captured so much attention in the industry, is still navigating the learning curve, said the concept's creator Phil Romano.

Romano, who has engineered such successful restaurant concepts as Macaroni Grill and Fuddrucker's, launched EatZi's with Dallas-based Brinker International three years ago in Dallas.

In a recent interview with SN, Romano talked about the resounding success of EatZi's in Dallas but he also said EatZi's operations at two New York sites are not performing as well as expected.

While EatZi's in Dallas is breaking $14 million a week with a 14% bottom line, EatZi's in Westbury, N.Y., on Long Island, is underperforming and at EatZi's in Macy's in midtown Manhattan, the average transaction is below par, he said. [See EatZi's Serves Up Coupons to Heighten Rings at Macy's, SN 3/29/99].

"At Westbury, the demographics looked great, but that one's not doing too well," Romano said. He declined to be more specific but he said the future of that EatZi's operation is uncertain.

Local observers have told SN that the location "is a nightmare to get in and out of." Crisscrossing parkways and heavy rush-hour traffic make the site unappealing as a place to stop on the way home from work, local residents said. But Romano said state regulations also have hampered sales.

"We have to compromise the concept. It just doesn't work when you have to do that. We can't sell wine in New York," Romano said, referring to a state regulation that prohibits food stores from selling wine. He said for that reason EatZi's will not open additional sites in New York state.

He added that in Dallas, EatZi's sells $1 million worth of wine a year.

Romano told SN that EatZi's doesn't know at this point what it will do with Westbury. At the Macy's location, Macy's marketing department is helping EatZi's reach locally-based consumers through such efforts as direct-mail promotions, he said.

The learning curve has slowed the planned aggressive expansion of EatZi's, but the concept itself is very viable, Romano told the HMR Summit audience. In fact, the identity that EatZi's has established for itself, along with its ability to stay flexible enough to respond to change, is its key to success, he said.

"Whatever changes you make, you should aim to keep the old customers. Don't throw them away. What you've got to do is add new ones through new ideas, bring in new customers, broaden your market," Romano said.

For example, there are plans to expand EatZi's business in Dallas via more wine sales. Another possibility for units is to provide catering -- even supplying local caterers -- a sales-building strategy that won't create a traffic jam on the sales floor.

"We need to increase our business without increasing our traffic too much," he said. "If it gets too crowded, it'll hurt us. We're looking at local caterers, to do their cooking for them."

Romano told an audience at a recent trade show that creating a point of difference is the key to EatZi's success. That's not to say the quality of the food and service isn't excellent, too, but that's a given, he said.

To build a successful concept it's necessary make it a brand, "a word in the mind of the consumer," he stressed.

"But you can't make chicken soup out of feathers. You have to have a solid, quality concept first. Then, that -- and the point of difference -- make the basis for the brand."

Getting people to think of EatZi's when they think of fresh, prepared food, thus giving it brand status, is accomplished with publicity, not advertising, he said.

"You've got to get people talking about it and writing about it, and then later, advertising can keep the concept healthy," Romano said.

Locating EatZi's in large cities such as Dallas, Houston, Atlanta and New York -- in addition to putting it where there is heavy customer traffic -- is part of the strategy to get optimum exposure, he explained. After the brand is established at "slam-dunk" locations, it can be expanded out to secondary sites.

"We need to be close to downtown, in the heart of the city. You don't get publicity in suburbia, but that's where we'll put the secondary sites. They'll be waiting for us in the suburbs [after all the publicity generated by urban locations]."

EatZi's has indeed become a household word among consumers in Dallas. Now it's time to secure a location in the city's suburbs, Romano said. He said an EatZi's will open a secondary location in Dallas before the end of the year.

Romano pointed out that a tremendous amount of research went into the EatZi's concept.

"I traveled around for six months to see what other people were doing, to see how we could serve a need and also be different," he said.

"I didn't know anything about grocery. When I was looking around I had a grocer, an architect, a manager and a chef with me. We tried all kinds of food, and saw how people were selling it."

Romano decided he wanted to create an entirely new category.

"There are two places people get food. Restaurants and grocery stores. We decided to create a concept in between the two, a market that sells restaurant quality meals," he recalled.

"We see EatZi's as offering restaurant meal replacement, not home meal replacement," said Romano, as he explained that pricing at EatZi's is crucial.

"Our pricing is higher than grocery stores' but lower than a restaurant's, and we let people know that with signs," he said.

SN has noted that typically a sign at the grill in EatZi's, might say: "Yankee pot roast, with two side dishes, $7.99. The restaurant price for this would be about $13, and there's no tipping here."

Even the way people choose their food at EatZi's creates a point of difference, Romano pointed out.

"In a grocery store, you have a shopping list and it takes a long time. It's work. In a restaurant, there's a menu. At EatZi's, it's emotion, and impulse," he said.

"I have people telling me they come into EatZi's for a loaf of bread and walk out with $40 worth of food."

Besides making EatZi's a completely different category, Romano made sure EatZi's offers customers what they want, he said.

"What do consumers want? They want value," Romano said. He explained, however, that today's consumer doesn't necessarily measure value in the size of the portions they get.

"They value their time and their health. They want good food fast. And that can be summed up under convenience," Romano said.

"They also value excitement, which I think is the most important. They don't want the same old thing. They want variety and ambiance. They want to feel like explorers on a new frontier," he added.

An ambiance that creates a sense of adventure has been developed at EatZi's with the help of opera music that's piped to the outside, a grill staff that's apt to break into a cheer or clang a gong when a brace of chickens comes off the rotisserie, and an open-production bakery area that bustles with activity.

"I don't like to have windows in EatZi's. I want to give the customer a 15-minute vacation. If it's raining outside, they leave that when they come in," Romano said.

Rotating new items onto the menu is also an important part of creating excitement, he said.

"While 80% of our food is comfort food, 20% of it is food they may experience for the first time," Romano said. That's part of the formula for getting customers to come back, he said, explaining that the size of transactions grow as customers get to know how to use EatZi's.

Romano said it's important, too, to have a distinctive look. He pointed to the exterior of an EatZi's shown in a slide.

"Those smoke stacks you see have no function. It looks like a manufacturing plant. It looks different. It's not a restaurant. It's not a factory. What is it? We spent extra money to put those up there to create a look. The red checks in front, the color of the building, and that horizontal logo that you see with two eyes make people remember us."

Romano said he expects that look to be catching people's eyes in a lot of different locations within the next 10 years.

"We should have 5,000 chefs at 100 locations in maybe six cities in ten years," he said.