Garden Fresh Restaurant Corporation History

Address:

17180 Bernardo Center Drive
San Diego, California 92128
U.S.A.

Telephone: (619) 675-1600
Fax: (619) 675-1616

Public Company
Incorporated: 1995 as Souplantation Incorporated
Employees: 3,955
Sales: $132 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: LTUS
NAIC:722211 Limited-Service Restaurants

Company Perspectives:

Since the opening of its first Souplantation in 1978 in San Diego, California, Garden Fresh Restaurant Corporation has expanded to 61 salad buffet restaurants with locations in Southern California, where they are known as Souplantation, and in Northern California and ten other states, where they are known as Sweet Tomatoes. Differing in name only, the restaurants are known for their abundance of fresh, great tasting salad selections, soups, bakery items, pastas and desserts in a self-serve format, set in a casual dining atmosphere.

Company History:

Garden Fresh Restaurant Corporation is one of the fastest growing restaurant chains in southern California. Started in the late 1970s, Garden Fresh offers buffet style dining with an emphasis on fresh salads, homemade breads and pastries, and soups made from scratch. Garden Fresh operates 61 restaurants under the names Souplantation and Sweet Tomatoes, and has locations primarily in the western and southern regions of the country. Much of the company's success is due to the rapidly growing market of health-conscious fast-food dining, as well as to Garden Fresh's strategic growth plan. Besides Souplantation and Sweet Tomatoes, Garden Fresh also owns and operates a takeout deli called Ladles, located in southern California.

A Fresh Idea: 1978--Late 1980s

Garden Fresh, originally founded as Souplantation Incorporated, was started in 1978 by Michael Mack, a San Diego businessman who, while possessing little background in the restaurant industry, saw great potential in the development of a fast-food chain with a health-conscious twist. Souplantation presented itself from the beginning as an affordable, healthy alternative to other chains, with prices kept well below the cost of a more traditional restaurant meal. It was not only low prices which initially drew customers to the business: Souplantation also offered a tremendous variety of condiments, vegetables, soups, and breads, all of which were laid out on two long buffet tables. During the time Souplantation was founded, 'all-you-can-eat' buffets were becoming increasingly popular, and the restaurant took advantage of this trend by offering its own version: for a fixed price, a customer could without limit choose as many meals as he or she desired, with the added incentive that, unlike more traditional buffet restaurants, what was being offered was beneficial to the customer's health.

The idea took off, and Souplantation in the 1980s began to grow rapidly in the San Diego area. The restaurants featured two buffet tables of approximately 55 feet in length located at the center of an open dining area. The company's attempt at uniformity in its look and quality was necessary to establish customer recognition and loyalty, especially as other, similar chains began to establish themselves during the course of the decade.

Competition became increasingly intense in the 1980s, as what the local San Diego papers referred to as the 'soup-n-salad' wars began to heat up in southern California. California consumers were among the first in the nation to popularize health food trends and, with that region's notoriously frenetic lifestyle, it was natural for that trend to be tied to fast-food and takeout restaurants. By the middle of the decade, San Diego had three chains competing against one another, with each offering similar fare at similar prices. The companies Soup Exchange, Fresh Choice, and Souplantation found themselves in a neck and neck battle for customers, and had to find some way in which to distinguish themselves from one another.

In response to the threat of Soup Exchange, a regional franchise, and Fresh Choice, Souplantation tightened its focus on its menu selections, concentrating primarily on salads and soup. While Fresh Choice and Soup Exchange experimented with other menus and pricing systems, Souplantation kept its fare and price packages simple and uniform. The company maintained such basic simplicity in its menu in an effort to refrain from confusing customers, with the notion that reliability and quality would win out over novelty. The strategy proved sound, as Fresh Choice's stock began to tumble at the end of the decade, and Soup Exchange, after revamping its image several times, saw its sales plummet.

While its two competitors struggled, Souplantation began to expand rapidly during the last few years of the 1980s. By 1987, the company's sites had a healthy average of 700 to 1,200 customers a day, with each paying between $5.00 to $7.00 for a meal. The chain grew throughout the southern California area and by 1990 had over two dozen sites in operation. In a spurt of tremendous expansion, Souplantation opened 11 new restaurants in just under 13 months, a period of growth which was ultimately to prove too much of a financial and managerial burden on the young company. Just after its rapid expansion, the company's sales began to falter, falling prey to unexpectedly high overhead and a system of management poorly equipped to handle so many sites at one time.

In 1990 the company took the drastic step of bringing in a new CEO who would have enough experience and understanding of the restaurant industry to turn the company around. After an extensive search, Souplantation finally brought in industry veteran John Bifone, an executive who had in the past year turned the 160-unit chain of Bojangles restaurants from a doomed company losing $9 million a year to one that was back in the black by over $1 million in 1989. Bifone had positive instincts about the company's future, saying to the San Diego Business Journal soon after taking over that 'What I really liked about the business was that I thought the Souplantation concept was a brilliantly positioned concept for the '90s and the turn of the century.'

Immediately upon taking the helm of Souplantation, Bifone began to systematically alter some of the more glaring problems at the company. First, he increased the company's focus on making its locations more uniform in appearance and quality. During the company's expansion at the end of the 1980s, some of its sites had, due to poor or misguided management, grown sloppy in their appearance and menu preparation. Bifone solved this issue by instituting a new training program whereby all Souplantation employees were given instruction over everything from food presentation to sanitation, with the most important emphasis being quality control and keeping each Souplantation location similar to the others.

Besides the new training program, Bifone also slowed the company's growth, choosing instead to focus on the quality and increased sales of the existing restaurants. Most drastically, Bifone convinced the company to change the name of some of the restaurants to Sweet Tomatoes, particularly those which were being introduced outside the San Diego area. The name Souplantation, Bifone felt, was too similar in sound to Soup Exchange, and did not emphasize enough the chain's focus on salads and other products.

1990--95: National Expansion

Bifone's efforts to renew Souplantation were successful, and within less than two years the company was ready to begin further expansion, this time with a focus on national growth. The company, unlike some of its competitors, particularly those which were franchises, renewed and maintained tight control over its quality and menus. In addition, because of its service structure the company had much lower labor costs--between 16 and 19 percent of its sales--than that of other, more traditional restaurants.

The concept behind Souplantation held the company in good stead as well: Richard Martin, writing for Nation's Restaurant News, stated that 'The relative ease with which salad and soup bar offerings can be modified to suit changing taste trends is seen as a fundamental advantage enjoyed by a food-bar based concept.' In other words, because Souplantation offered such perennial basics as salad, soup, and bread, it could easily adapt to changing fashions in cuisine and culture, regardless of region or time.

When Souplantation first expanded into regions other than the company's home base of southern California it chose areas which were naturally compatible to the restaurant's image and menu, namely regions in which agriculture flourished and healthy lifestyles were popular. In the early 1990s, Souplantation opened several new restaurants in Arizona and Florida, all of which operated under the name Sweet Tomatoes. Arizona and Florida were both states in which the products necessary for the company were easily attained at relatively low cost, and, because of the high population of retirees in the regions, buffet style restaurants had a history of healthy sales.

The early 1990s saw Souplantation not only mitigate successfully the risks it took during the company's rapid expansion during the previous decade, but begin to grow again as well, and this time with a more strategic, conservative agenda. Within a few years, the company penetrated markets in Utah, Texas, New Mexico, and, by the middle of the decade, made a bid for southern consumers in Georgia. The company's sales were doing so well that the business found it necessary to change locations in 1993, moving to a more spacious office space in the San Diego area which would allow for the hiring of more employees and further expansion.

1995--99: Going Public and Continued National Growth

In May 1995 Souplantation went public with a listing on the NASDAQ. The company made the decision to go public in order to both reduce debt, much of which it had accrued during its expansion and restructuring in the early 1990s, and use the profit gained from stock sales to prepare for further expansion across the country. Just before Souplantation's IPO, the company changed its name to Garden Fresh Restaurant Corporation, but maintained the names Souplantation and Sweet Tomatoes for its restaurants.

1978:Souplantation is founded.

1990:Company adds the name Sweet Tomatoes to its restaurants.

1995:Initial public offering.

1999:Garden Fresh launches the Ladles takeout deli concept.

In 1996 Garden Fresh trumped its faltering competitors, experiencing a 74 percent increase in profits. Despite devastating floods in southern California the previous year, which had caused the price of lettuce and other salad products to skyrocket, Garden Fresh maintained its steady climb in sales, and managed to continue to keep the cost of its menu well below the $10 mark. In August 1996, Garden Fresh opened another restaurant in Florida, and had a record opening day guest count of over 1,500 customers, a tremendous amount of traffic for a 7,500-square-foot restaurant.

The middle years of the 1990s saw Garden Fresh develop into a truly national company: by 1997, almost 40 percent of the company's growth was due to restaurant openings in states other than California, with many of the locations centered in the western part of the country. In 1998, Garden Fresh had a total of 56 restaurants, spread from throughout the Southwest all the way to the eastern regions of the country, and had sales totaling over $110 million. Garden Fresh's focus on healthy, convenient food was paying off, especially as consumer trends in the 1990s continued to lean towards low-fat, high-fiber fare. In 1998, Garden Fresh also opened four new locations in Atlanta, Houston, Vancouver, and Portland, the latter of which represented a new territory for the company.

Because the company utilized a steady, strategic growth plan, Garden Fresh's sales continued to meet or exceed the company's projections, and were able to answer to much of the managerial and structural overhead costs run up by expansion. The company's stability, even in the face of rapid expansion, was also in evidence when, in the summer of 1999, a hurricane disrupted the opening of three new Sweet Tomatoes sites on the East Coast. Although the dates had to be set back because of damage done to the buildings, the openings went ahead as planned.

Century's End: Experimenting with a New Niche Market

Garden Fresh had proved its success in the buffet business, and the company saw in that success another opportunity to develop a new market, what the company called its 'takery' concept. The 'takery' idea--a combination of 'takeout' and 'bakery'--made use of Garden Fresh's reputation for serving freshly made food which could be enjoyed on the run. In July 1999 Garden Fresh opened its first 'takery' in Encinitas, California. Calling it Ladles, the store offered pre-packaged soups, salads, and freshly made breads to go. The company based the idea on both the success of its own chain and the inspiration of gourmet New York delis such as Dean & DeLuca and Balducci's. Ladles was not a sit-down buffet like Sweet Tomatoes and Souplantation, and instead was presented as a healthy, gourmet alternative to meals cooked at home. Ladles' prices, because all the meals were prepackaged and had a gourmet twist, were slightly higher than those of either Sweet Tomatoes or Souplantation, averaging just around $10 for a full meal.

By 1999 Garden Fresh was operating 61 restaurants across the nation and had plans to continue expanding on an average of 12 restaurants a year. With that year's sales over $132 million, and trends in the restaurant industry increasingly tending towards the company's favor, Garden Fresh's future appeared bright.

Principal Competitors: Buffets, Inc.; Fresh Choice, Inc.; Furr's Supermarkets, Inc.; Bishop's.

Garden Fresh Restaurant Corporation History

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