Landry’s, Inc. reeled in seafood chain McCormick & Schmick’s in a buyout on Jan. 3, six months after the floundering chain was put on the market. The move signifies an end–and a new beginning–to the brand that touted its old-fashioned ways and hung onto them until they killed it.

“They were proud of an old-fashioned kind of position, and no one wants old-fashioned anymore,” says Cliff Courtney, executive vice president and chief strategy officer of Zimmerman Advertising. “They want something new.”

The first McCormick & Schmick’s opened its doors in Portland, Oregon, in 1976. It grew to 87 restaurants in the past 35 years. Landry’s has already closed a handful of locations since the buy-out.


“They have an original brand promise and mission that was actually very worthy, and for a long time, served them well,” says Tom Kelley, managing partner of Concept Branding Group.

But the fall was foreseeable. Courtney delineated a number of weaknesses of the company when he spoke with Rmgt in June: the brand is seemingly identical to when it first launched; its huge menus overwhelm guests; the brand itself feels stale; and the meals are crafted to take a long time to eat.

Both Kelley and Courtney agree that McCormick & Schmick’s collapse was mainly due to its stubborn resolve to not evolve.

“Their whole position was pushing fresh, which I get is the default position in seafood, but there’s nothing ‘fresh’ about the fresh position,” Courtney says.

“The existing management team back then said they had this famous plan they were going to implement,” Kelley says. “It really just goes to a larger point of some of the great crumbling brands that have been around for a while, relying on these management teams that have just become so insular and so unresponsive to outside opinion or outside counsel to help them turn around.”

Courtney says McCormick refused to recognize the changing pattern of American eating by sitting in a category without scale.

“People already eat less seafood than other proteins,” he explains. “So you’re dealing with a smaller pond, as it were. Secondly, compression in restaurants, i.e. fast casual … things that are less expensive and new are winning in restaurants, as opposed to slow and expensive.”

Faulty Math

The numbers support Courtney’s claim. According to McCormick & Schmick’s most recent quarterly report, filed Sept. 28, 2011, the brand’s net income for the first 39 weeks of 2011 was a loss of more than $6 million.

In comparison, a year prior at the end of September 2010, the brand’s net income had been nearly $2 million.

Kelley indicates McCormick’s management team of the past decade has had more success twiddling their thumbs than running a national restaurant chain.

“They just, most recently in the past 10 years or so, have suffered terrible management and terrible execution,” he says. “I think the [new] management team will be like night and day between the former management team at McCormick & Schmick’s.”

One thing Kelley calls “troubling,” however, is the style in which the former management team was terminated.

“I read it this morning [that] the supposed-turn around team that was running McCormick & Schmick's for the past four or five years received $6 million in payouts as part of the takeover,” he says, “which really is just a shame, because the way they led that company down the road and let it fail was just astonishing.

Public Enemy

Courtney points to the company going public in 2004 as another tumble in its downward slide.

“Once you’re trying to please shareholders, you get a bad case of white line fever. You’re staying in the middle of the road … you play it too safe,” he says.

He says privatization gives management the confidence it needs to trim fat without being judged or questioned.

Upon the buyout, Landry’s immediately announced McCormick & Schmick’s would no longer be a publicly traded company, retreating once more into the private sector.

A Fresh Start

Both Kelley and Courtney view the buyout as a win for McCormick & Schmick’s, mostly due to Landry’s successful record.

“Landry’s has a history–a pretty impressive, billion-dollar history–of resurrecting brands and making them relevant again, especially in seafood,” Courtney says. “I’m a big fan of Landry’s, because, for starters, they’re bold, and I think fortune favors the bold.”

Whereas McCormick sat in a category without scale, “Landry’s, on the other hand, they have scaled systems,” Courtney explains. “So their economic efficiencies for running seafood are pretty big. I guarantee they’re working up the numbers on how to buy fish more effectively, put in those restaurants, how to take the best practices and make them work.”

A fat trimming, meanwhile—closings and potential reallocation of McCormick’s restaurants to other Landry’s concepts—is to be expected, says Kelley.

It also helps that Landry’s is  a marketing-centric organization, Courtney says, because “brands are driven by great marketing, not just great merchandising.”

They agree there is a chance that Landry’s will take the drowning seafood chain and resuscitate it to the life once enjoyed.

“[Landry’s] have not shown yet that they can make this brand exceed,” Courtney says, “[but] listen, nobody likes to see brands go down. We’re in the business of seeing America prosper.”

By Sonya Chudgar

Industry News, Restaurant Design, Landry's, McCormick & Schmick's