EXPANSION ON A ROLL

ROBERT VOSBURGH

RIDGELAND, Miss. -- McAlister's Deli, based here, is preparing for a hoagie-sized expansion throughout the Southeast, and eventually the nation, as the result of a recently completed management-led buyout of the 45-unit chain.

The inside acquisition of McAlister's Corp. was led by two restaurant-industry veterans, Michael J. Stack and Philip Friedman. Stack served as chief executive officer -- he has now also assumed the role of chairman -- and Friedman -- formerly the company's strategic business planner -- is president and chief financial officer.

Founded in 1989, the chain currently is made up of 10 company-owned and 40 franchised units, operating in 10 states. By year-end 1999, officials said, they expect to have a total of 77 deli-restaurants generating annualized systemwide sales of $88 million.

"As in 1999, franchising will be the primary growth engine for McAlister's in the years to come," said Stack. "Our strategy is to refine and define our concept so that franchisees see McAlister's as their next growth vehicle."

Indeed, the emphasis on expansion through franchise agreements is at the heart of the concept's five-year plan, which projects 305 restaurants in existence, producing an estimated $290 million in systemwide sales by 2003, said officials.

The chain, which opened its first unit 10 years ago in Oxford, Miss., uses a value-priced menu as its core sales driver. The sandwich, baked potato and salad menu ranges in price from $3.95 to $6.95, with an average per-person check of $6.50, according to Stack.

Among the bestsellers are items listed under McAlister's Signature Sandwiches. Here, eight deluxe sandwiches include the McAlister Club of turkey, ham, bacon, cheddar and Swiss cheeses; the Memphian, which is layers of roast beef, turkey, ham and provolone cheese on a 6-inch wheat hoagie roll; or the The Big Nasty, comprised of roast beef served open-faced on a foot-long wheat hoagie roll with McAlister's "Come-Back" brown gravy, a proprietary item that has become a customer favorite, according to Patrick Walls, vice president of franchise sales and general counsel.

There are also Texas-size spuds, from the simple (Justaspud, served with butter and sour cream, $2.99) to the elaborate (Spud Max, about 2 pounds of potato, ham, turkey, bacon, cheddar and Swiss cheese, sour cream, green onions and black olives, $5.49). The special "Come-Back" gravy makes an appearance here, too, in the Beef & Smoked Cheddar Spud, which includes a potato filled with hot roast beef and smoked cheddar, topped with a side of the gravy, for $3.95.

The chain is currently adding three new potato creations, and is in the process of testing an additional six possibilities that may be added to the menu at a later date, said Walls.

A build-your-own-sandwich section invites patrons to use any meat and one of seven breads, eight cheeses and four mustards to construct the sandwich of their choice. Combination sandwiches are also listed, including the Delta Delight, comprised of roast beef, kielbasa, jalapeno cheese and barbecue sauce, for $4.60.

The meats, cheeses and other sandwich fillers are sliced fresh every day, at the beginning of each daypart, according to Walls.

Prepared entree-size salads finish the main-course portion of the menu, which is rounded on either side by appetizers, soups and desserts. On the beverage side, McAlister's iced tea -- sweetened or unsweetened -- is the No.1 drink of choice, he said.

Aside from a focused menu, operations also contribute to margins, since the food items do not require full prep and cook cycles; rather, all meat products are purchased precooked and heated as needed in a hoodless kitchen. The baked potatoes are cooked in standard convection ovens. As a result, capital-intensive hood, exhaust and fire control systems are not required.

According to Stack, McAlister's Deli restaurants typically do 55% of their sales at lunch, 45% at dinner, and achieve a weekly catering and carryout mix of 35% of total sales.

Another of the concept's strengths is its hybrid nature: while customer ordering closely resembles systems used by quick-service venues, the dining experience is decidedly more akin to those found in casual-dining establishments. For example, customers make their selections and place their orders at a counter with four point-of-sale stations. The meals are prepared to order and assembled in less than 10 minutes.

But here, the similarity to QSRs ends, because customers are given a table tent with a number on it, and the completed meals are brought to the table by staff members, along with disposable containers and "upscale" disposable flatware, thereby eliminating the need for washing.

This switch to casual dining is further enhanced, since the waitstaff continues to offer service during the meal, said Walls. These orders are taken by the staffer, with the patron's money, back up to the order counter.

"We have people that walk through the dining room. They will refill your drinks, they will ask you if would like anything else, like another side dish or dessert," said Walls. "You don't have to leave your chair."

The chain calls this integration of service "quick casual," because of its location on the restaurant spectrum, he said.

"When we've done customer surveys, and asked people who our competitors are, the names that come up are Chili's, Applebee's, those types of places," said Walls. "So, our customers seem to equate us more with the casual dining side of the business."

The restaurants feature 130 seats both indoors and on outside patios, and are generally more than 3,200 square feet. The decor consists of drop lighting, dark woods, a brick counter and oak shelving, black and white tile floors and handwritten menu chalkboards above the order area. These are augmented by paper menus on the counter itself.

To lead the expansion campaign, both Stack and Friedman said they would use their past experience to leverage McAlister's hybrid appeal. Stack has held senior operating and executive management positions with Westin International, Host International, Marriott Corp., Pizza Hut/PepsiCo, and was a two-time franchisee of Chi-Chi's, having developed the Mexican restaurant concept in 13 states.

Friedman has also worked at Marriott, Westin and Pizza Hut/PepsiCo, and is currently chairman of the board for Rosti restaurants, a Los Angeles-based casual dine-in/takeout chain of Tuscan-style eateries.