Saying 'bonjour' to the competition La Madeleine cooks up a recipe to return to growth
By KAREN ROBINSON-JACOBS Staff Writer Published June 12, 2004
Stymied by strategy squabbles, a lack of cash and a need to renovate, La Madeleine Bakery, Cafe & Bistro suffered from arrested development for five years while its competitors grew like mushrooms. Now - armed with updated computers, joint-venture investors and a seasoned management team - the company sees an opportunity for its first growth spurt of the century.
Dallas-based La Madeleine, which hasn't opened a restaurant since its 62nd in 1999, plans to open up to eight by the end of next year. They'll begin with two eateries in Houston and one in Las Colinas.
By mid-2007, La Madeleine officials hope to have about 90 restaurants.
Each eatery costs about $1.2 million to build. But the expansion will give La Madeleine a better chance to compete in the growing "fast-casual" dining segment that the chain helped pioneer with its launch in 1983. Restaurants in this group, including some of the nation's fastest-growing, serve meals with better ingredients than typical fast-food restaurants use, and they offer faster service and lower prices than most sit-down spots.
"People want to move to higher-quality food, but they still want it quickly," said Matt Ragas, editor of FindProfit.com, an investment newsletter and Web site. "And that's good news for these guys."
It may seem très bizarre to launch a major expansion of a French bakery and cafe with so many diners consumed by the low-carb craze.
But Wallace Doolin, who was brought in two years ago to jump-start growth at La Madeleine, said he isn't worried. The 57-year-old chief executive and longtime restaurateur is banking that diners will find enough to like in the carb-friendly items that were recently added to the menu - such as herb-crusted pork tenderloin and beef tips in Merlot - to offset any lost dough from a cut in bread-related sales.
"Our overall business is up because we're not just a bread place," said Mr. Doolin, acknowledging that bread sales are down by about 20 percent compared with last year.
Even though baked goods account for 18 percent of revenue at the company, overall sales for the fiscal year ending June 28 will be up slightly to $118 million, Mr. Doolin said. Privately held La Madeleine doesn't disclose specific figures.
Sales are expected to increase further as the company expands its portfolio, he said, largely through joint ventures.
La Madeleine "can be a fairly substantial brand," he said. "This brand has a lot of ability to travel."
Pioneering
Known for its French-country decor - complete with weathered wood tables, antique bricks and stone fireplaces - La Madeleine is the brain child of Patrick Esquerré, who was inspired by his childhood in the wine-rich Loire Valley region of France.
The restaurants, with an average check of about $10 per person, offer fare like that served in full-service, casual dining chains, but in a cafeteria-like atmosphere.
Diners line up, trays in hand, to select soups, salads and drinks. Restaurant staffers deliver entrees to the tables.
In the 15 years under Mr. Esquerré's leadership, the chain grew from its first restaurant, on Mockingbird Lane, to about 60 locations in eight markets.
Growth stalled at restaurant No. 62 - stunted by a number of factors, including a dispute among Mr. Esquerré's investors over expansion plans. In addition, there was a disastrous foray into Chicago in which the company opened, then closed, three restaurants. Along the way the company racked up $33 million in debt, according to restaurant trade publications.
The disputes were ultimately resolved, with Mr. Esquerré leaving the company in 1998. His investors sold the brand in December 2001 to Paris-based restaurateur Louis Le Duff and several other investment groups including Summer Street Capital and Morgan Keegan Investments.
Trade publications put the purchase price - which was not officially disclosed - at about $60 million, or less than $1 million per restaurant.
Mr. Le Duff - whose Groupe Le Duff is one of the leading bakery and cafe restaurant companies in France - remains the largest shareholder. And Mr. Esquerré remains one of the chain's biggest cheerleaders.
"If they go back to expansion now, I'm very glad," said Mr. Esquerré, who opened, then closed, two restaurants in Dallas after leaving La Madeleine and has returned to his roots in marketing. "Because my heart is still there."
Reinventing
Mr. Doolin, who spent eight years as chief executive of Dallas-based Carlson Restaurants Worldwide, owner of the TGI Fridays chain, arrived at La Madeleine in April 2002 and began "doing work to get ready for growth."
He brought in a new management team, and the company spent "several million dollars in technology," including installing a new computer system to coordinate order handling in the kitchen.
Last fall, the company added the word "Bistro" to the name and began adding more dinner-oriented menu items.
"That allows us to compete with casual dining better," Mr. Doolin said.
But the company's real battleground is in the segment that it helped form - fast casual.
While La Madeleine was on hiatus, its fast-casual competitors were on a roll.
Between 2000 and 2003, Panera Bread Co., a St. Louis-based bakery-cafe chain that had been the darling of Wall Street until its shares deflated last month, grew from 262 units to 602.
The development delays mean that La Madeleine lost out on some prime real estate opportunities and consumer awareness while its competitors were chewing up market share.
"There is a lot more competition" in that segment, said Ron Paul, president of Technomic Inc., a Chicago research firm. "That's not a positive, but it's not a significant enough negative to keep them from succeeding."
Mr. Paul added that La Madeleine could benefit from being the only real player in the fast-casual space with a French flair.
"I think we've done the Italian, we've done the Asian," he said. "I think we're going to see some success in this category."
Beyond 'bakery'
Industry consultants said the company is smart to push its lower-carb items to get consumers beyond the "bakery" image. And like other bakery chains, La Madeleine plans to come out with a low-carb bread line for its sandwiches.
"They've done some intelligent things," said Tom Rollert, a Dallas-based restaurant consultant with Dick Wray and Consultants Inc. "This is a time that you don't push being a bakery. You push the meat that's in the bread.
"It's not a sacrifice in quality," he said. "It's paying more attention to operating smart."
E-mail krobinson@dallasnews.com
ABOUT LA MADELEINE
Headquarters: Dallas Founded: 1983 Restaurants: 62 Staff: About 2,500 Sales*: Fiscal 2002: $118 million Fiscal 2003: $116 million Fiscal 2004: $118 million** * Fiscal year ends in June. ** Estimate SOURCE: La Madeleine Inc.