WorldCity Business Magazine

The South Florida flavor

by Doreen Hemlock

When the Benihana chain of Japanese restaurants moved its headquarters from New York to Miami in the 1980s, founder Rocky Aoki wasn’t lured south by tax breaks, financiers or market research.

Aoki came for the powerboat racing.

The restaurateur had been traveling so frequently from his New York home to race fast-boats in South Florida’s warmer waters that he figured he’d simply relocate his office – near his hobby.

“And it so happens it was a great move, because the state has no income tax, is a good gateway to the Americas and is easy for travel domestically because of the airport,” said son Kevin Aoki, vice president of marketing at the company’s Miami base.

South Florida rejoiced in May when Burger King Corp. announced it would keep its world headquarters in the Miami area, rejecting an incentive package from Houston and staying in the hometown of its founders.

But don’t expect a slew of global restaurants following in the BK wake.

While South Florida hosts a handful of headquarters in the business, it turns out many like Benihana and Burger King set up in the area for reasons of life-style or simply because their founders already lived here.

For when it comes to number-crunching, South Florida doesn’t always add up. In today’s competitive restaurant market, some South Florida-based chains are moving their base from the area, some retreating from oversea, and few are prospering globally.

A case in point: Arby’s, the roast beef sandwich chain owned by Fort Lauderdale-based Triarc Companies.

Triarc just negotiated a merger with the biggest Arby’s franchise in the United States, RTM Restaurant Group based in Atlanta. When the deal goes through, Triarc expects to shift its base to Atlanta, costing Fort Lauderdale about 130 jobs.

Plus, two chains with significant international presence already have moved their home base away in recent years.

Kenny Rogers Roasters, the rotisserie-chicken chain that began in 1991, moved from Fort Lauderdale after expanding too fast and landing in Chapter 11 bankruptcy. The company was swallowed up in 1999by Nathan’s Famous, which shifted the headquarters to itsown home base in Westbury, New York.

Plus Tony Roma’s, which began serving up baby-back ribs in 1972 in North Miami, now operates from Dallas. The company’s Web site describes the chain as spanning more than260 restaurants in 27 countries from Australia to Germany, Thailand to Venezuela.

Restaurateurs say part of South Florida’s weakness in luring restaurant-chain headquarters is simply location. While the area offers a vital airport hub, it is not located centrally enough to serve the U.S. market, which remains the focus of many chains. Miami International Airport provides excellent links to Latin America and the U.S. Northeast, but connections are less ample to the U.S. Midwest and West. Centrality helps explain why many chains instead keep bases near airport hubs in Texas, Ohio and Illinois.

But serving a nationwide clientele wasn’t top of mind when some of today’s chains launched in South Florida anyway.

Pollo Tropical, for instance, started in Miami in 1988, because one of the two founding brothers lived in the area after studying hospitality at Florida International University.

When his brother Stuart Harris in Maryland touted “healthy” chicken for restaurant concept, Larry Harris suggested rice and beans as side dishes to appeal to Cubans in Miami. Neither founder is Latin or Caribbean they’re Jewish-American. But like all solid restaurateurs, they saw the need to localize their concept. And their concept has become so Caribbean-oriented that the chain later sputtered during a U.S. expansion into locales without tropical flair.

Even Burger King, which initially sold hamburgers for 18 cents and whoppers for 37 cents, started in the Miami area in 1954 because the founders lived here: James McLamore and David Egerton. The chain gradually expanded, with sales likely to hit $12 billion this year in 11,200-plus outlets in 65 countries.

Said Don Perlyn, chief executive for Fort Lauderdale-based Miami Subs Grill and a South Florida restaurant veteran: “It’s a fabulous place to live. Just look out the window.”

Still, few chains besides BK have succeeded in going global from South Florida.

From Miami, Benihana manages its U.S. restaurants plus franchises in the Latin American region. Yet a sister company in New York handles operations in other parts of the world, including Europe and Asia, said Kevin Aoki.

Pollo Tropical remains concentrated in Florida, with more than 60 company-owned stores, and operates in only two other markets near Florida: the U.S. Commonwealth of Puerto Rico and Ecuador, said public relations manager Christine Michaels.

In fact, some chains still based in the area have been retrenching from international operations.

Miami Subs Grill, also now part of Nathan’s, has cut back to 90 restaurants, with none overseas. In the 1900s, the sandwich chain used to have more than 180 units, including outlets in Ecuador, Peru and Dominican Republic, among other nations.

And Pollo Tropical recently closed a couple of Ecuadorian operations amid upheaval in that South American country, said spokeswoman Michaels.

To be sure, growing a U.S.-based chain worldwide is no cakewalk. It takes solid partners, deep pockets and a long-term commitment, according to restaurant executives.

Miami Subs’ Perlyn said his chain stumbled overseas by reacting to requests for franchises and not checking out potential partners or overseas opportunities enough. Some deals failed. “We probably went international too soon in our history. We weren’t as ready as we needed to be,” Perlyn said.

That advice helps explain why Pompano Beach-based Roadhouse Grill now opts to work with just three well-heeled franchise partners overseas in Brazil, Italy and Malaysia. Its Italian partner just opened a sixth outlet and plans to grow to 39 in Italy within 10 years, said Michael Brant, executive vice president.

“They have the access to working capital to expand,” Brant said of the foreign partners for the chain of casual-dining restaurants.

In contrast, Roadhouse Grill has no plans to expand in the United States beyond its current 68 company-owned outlets because of financial strains. The publicly traded company lost roughly $6 million last fiscal year on sales of $138 million, its fourth straight year of red ink.

Success in any market also demands customization to local tastes, regulations and practices, executives add.

Burger King, for example, offers shrimp burgers in seafood-loving South Korea and spicier items in Mexico, where chiles are popular. And it adapts to rules such as not adding salt to french fries in Europe, said Allison Russell, director of corporate communications.

The burger giant announced last month that it will keep its headquarters in South Florida, spurning Houston’s offer only after Florida and Miami-Dade County offered a nearly $9 million incentive package. The deal keeps 600 jobs in the county, plus Burger King commits to add at least 60 more within three years. The company will consolidate its S. LeJeune Road in Coral Gables, slated for completion by 2009.

BK executives said they also considered several other airport hub areas including Atlanta, Dallas, Denver and Chicago before opting between Houston and Miami.

The Beacon Council, Miami-Dade’s economic development group, applauds the deal as a net gain. The BK headquarters should generate $25 million-plus in new taxes over15 years. Furthermore, Burger King’s continued presence helps attract other companies looking to relocate or expand their international operations.

For now, it seems few newcomers are likely to be restaurant-chains doing global business. Unless of course, the honchos happen to like sunny beaches or power-boat racing.