Struggling back from the brink; a slimmed-down Magic Pan is repositioning itself to attract a wider customer base and boost sales.
Date: 9/20/1986; Publication: Restaurant Business; Author: Long, Dolores

STRUGGLING BACK FROM THE BRINK

Before the Quaker Oats Company unloaded its sagging Magic Pan crepery chain to Bay Bottlers Ltd. in July of 1982, the San Francisco-based Magic Pan International, Inc. suffered from customer count declines averaging 14 percent and lagging sales of $88.1 million at its 93 units.

Now, with new owners, a fresh management team--and only 55 units-- Magic Pan has survived its dramatic downward spiral and appears to be on the way up again. In late 1983, average unit volumes stood at $870,000, a figure that has grown to $1.1 million in 1986. A strategic plan outlining a new image, repositioned menu, decor improvements, and new marketing strategies have boosted check averages, attracted a more heavily male clientele, and revitalized a chain whose profits were as flat and thin as its renowned crepes. Prior to its purchase by Bay Bottlers, Ltd. of Houston in 1984, the chain hit bottom with a six million dollar fiscal loss. Bay Bottlers owner Charles Patel, Jr., became Magic Pan's CEO, placing his medical doctor brother Michael as president.

NEW TEAMS

Because of Magic Pan was the Patel family's first venture into the restaurant industry, a series of professional managers were brought in, with the Patel family in charge of overseeing operations at arm's length. In 1985, feeling that the Patel family should have a more hands-on approach to the restaurant business, Charles Patel, Jr. stepped in as a final decision-maker and brought in Kim O. Andereck, 38, as senior vice president, in May of 1985. Andereck, former president of Kelly's Restaurant Group in Orlando, brought a "war game" mentality to the Magic Pan turnaround efforts, aimed at cutting back waste and inefficiency. Notes Andereck: "Magic Pan got into trouble because we were in the construction business, the real estate business, the lease equipment business--everything but the food and restaurant business. When Quaker made the decision to build 20 Magic Pans annually in the 1970s, we found we had more construction people in the home office than we did operations people."For 18 years, this chain was fueled by dollars for capital expansion and the details of running the place were left to underfunded operations people who had to sink or swim or their own." Although Magic Pan had enjoyed a longevity of qualified operations people on the unit level throughout its history, Andereck blames a lack of operational experience at headquarters on many of Magic Pan's failings: "Some former officers had real estate and leasing knowledge, but didn't know a side of beef from french fries."

MISSED OPPORTUNITIES

Andereck prides himself on having always been an operations man and spends at least two weeks each month actually out in the 55 units across the country. Since 1981, 55 restaurants have either been sold or the lease has expired, and Andereck is looking to rid the chain of what a calls "dog units," those sites that were secondary locations not on ground level, or located on the back or loading dock site of a shopping center instead of a choice center pad. "Some locations were purchased in the heyday of mall expansion, some of these in the middle of cornfields and the population that was promised by the developer just never materialized. In other places, the demographics changed."

LOCKED IN

Andereck's management team of Jon Forsmann as vice president of operations and Fred Rash, the eastern regional manager based in Hartford, CT, has spent the past 12 months repositioning the menu, the look and the perceived image of the existing Magic Pan restaurants. Says Forsmann: "Magic Pan was to crepes what McDonald's was to hamburgers, but with a menu that was basically 90 percent crepe offerings, we found ourselves locked into both a product, a price and a clientele. Our check average for crepes at tops was $6. Today, with a more varied menu, we average $10.57."

Adding more meat, chicken and veal items to the menu, with crepes now relegated to the bottom one-third of the menu, has boosted the
male/female customer ratio to 60/40 from a previous 80 percent female. Says Andereck: "We don't want to alienate our built-in
clientele, but our very out-dated 'tea room' image was much too limiting.

DESSERT CREPES

The chain still utilizes its trademark pan and patented cooking wheel, but the emphasis today is on saute specialties prepared with veal, chicken, beef and seafood, with the signature crepes designated to the dessert or specialty item category. The sauteing and stir-frying still takes place in the restaurant in full view of the diner, taking advantage of today's trend to display kitchens and cooking. The new menu is the largest single change in history of the chain, with all locations rolling out the new items last April. At least eight regional specialties are offered in various locations, with the remainder of the menu offerings being standard chain-wide.

Menu testing is an ongoing process in the chain's cluster markets and Magic Pan is currently evaluating alternatives such as pies, cakes and tortes to the traditional crepe dessert. Peasant dresses are no longer the uniform of the day, to the dismay of many of the older patrons, replaced by contemporary black and white. Says operations v.p. Forsmann: "About 50 percent of the operations received a "revitalization" with no structural changes, replacing carpet, fabric and wall texture." With 10 freestanding units and 45 mall locations in the chain, the company has spent as much as $200,000 for a 'full bloom' revitalization with the average cosmetics costing around $50,000 per unit.

Andereck has withdrawn all television advertising while he repositions the chain's marketing approach, relying in the interim on coupons and radio to tailor fit each unit: "We're more like 55 mom & pop restaurants than a nationwide chain." Andereck contends that the basics outlined in the waning days of Quaker's ownership are getting some payback today, with the most helpful measures being the repositioning of menu and image and the streamlining of former deadweight units.

ACQUISITIONS

With its own house now finally getting into profitable order, Magic Pan can begin to zero in on strategic goals to guide the company into the 1990s. The acquisition of 15 more units within the next 12 months is on the agenda and Magic Pan is aggressively looking to acquire another small chain located in its current cluster markets in California, Texas, Oklahoma, Colorado, Canada, Atlanta, and several New England states. Notes Andereck: "Our Turnaround strategy has been to look at each individual restaurant and tailor it to its market instead of making decisions which apply ti each unit, as though they all shared one personality."

In addition to the streamlined Magic Pan chain, the company has pioneered three new concepts. Puck's, a hockey and sports theme restaurant in Edmonton, Alberta, Canada, opened last October and its expected to gross $1.5 million in its first year. The project is potentially a prototype for a chain. A non-profitable Magic Pan in the Brea, CA, mall was converted into Laredo's, a Tex-Mex theme. Another non-producer in the Beverly Hills area is set to open this fall as an upscale steak house called T. Bones. Frogg Lane, Boston, doing a large bar business, grosses about $2 million annually. Although Magic Pan has "left crepes for the faithful" on its menu according to Andereck, it enters its third decade of operation no longer a specialty shopping mall restaurant but instead gradually moving into the casual theme dinner house segment with a 1980s menu, decor and a broad base of customers.

Dolores Long