THE FIRST COURSE

ROSEANNE HARPER

GILROY, Calif. -- Nob Hill Foods here has gone into the restaurant business.

That's how Jim Oteri, senior vice president of the 27-unit chain, characterizes Nob Hill's new hot-meals service concept, called Hot Meal Express.

The concept is situated in the Courtyard Cafe, an area carved out between the deli and the bakery in three of Nob Hill's stores. Oteri, the architect of the concept, oversees it with a restaurateur's perspective.

"When we decided to do this, we looked at it as going into the restaurant business -- and we know that about 90% of restaurants go broke the first year, so we wanted to make sure that didn't happen," Oteri said in an interview with SN.

With the future in mind, Oteri designed a plan specifically aimed at building sales volume at the expense of profit -- for a while. "It takes time for the restaurant business to mature. You generally have one shot at each customer, so you had better send them away satisfied, so they'll want to come back," Oteri said.

Getting that customer back is indeed the top priority at Nob Hill's Hot Meal Express, and the chain is taking specific measures to build repeat business.

"We give you a ton of food, and at a fair price. There's no portion control," Oteri said. "We just tell our people to fill up the plates. We can always raise the prices later, but above all we want them to walk out satisfied."

Oteri makes no bones about not making money on the Hot Meal Express right now. "I think when you go into the restaurant business, you have to pay your dues. You have to recognize that that first year will probably be a no-profit year.

"At this point, we're not making money. If we're breaking even, we're doing well. The next step, after a while, will be to raise prices."

He said most restaurants make the mistake of cutting back on portions or setting their prices too high in the beginning. Great-quality, fresh food is a prerequisite for success. But so are value and big portions, he stressed.

"I come from the school that says you first have to win the confidence of your customers."

He may sound like a restaurant man, but Oteri told SN his background is strictly retail. Still, the restaurant business is in his blood; Oteri's grandfather, Caesar Cardini, owned and operated a trendy restaurant in Tijuana, Mexico, that was a favorite hangout of the Hollywood crowd in the 1920s. It was there that Caesar Cardini introduced his celebrity guests to Caesar salad -- the forerunner of today's version of Caesar salad that consumers know and love.

Indeed, Caesar salad is so popular in northern California that Nob Hill offers only that one variety in its meals program.

"If we had three or four different kinds of salad, Caesar would still represent 80% of sales. It's also just an easier program to operate, when you limit it to one variety," Oteri said. The salads are packed in-store each morning and merchandised from a self-service case adjacent to the hot-meals service counter. Oteri said that Nob Hill found salad bars unprofitable.

In addition to offering quality, abundant food at a fair price, successful restaurateurs know that location plays a key role in success. And Nob Hill thought of that.

Inside the store, the Hot Meal Express program is deliberately situated near the front and is smack in between the deli and the in-store bakery. And that will be the spot where future Hot Meal Express operations will go, Oteri said.

"It's the first thing you see when you come in the door, as you walk through the floral department. You see the carving station and entrees and sides all displayed, and sandwiches being made," Oteri said. All the food preparation can be observed, too, just beyond the hot-food counter.

Being sandwiched strategically between the traditional deli counter and the in-store bakery is also crucial, Oteri said. "That's important, because a lot of people want to buy a slice of pie to take home with their meal, and it makes sense that the sandwich trade at the deli is right there."

A local observer told SN that the program's sensual effect serves as its own ad, because you see the presentation and smell the food aromas right away. An industry consultant who visited the newest Hot Meal Express installation at a Nob Hill unit in Redwood Shores, Calif., told SN he was extremely impressed with the program.

"The way they've laid it out is probably the best supermarket application I've seen since Wegmans in Pittsfield. You see the carving station immediately.

You know what they're offering right away," said Stephan Kouzomis, president of Entrepreneurial Consulting Inc., a Louisville, Ky., consulting firm that works with manufacturers and supermarkets.

Kouzomis said he observed the operation for several hours on a weekday afternoon. "The value was excellent. I had a rotisserie chicken dinner. It was a huge amount of food. It's obvious they're paying a tremendous amount of attention to the customer, too. That kind of restaurant view and perspective has to be there for success."

Kouzomis added that almost all the seats were taken between 1 p.m. and 3 p.m.; the cafe offers 40 seats at tables.

Oteri estimated that takeout and eat-in are about 50-50 at this point, and at two of the three stores the program is in, the biggest burst of sales comes during lunchtime.

At the Redwood Shores unit, however, the sales pattern is more varied. The store is located in the Silicon Valley where computer and technology companies abound. "At that store, the pattern varies. Oracle has 3,000 people working in a building right nearby and those people in the computer business work odd shifts. They may come in for lunch or dinner at anytime," Oteri said.

The Hot Meal Express at that store is ringing up $14,000 to $15,000 a week, way above projections of $8,000 to $10,000, Oteri noted.

The Hot Meal Express concept had its initial test run at a Nob Hill unit in Gilroy last summer. Riding on that success, the program was rolled out to two other stores in the fall. The next openings are scheduled for October, Oteri said.

All entrees are cooked on premises, but some of the side dishes are brought in frozen in bulk, and thawed as needed. The meals program includes a carving station and a made-to-order sandwich station, as well as the service hot tables, which offer up six or seven entrees and 11 side dishes every day.

"It's sort of a Boston Market setup except that we display the entrees as well as the sides," Oteri said. Indeed, he credits Boston Market with helping to get Nob Hill's program off to a good start.

"I think because Boston Market is big out here, the customer was pretty used to the format. On the first day at Gilroy, the first customer just walked up and ordered like the counter had been there for 10 years. Boston Market has definitely done a good job of educating the consumer," Oteri said.

Commenting on the particularly good business the Redwood Shores store is doing, he pointed out that it opened at an advantageous time of year, in the late fall. In California, unlike many other markets, winter is the best time for a meals business.

"It's a whole different market out here. We're constantly competing with Mother Nature. There are two things that are really hard to do here and that's get Californians out of their cars and get them to go home before dark," Oteri said.

Monday nights during football season have been top meals nights at all three of the Nob Hill units that have Hot Meal Express.

"People go home to watch Monday night football and they take all kinds of things with them. Chicken dinners, and rotisserie chickens, and we've sold a lot of our tri-tip sandwiches. That's our best-selling hot sandwich," Oteri said.

While the peak sales are at lunch and dinner times, because they're generated by workers on a break or on their way home from work, Nob Hill is looking for ways to court retired consumers, too, in an attempt to fill in the slower segments of the day.

"We've been offering some specials for senior citizens. Like cents-off, or free beverages between 3 and 5 in the afternoon," Oteri said.

Oteri considers the decision to make the hot table a service one, instead of a self-service buffet, an easy one. "With service, you sell more. Absolutely. In our seafood department, for example, sales at the service counter are three to four times what they are at the self-service case."

He explained that service underscores the perception of fresh. Service, too, gives associates an opportunity to sell, he pointed out. "We put our best people in the fresh departments, and we look for people that will be good dealing with people. Our human resources is good at finding them. When I hire someone, I don't look for retail experience at all. I'll teach them anything, but I can't teach them to smile. They have to bring that to the table."

Convenience is by no means sacrificed by having virtually every element in the cafe area full-service instead of self-service, he insisted. Indeed, associates can help the customers get what they want quickly.

"We train our people very well, and they're fast. They're expected, for example, to make a sandwich in 45 seconds or less," Oteri said.

The cafe has its own cash registers, too, to enable customers to get in and out quickly. And pricing is simple so it doesn't slow down the customer's selection process, Oteri said. Meals are $4.99 or $5.99, depending on the entree; all hot sandwiches are $3.99; and all cold, deli sandwiches are $3.75.

Some sandwiches and salads are offered from self-service cases, but prepacked, chilled versions of the hot meals are not offered at Nob Hill. Not yet.

"The first step is hot food. First, customers have to have confidence in what we're doing. We need to win them over with the hot food. It's like a popular restaurant making a name for itself first," Oteri said.

"Look at Wolfgang Puck," Oteri added, referring to the celebrity chef whose branded, frozen gourmet pizzas are marketed in supermarkets and specialty stores. "If he'd have tried to sell frozen foods first, he'd have failed.

"Refrigerated is a hard-sell anyway. People out here don't light their ovens if they can help it."

Nob Hill does offer some rotisserie chickens and turkey chilled, but not the main menu entrees or sides. "Maybe a year from now, we'll begin to offer chilled, prepacked but not until the items are highly identifiable."

Particularly because the chain is offering huge, heaping plates of food for $4.99 and $5.99 and overstuffed sandwiches for $3.99, it has to keep a sharp eye on shrink. That has paid off with average shrink of only 2%, Oteri said.

Keeping good records, making secondary use of left-over items, and exerting tight controls on operations are all keys to keeping shrink so low, he said.

"We try to run out, but if there is turkey breast or tri-tip left, we'll use it in new juices the next day -- for instance, barbecue sauce for the tri-tips, and any chickens left are shredded for salad."

And the deli manager is the only person who is allowed to throw out the garbage. That way, he can see what's being dumped and can question why, Oteri said.

Menu items were carefully chosen, too, often for their durability. For example, one of the reasons Caesar salad is the only one offered is that it holds up well. And Oteri's grandfather's original Caesar dressing is not used, because "it has to be made fresh, on the spot." Instead, the salads have a more durable dressing that has a cream and dijon mustard base.

All meats are rotisseried or roasted in the stores. That is a factor in keeping shrink down, because they're started from scratch and they also hold up well.

And the hearty rotisserie entrees are menu mainstays because that's what people want. "They might talk about eating healthy, but what they buy is meat and potatoes," Oteri said.

Asked if Nob Hill's management had considered bringing in a branded food-service operation instead of creating its own, Oteri answered with an emphatic no.

"We wanted to have total control. We know we're putting in 100%, when a franchisee might only put in 50%," a bad thing for the whole store's image, he said.

The next stores set to get the Hot Meal Express/Courtyard Cafe concept are a rebuilt unit in San Ramon and a from-the-ground-up store in South San Jose. Each installation costs about $100,000, Oteri said.

"We're also looking at putting quasi, down-scaled versions in some existing stores. The paper trail we'll follow is the sandwich business at each store."