The last 18 or so months for Xperience Restaurant Group have not exactly been normal. The multi-concept company reported its most successful year on record in 2021 and followed that with an even better run in 2022. Sales climbed double-digits on top of double-digits and by the time 2023 neared close, XRG had debuted nine locations across a year and half and acquired two concepts—Rio Mambo Tex Mex y Mas and THE RIM scratch craft eats from RM Restaurant Group.
CEO Randy Sharpe says, like many operators in the space, it was difficult to gauge this post-COVID haze through any accurate filter. Was it artificial growth? Pent-up demand? Where does the business stand? XRG has a much-firmer grasp of that now as 2024 gets going. The company, known for concepts such as SOL Mexican Cocina, Solita Tacos & Margaritas, the iconic Las Brisas, and its longest-running brand, El Torito, boasts 72 units with a goal to reach 100, but there’s no dart on the timeline. XRG has settled into a more comfortable cadence of roughly two openings per year and an opportunistic eye on M&A if a chance to improve a concept, not just add to the portfolio, comes by. Or, as Sharpe puts it, “looking for evolutions, not revolutions.”
Alongside this more “normal” rate of expansion, Sharpe has a clear sense of where XRG, which was formed in 2018 after Z Capital spent $47 million to acquire Real Mex Restaurants out of bankruptcy, when it had 52 locations, should center its efforts. It’s no grand secret dining out has become pricier, helping drive the top line despite softened traffic for much of the foodservice field. But, in some respects, it’s an upside-down arena in full service. The price of an entrée at some fast casuals isn’t all that distant from what you might spend at casual eateries. First Watch, in one example, carried a per-person average of $16.35, executives said last quarter. Salads at sweetgreen run from $13.45 to $15.45.
“I’m a firm believer that you have to focus on the experience,” Sharpe says. “People are very discerning where they spend their money. I am seeing it louder and louder when the experience doesn’t meet expectations right now.”
Sharpe shares a story of a recent Las Vegas work trip. He dined at an experiential-theater-type restaurant he had tried before. Only now, prices were 30–40 percent higher. However, the show was materially better. The hospitality, 100 times over, Sharpe says. So even though it cost significantly more, since the experience was memorable, it exceeded expectations. “That’s free,” Sharpe says of surprising guests. “A person walks in the door, the manager ensures that guest and makes sure they get what they need. If we make it special, they’re going to come back.”
This isn’t a fresh mindset for Sharpe. One of the reasons he believes XRG enjoyed record sales out of COVID and beyond is because it didn’t drift from what core customers attached value to. Its concepts didn’t scale back menus. Rather, they looked for ways to provide more experience as soon as they could. This wasn’t an effortless—or cheap—approach at times. One example was to take plated brunch, which was a staple at some of XRG’s upscale brands, and, instead of slicing it, reconfigure setups to make it work. XRG erected plexiglass and put attendants behind barriers at each station to guide guests through.
What it accomplished, Sharpe says, is to give loyal customers an experience they not only expected and remembered, but felt was worth leaving the house for during a time when traditional habits had become infrequent luxuries. XRG did the same with Taco Tuesdays. Pre-virus, it would lay out a large spread and people could buy tacos from servers and start building. XRG managed to keep the feeling by having two employees lead customers along, a move that, again, cost more labor, but rang high on the appreciation factor. The company also kept its chef’s special quarterly program that introduced new items and brought back old favorites. There was no cut-back.
XRG didn’t close a single restaurant or take on new debt during COVID.
And the company, mainly a California-based footprint, went from down 90 percent in sales early on to 65 percent or so before outdoor dining and other options allowed it to reach single-digit declines by early February 2021. And then, business boomed.
Now, instead of factors like 6-foot-spacing and understaffed restaurants, XRG is navigating the value perception as it pertains to discretionary spending. Sharpe says consumers are getting hit on multiple fronts as their everyday lives ratchet up.
Whether that slows or not as economists grapple with predictions, Sharpe doesn’t think the table stakes of winning over customers is going to change. Guests continued to dine out through inflationary pressures. As is often the case, although people might come less often, they see restaurants as an avenue for experience that’s more affordable than, say, a weekend vacation. A race toward “affordable luxuries” is a common turn in shaky economic times, sometimes referred to as the “lipstick index.”
Sharpe says he reads every article and consumes all the industry data he can find. And while he understands why brands focus on cost-cutting and control, XRG seeks balance. “It has to be a balance between keeping you profit margin at a certain level and making sure you have enough focus on the experience,” he says. “Because experience is what matters to our guest right now. They’ll spend the money at your restaurant or your concept or your company, if they come in and they have a level of consistency and excellence that they expect.”
“If you don’t, you’ll lose traction fast,” Sharpe adds. “And then all those cost-cutting measures didn’t matter too much, did they?”
The statement, “was it worth it,” he continues, is the easiest way to describe what value means. “That’s our focus. That’s what we believe. And we still believe in looking for ways to control our costs in order to continue to be successful. But there is a gentle balance to that,” he says.
Technology sits in the middle of XRG’s approach. It serves to help with controls and guest experience where applicable. For instance, the company invested in a bar KDS instead of tickets. Today, the level of execution is dramatically higher and the timing of food and cocktails steadier.
It’s a good snapshot of XRG’s broader vision. These past 18 months were a tornado of maneuvering. Whether it was figuring out what guests needed out of the pandemic or buying new brands, then finding models, approaches, and square footage that worked best, XRG reacted to and rolled with opportunities. In 2024, though, Sharpe says, the goal will be to focus on optimizing locations that have opened and to ensure the company positions itself for lasting success. If another potential acquisition appears that would improve the platform, XRG will engage. “But for us,” Sharpe says, I think it’s time to take a deep breath and focus on what we have in front of us.”
That could become a common theme in 2024 as restaurants work to decipher all the innovation that flowed via solutions during crisis times. This includes evolving technologies like AI and robotics, and the ever-enduring challenge to turn data into leverageable currency.
Not to mention, Sharpe says, it’s an election year. So who can really say what that entails, other than more chaos.
It won’t be as simple as raising prices, Sharpe adds. XRG knows that story all too well living in the Golden State. The longer-term plan is to train and bolster restaurant teams so managers can deliver on the things guests are willing to pay more for, he says. The fact the FAST Act is bringing minimum wage to $20 for large quick-service chains is a rearview point, too, since XRG was already there. Kitchen staff have made that “for a while now.” It actually might open opportunity since it levels the wage field a bit. “It should be interesting,” he says.
“There’s transactional growth out there and we see some of that in more of our off-premises piece of our business,” Sharpe adds. “But we’ve grown through the experiential from day one. Make it more of a memorable experience for our guest and that’s something that we pride ourselves at being great at.”
