J. Alexander's exterior storefront.
J. Alexander's

J. Alexander's has seen its sales rebound in recent months.

J. Alexander’s Acquisition Sign of ‘Incredible Year’ for SPB Hospitality

And the deals could keep coming at the Logan's Roadhouse parent company.

In the spring of 2020, CraftWorks Holdings was bankrupt and on the heels of closing 37 restaurants. COVID-19 forced the multi-concept group—rebranded in 2018 after its acquisition of Logan’s Roadhouse—to close all 261 of its corporate locations and terminate a majority of its 18,000 workforce. Court documents showed fewer than 25 employees remained “to help preserve, maintain, and secure … assets during the shutdown period.”

CraftWorks’ dip was among the most dramatic in the pandemic’s early headlines. The Wall Street Journal, quoting “people familiar with the matter,” credited “a devastating collapse in consumer activity,” alongside state and local restrictions for the plummet. CraftWorks noted in a filing it was “mothballing” all stores and hoped it would be able to “restart … operations at some point in the future, but there are many preconditions to a restart, including the obtaining of financing, the hiring of staff, and the ability to create a coherent and profitable business plan.”

It added, candidly: “The shutdown could persist for a prolonged period time, if not permanently.”

Suffice it to say, CraftWorks’ future was murky.

The bankruptcy omitted 77 franchised locations. But CraftWorks’ other 261 stores hit the block—a lineup that included Logan’s Roadhouse, Old Chicago, Gordon Biersch Brewery Restaurant, Rock Bottom Restaurant, BreweryBig River Grille & Brewing Works, ChopHouse & Brewery, A1A Ale Works, Ragtime Tavern Seafood & Grill, Seven Bridges Grille & Brewery, and Sing Sing, a Big-Bang dueling pianos concept.

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Fortress Investment Group ended up as the buyer, acquiring CraftWorks’ assets through a $93 million credit bid, or $45 million less than an original March agreement of $158 million. And with it came the emergence of the SPB Hospitality platform, a moniker for “Steak, Pizza, Beer.”

If you want to talk turnarounds in the especially hard-hit restaurant business over the past 16 months, SPB CEO Jim Mazany says, just look at that March 2020 spell versus the summer period thus far. The restaurant industry experienced a flurry of M&A activity recently, with five deals struck in seven days. On the buyer-side most recently? SPB Hospitality, which acquired J. Alexander’s on July 2 for $220 million.

“We have had just an incredible year,” Mazany says. “So between Logan’s Roadhouse and Old Chicago, and our brewery group, the company itself has had a tremendous transformation in our business model, which put us in a position to look for opportunities to acquire other brands.”

Before the deal, SPB’s lineup consisted of Logan’s, Old Chicago, Rock Bottom, Gordon Biersch, ChopHouse & Brewery, A1A Ale Works, Twisted Tenders, Roadies Sliders, Ragtime Tavern, Seven Bridges, and Big River Grille & Brewing Works.

J. Alexander’s tacked on 47 upscale restaurants across five concepts, including J. Alexander’s, Stoney River Steakhouse and Grill, Redlands Grill, Overland Park Grill, and Merus Grill.

SPB’s portfolio is fast—and suddenly—becoming one of the sit-down sector’s widest and most diverse collection of brands. And it’s likely not done growing.

Mazany says SPB has plans to scale J. Alexander’s, but also sees “possibilities for acquisitions to come into the SPB portfolio that make sense. That complement what we do. And that work within our strategies.”

In other terms, SPB probably isn’t done buying.

No matter how you label it, though, it’s a remarkable shift of direction for this family of brands.

Before COVID, Logan’s in particular, posted average-unit volumes of about $2.1–$2.2 million, Mazany says. Today, it’s north of $3 million. “We’ve seen great growth and market share within the segment that they operate,” he says of the steakhouse sector. “And we have been able to layer in some sales channels and growth vehicles that have really helped grow that average-unit volume. So you take a platform like Logan’s and you grow it at that number—that is absolutely something that has been really good for us as far as from a profitability perspective and return on investment.”

Logan's Roadhouse

SPB's Ember Smoked BBQ, a virtual brand operating out of Logan's Roadhouse, has been it's hottest release so far.

J. Alexander’s recently rounded the corner on a significant turnaround of its own. The chain, public for nearly six years, indicated in summer 2019 it was seeking strategic alternatives to reboot the business. It retained investment banking firm Piper Sandler to facilitate a review of and said anything from a merger, sale, acquisition, share repurchase program, or strategic investment, was on the table.

The question at hand was if J. Alexander’s was truly big enough to be an efficient standalone company on the stock market. Piper Sandler contacted more than 125 potential buyers, and three emerged. One offered “a premium to the then-current market price,” but that changed once the pandemic dropped in. J. Alexander’s reduced its proposed purchase price multiple times and insisted on conditions relating to performance. For a bit, talks shelved in favor of COVID-response tactics.

But at last, sales lifted 5 percent in April versus 2019—the first time J. Alexander’s reported growth since coronavirus. At J. Alexander’s and Redland Grill, average weekly same-store sales per restaurant in Q1 lifted 3.1 percent year-over-year to $106,600, and at Stoney River Steakhouse and Grill, average weekly same-store sales upped 4 percent year-over-year to $75,300.

If we go back to April 2020, comps at J. Alexander’s/Grill restaurants plunged 81 percent. Stoney River’s fell 78.3 percent. In May, the figures were negative 61.5 and 62 percent, respectively.

By Q2 of last year, average weekly sales were $51,600 at J. Alexander’s/Grill and $35,000 at Stoney River.

J. Alexander’s flipped the dial on digital marketing and email campaigns to drive awareness to off-premises. It added curbside service, invested in online ordering with ChowNow, and began offering family-style meals, as well as butcher shop sales of cook-at-home, hand-cut steaks. The company offered bottles of wines to-go, too, and tested delivery in certain markets.

In response, off-premises-only sales during the week ended May 31, 2020 totaled about 29 percent of total take and were up roughly 35 percent over the week ended March 29, 2020, which was the first full stretch of primarily carryout-only sales.

With dine-in returning, the channel held, mixing 16 percent of total net sales in Q1, or $720,000 in average weekly off-premises business. That’s only $10,000 fewer than what J. Alexander’s saw in Q4 2020.

Mazany says talks of acquiring J. Alexander’s with SPB’s advisers began about four or five months ago. It really got on the company’s radar screen, he says, toward the end of 2020 when “we realized there was some really strong forward momentum in the company.”

“From our performance, we were tracking ahead of our turnaround plan here,” he says. “And I think when we saw that opportunity, and we looked at how this year’s taken off for us, and this has been a great first six months of the year for SPB and all the brands—it really started to heat up at the end of the first quarter.”

Personally, Mazany says he’s been a fan of the J. Alexander’s brand for some time. The company was founded in 1971 as Volunteer Capital Corporation by renowned entrepreneur Jack C. Massey, the principal shareholder, and two Nashville businessmen, Earl Beasley, Jr., and John Neff.

Massey is the same restaurant maven who Colonel Harlan Sanders reportedly once offered $100,000 and half of the company’s profits to run KFC. In 1964, Massey and future Kentucky governor John Y. Brown paid $2 million for the chicken giant. They took it public in seven years, expanding the brand from 600 or so units to more than 3,500 globally. Massey made $45 million when the now Yum! Brands-run business was sold in 1971 to Heublein Inc. There are more than 25,000 KFCs today.

Logan's Roadhouse

Logan's Roadhouse has stuck to its value roots over the past year.

The Volunteer Capital story is a long and complex one, but the first J. Alexander’s unit, known for its contemporary American dishes and wood-fired cuisine, arrived May 1991 in Nashville, Tennessee. Lonnie J. Stout II became chairman following Massey’s death in 1990 at the age of 85.

“Where we saw the opportunity that they were looking for alternatives to sell, it was something that I actively wanted to pursue for us because I believe it’s a really good complement to what we do,” Mazany says. “And I think the brand fits in really nicely into our portfolio and we have plans for growth in all of our SPB brands. But specifically, as we look at this acquisition, we also have plans to grow the J. Alexander’s brand into the future.”

To start, Mazany says J. Alexander’s does “a lot of things really well.” So this isn’t an overhaul project out of the gates.

SPB can bring marketing expertise, purchasing power, operational chops, IT, and simply a backbone of being “really good restaurateurs,” he says. And if you look at the past year, SPB proved successful launching virtual brands, devising new sales channels, and igniting revenue drivers across the board, like catering. It installed call centers where people answer the phone for to-go orders. It’s growing third-party delivery in every avenue.

“So we find ourselves as really good brand stewards, understanding the DNA of each one of the brands we have in our group,” Mazany says. “And we support that DNA and give the brands the opportunity to grow under the leadership that we provide. And the financial stability.”

“From a guest point of view, our satisfaction scores have never been higher across the board,” Mazany adds. “True operational excellence has been put into the company and I think our approach of how we think about the business and our guest and restaurateurs, I think, is a big a change from our previous [situation].”

SPB is approaching 10 months of sustained growth. A good roadmap for what might happen at J. Alexander’s would be what’s unfolded at Logan’s, where SPB took its core equities and amplified them. Namely, keeping prices down to separate from category peers. Logan’s average check clocks in at $12–$13 range with steak offerings starting around $10. The average check at Outback, for comparison, was $23 in 2019, with 91 percent of the sales stemming from food and non-alcoholic beverages. Outback just recently unveiled a more value-focused menu, reflecting a shifting landscape. The per-guest average check for Texas Roadhouse that same calendar was $17.57.

In October, Logan’s created an option for guests to customize meals and “Make it a Combo” by adding wood-grilled chicken, hand-cut salmon, shrimp or crispy crab cakes to any entrée. It also added Southern Fried Fish to its dine-in “American Roadhouse Meals” menu, where guests can choose from a variety of hearty entrées served with two sides from 3–6 p.m. for $8.99.

“The from-scratch cooking that we do at Logan’s, the way in which we operated as a roadhouse but with a more limited menu that’s more to the core of what our consumer really likes and wants, we have been rewarded with that as guests return, and our additional layers of sales that we put in place continue to grow,” Mazany says.

More than 20 percent of revenue at Logan’s today hails from off-premises. Mazany believes it will reach 25–30 percent of total sales in time.

Virtual brands have been strong as SPB, too. Twisted Tenders is a virtual concept that launched in December. A month or so ago, Ember Smoked BBQ activated for third-party delivery in 19 states. There’s also Roadies, Logan’s on the Road, and OC (Old Chicago) on the Go. Mazany says the most recent iteration, which focuses on mesquite-wood smoked, grilled and seared entrées or burgers and handheld sandwiches, has been, by far, the “hottest of all the brand that we’ve had.”

“I do think there will be a demand [for virtual brands after COVID] and I think one of the drivers of our success has been value,” he says. “The Logan’s price point and the value that we offer, all through the pandemic we have not been aggressive with price at all. We’ve held the line on our pricing, from pre-pandemic through the pandemic. Modest increases here and there when we faced some commodity pressure. But we really believe the value that we offer, not only in our virtual brands, but within Logan’s itself, is a big driver of our success and we see that from our guest satisfaction scores, our guest intercepts, the feedback coming back of the value for the experience has been very strong for Logan’s.”