Restaurants Unlimited, Inc. History

Address:

1818 North Northlake Way
Seattle, Washington 98103
U.S.A.

Telephone: (206) 634-0550
Fax: (206) 632-3533

Private Company
Incorporated: 1969
Employees: 2,000
Sales: $180 million
SICs: 5812 Eating Places

Company History:

One of the fastest-growing restaurant companies in the United States, Restaurants Unlimited, Inc. operated more than 20 full-service dining establishments and nearly 300 Cinnabon stores that sold specialty cinnamon rolls. In the course of its growth, Restaurants Unlimited became recognized as a trend-setting industry leader, assembling a diverse collection of restaurants that positioned it as a food-service force to be reckoned with in the 1990s and beyond.

Like most entrepreneurial creations, Restaurants Unlimited had humble beginnings. The company's founder was Richard Komen, whose first foray into business began in the back of a pick-up truck loaded with peanuts. Komen--who led Restaurants Unlimited during its first two formative decades of existence and became arguably the most successful restaurateur in Seattle's history--earned a graduate degree in accounting at the University of Washington, then went on to work as a representative for Associated Grocers, a regional wholesale grocery supplier based in Seattle. In 1961, he stopped by his former university's Husky Stadium, where he talked with members of the school's athletic department about taking over the concession business for Washington Husky football games. Then 28 years old, Komen had $1,000 in savings and no experience in food service, yet his inquiry was a fortuitous one. The concession contract for the 55,000-seat stadium was soon coming up for public bid, and the contract winner would receive a three-year deal to supply the concessions with hot dogs, soft drinks, and peanuts for Washington Husky fans.

Komen bid for the contract despite his lack of experience, his youth, and his limited cash to underwrite the venture. Komen improved his odds by enlisting his uncle, who owned a successful diner in Seattle, as a partner. Six weeks later he was awarded the concession contract for Husky Stadium, beginning with the 1961 season. Concurrent with this first big break, Komen formed Volume Service Company as the corporate entity to operate his concession business. He then spent each Friday night before a Husky game with friends bagging peanuts by hand, gradually emptying the back of his loaded pick-up.

Komen enjoyed considerable success as a concessions operator, and soon gained the food-service contract for the Seattle Center, a vast complex created for the 1962 World's Fair. Several years later, he was awarded the concession business for two ski resorts located near Seattle. Komen and his Volume Service Company rapidly became a recognizable food-service force, moving beyond Washington's borders to gain concession contracts later in the 1960s for Oakland Coliseum in California, the H. Truman Sports Complex in Kansas City, the Fair and Exhibition Center in Louisville, Kentucky, and the Los Angeles Convention Center.

By the beginning of the 1970s, though Volume Service Company had become a highly successful business, Komen's entrepreneurial passions were beginning to pull him in a different direction. One year after he was awarded the concession contract for Husky Stadium, Komen had opened his first restaurant--Hippopotamus--but three years later, in 1965, the restaurant closed its doors, temporarily ending Komen's diversification into the full-service dining business. In 1969, he renewed his efforts at creating a successful restaurant, opening a dining facility called The Red Baron which operated as a division of Volume Service Company. Later that year he formed a new company, Restaurants Unlimited, and focused his efforts on creating a new niche in the food-service industry.

Volume Service Company was sold to Chicago-based Interstate United Corporation in 1972, by which time Komen had intensified his efforts toward becoming a successful restaurateur. In the course of his business travel for Volume Service Company, Komen had noticed two burgeoning dining trends, particularly in California and Hawaii. One was the increasing popularity of restaurants serving steak, prime rib, lobster, and salad in a casual dining atmosphere. The other was the dining public's acceptance of theme restaurants decorated in a distinctive style with a menu that reflected the period and country implied by the decor. Komen combined the two trends and created two restaurants--Horatio's and Clinkerdagger, Bickerstaff & Pett's Public House. These ventures would become the engines that propelled Restaurants Unlimited through the 1970s.

Horatio's and Clinkerdagger, decorated in dark, wood-paneled decor reminiscent of Edwardian English pubs, were both opened in 1971. That same year Raymond Lindstrom, who had spent the previous two years working for restaurants, joined Komen in his drive to build a successful restaurant business. Komen and Lindstrom enjoyed immediate success with their ventures. Seattle residents flocked to the two new restaurants, embracing the concept of steak, lobster, prime rib, and salad served in a decidedly Dickensian atmosphere. Horatio's, which featured seafood, collected $1.2 million in sales after its first year of business, convincing Komen and Lindstrom they had created a successful model that could be replicated.

The two restaurateurs did replicate their success, opening another Clinkerdagger in 1972 in Tacoma and a third in Spokane in 1974. By this time, Komen's dining concept was flourishing, enjoying what Restaurants Unlimited managers would later describe as its heyday. Encouraged by the success of his three Clinkerdaggers and one Horatio's, Komen moved beyond Washington's borders in 1976 by opening a Horatio's in Honolulu, and then he opened a Clinkerdagger in Anchorage the following year. Four more Clinkerdagger restaurants and two more Horatio's would be opened before the end of the decade, extending Restaurants Unlimited's geographic coverage into Oregon and California. By the late 1970s, however, the concept underpinning the success of the restaurants had lost its attractive power--particularly in the case of Clinkerdagger, which stopped growing in 1976 and then limped along for the rest of decade recording limited success.

Public tastes had changed, in terms of both the type of food dining patrons craved and the type of dining atmosphere they desired. Wholesale changes were needed and Komen and Lindstrom knew it, but they were uncertain which direction to go. By 1980, the company's restaurants were merely vestiges of a once-popular chain. Restaurants Unlimited had tapped into the dining trends of the early and mid-1970s, but its establishments were outdated in the 1980s. The fact that Komen and Lindstrom had astutely ascertained what would make a successful restaurant concept during the 1970s gave rise to optimism that they would find a popular entry for the 1980s, but the two restaurateurs struggled, unable to divine a profitable future course for their company.

For a year every outward manifestation of activity came to a halt. Komen and Lindstrom spent the time canvassing the country's restaurants, searching for new a new dining trend to carry their company through the 1980s. Restaurant consultants were hired and design teams were contracted. Finally, after a year of introspective analysis, Komen and Lindstrom built their new restaurant, Morgan's Lakeplace, in December 1981. Ten years had passed since they had opened the first Horatio's and the first Clinkerdagger, Bickerstaff & Pett's Public House. At a cost of $350,000, Morgan's was in many respects the antithesis of Clinkerdagger: dark wood paneling was replaced with lightly colored, weathered wood and large glass windows; beef and rich, butter-based sauces gave way to an eclectic, multinational menu featuring pasta, chicken, seafood, and vegetables. It was a contrast the public applauded.

With Morgan's, Komen and Lindstrom placed an emphasis on food quality rather than restaurant motif, which had been one of the primary attractions of both Clinkerdaggers and Horatio's, and this strategic shift made Morgan's a tremendously popular restaurant. The opening of Morgan's also provided the first indication of what type of restaurant company Restaurants Unlimited was destined to become. Before Morgan's, Restaurants Unlimited had expanded in a manner typical for restaurant chains: the two successful prototypes were duplicated again and again in different areas. This time, however, the company would not repeat the pattern.

Although the original Morgan's proved to be highly successful, it was the only Morgan's restaurant the company ever constructed. Instead, Komen and Lindstrom went on to build a variety of restaurants that, with a few exceptions, operated under different names and were designed specifically for the particular markets they occupied. Moreover, when one brand of restaurant began to decline in popularity, as Clinkerdagger did in the late-1970s, the partners closed the struggling restaurant and reopened it as a different type of restaurant. As a result of these changes, Restaurants Unlimited became less of a restaurant chain and evolved into a family or collection of restaurants.

Soon other Clinkerdagger locations were converted into restaurants more reflective of the 1980s. Restaurants Unlimited's sixth Clinkerdagger, in Beaverton, Oregon, was recast as Hall Street in 1982, for example, while its first Clinkerdagger, in Edmonds, Washington, was changed into a restaurant called Scott's that same year. The success of these new ventures sparked the construction of a wave of new restaurants throughout Restaurants Unlimited's territory, each one slightly different from the rest. Cutter's Bayhouse, a more refined version of Morgan's, was opened in Seattle in 1983, the same year Ryan's opened in Honolulu. Other openings included Skates on the Bay in Berkeley in 1984, Stepps on the Court in Los Angeles in 1985, Stats in Chicago the same year, and Kincaid's in Bloomington, Minnesota, in 1986. Others followed at a rapid pace, enlarging Restaurants Unlimited's geographic scope and financial magnitude.

All told, Restaurants Unlimited created 18 new restaurants during the 1980s, but Komen and Lindstrom were not satisfied with this prodigious program of expansion. Instead, they led Restaurants Unlimited in a new direction by opening a specialty cinnamon roll business in 1985. Cinnabon shops featured over-sized cinnamon rolls, which were becoming increasingly popular during the mid-1980s. The first Cinnabon opened in a mall near the airport serving the greater Seattle area. All of the 22 additional Cinnabons opened the following year were located in malls, where customers could watch the rolls being made by hand. This network of "bakeries" provided a new franchise arm for Restaurants Unlimited that complimented the company's growing collection of restaurants. The Cinnabon chain stretched from Hawaii to Illinois after its first year of operation, then 16 more outlets were opened in 1987--blanketing the country with high-profit cinnamon roll businesses.

By the end of 1990, there were 72 Cinnabons scattered throughout the nation, generating roughly 25 percent of Restaurants Unlimited's $100 million in annual sales. The company's restaurant business also recorded a vigorous rate of expansion during the late 1980s, adding six restaurants between 1987 and 1989. Perhaps the most significant of these new dining establishments was a restaurant opened in Seattle in late 1989 called Palomino Euro Bistro--a Mediterranean-style restaurant featuring wood-fired rotisseries and a menu borrowing from Greek, Italian, and other southern European cooking. With the opening of Palomino, Komen and Lindstrom ushered in a new era for their company, one that focused on only a few restaurant "brands." Restaurants Unlimited's management expected Palomino to be the vehicle for the company's new, narrower approach. As one senior company official explained to Nation's Restaurant News, the concept was a "horse that we're going to be riding for some time."

A second Palomino was opened in Minneapolis in 1991, then two more were added to the company's collection of restaurants in 1993--one in Palm Desert, California, and another in San Francisco. This new strategy for growth was expected to facilitate the company's expansion and, in the process, turn Restaurants Unlimited into a more typical restaurant chain once again. At the same time, the company made another strategic decision to spend more time and money developing its only self-service restaurant, an all-you-can-eat establishment called Zoopa. Opened in 1990 in Tukwila, Washington, Zoopa enjoyed only modest success during its first year of operation. But the company made several adjustments, particularly in the restaurant's pricing structure, to improve its performance and thus created a solid restaurant brand to expand with in the future.

Also during this time, Restaurants Unlimited opened its most extravagant restaurant to date in Seattle. Called Palisade, the 13,000-square foot, $4.5 million restaurant was opened in 1992 and featured a 1,000-square-foot saltwater pool, a wood-fired rotisserie, and an up-scale menu offering prime rib, chicken, pasta, and seafood. Expected to contribute between $7 and $8 million in sales annually, Palisade represented an exception to Restaurants Unlimited's strategy of relying on its Palomino and Zoopa brands and its Cinnabon chain to fuel the company's growth.

A year after Palisade opened, Lindstrom, president of the company since 1979, was named Restaurants Unlimited's chief executive officer, with Komen retaining his corporate title of chairman. In reference to his promotion, Lindstrom explained to Nation's Restaurant News, "We had to send the community and this organization a signal about the succession that is already going on."

As Lindstrom gradually assumed control of the company, Restaurants Unlimited entered the mid-1990s continuing to expand both its restaurant business and its Cinnabon chain. By 1995, there were 276 Cinnabon shops--half of which were franchised--located in 37 states, Canada, and Mexico. Restaurants Unlimited planned to increase the total to 500 by the end of the decade. The company also hoped to exceed the meteoric 25 percent annual sales growth rate Cinnabon recorded during its first decade of existence and build on its $100 million annual sales volume. In order to reach its optimistic goals and become one of the country's leading food-service concerns, Restaurants Unlimited planned to become a publicly owned company by 1998.

Restaurants Unlimited, Inc. History

Company History:

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