Meat And Potatoes

In an industry noted for concepts and gimmicks, Ryan's has become one of the hottest restaurant chains around, without franchising, advertising, or leveraging.

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TAKING HIS MIDDAY MEAL AT A fast-food restaurant a few miles out of Greenville, S. C., Alvin A. McCall Jr., a trim 59-year-old with the hungry look of a toughdriving businessman, admires how efficiently this eatery functions. Items: the wait in line was brief, the sirloin was cooked just right, the iced tea was refilled without asking, the bread was served warm and buttery, the salad was crisp, the desserts were plentiful and free, the wall-to-wall carpeting was litterless. What more could a diner-out ask?

To be sure, the decor is strictly American roadside: high-ceilinged, fake-beamed, illuminated weakly through windows that reveal close-up views of steamy automobile radiators. Still, the place reeks of efficiency, from the cook grilling a score of steaks, to the waitress carrying the tray, to the cashier toting up the tab. In that bustle, customers don't linger: the average turnaround time for a sit-down meal has been clocked at a brisk 35 minutes. On schedule, McCall fires up his pipe, then disgorges more than enough cash to cover the bill (a meager $5.09) and tip. "Pretty nice little operation," he remarks, appreciating the brains behind this establishment, the very first restaurant of Ryan's Family Steak Houses Inc. and sire to some 50 more exactly like it.

The brains behind them belong to none other than Alvin A. McCall Jr. himself, founder of the chain that he called Ryan's because the name "had a good ring, was short and easy to identify, and was Irish." Ryan's wasn't McCall's first foray into quick cuisinery. Back in 1971, he started Western Family Steak Houses, a chain he later renamed Quincy's Family Steak Houses, because it had a good ring, was short and easy to identify, and, more or less, was Irish. When McCall sold his portion of Quincy's to what is now Trans World Corp., he not only got the buyer to waive the usual noncompete clauses, but built explicit permission into the terms of the sale to compete. "I left them a good structure, though," McCall recalls guiltlessly.

And compete he did, founding Ryan's in 1977 and bringing it public in '82. Today the average unit takes in about double that of its nearest competitors (led by Quincy's, along with Sizzler Restaurants International, Ponderosa, and Western Sizzlin). Ryan's net profit margin of 9.9% in 1985 ranks well above McDonald's Corp., often considered the leader of the fast-food industry. On revenues of about $55 million for fiscal 1985, Ryan's earnings stand out among chains that boast many more units. Sizzler, for instance, with 488 units owned or franchised, made about $10 million last year; Ryan's earned $5.4 million with only 53 owned and franchised outlets. For fiscal '86, Ryan's is projecting revenues of close to $100 million, well ahead of its 58%, seven-year compound growth rate.

What has made Ryan's exceptional, McCall says, is good food with good service at a good price. To achieve all three, Ryan's, in an uncommonly stubborn way, flouts convention while committing few errors. For example, the industry has seen more than one chain overexpand like a five-year-old feasting on cotton candy, then run out of capital altogether. Ryan's not only thoroughly trains the 60-person staff of one unit before opening the next, it pays for the real estate and construction of each one in cash. As a result, the company at the end of 1985 owed a mere $772,000 on shareholder's equity of $38 million. By the end of 1986, net equity should be approaching $50 million.

Like just about everyone on the highway, Ryan's started out franchising, the accepted path to restaurant-chain fast growth. But it soon stopped. "We couldn't exercise control," complains McCall. Today there are only four franchisees, with a total of 12 stores. For the same reason, Ryan's refuses to use OPM -- "other people's money," as in borrowing -- to expand. "Leverage?" he asks, biting tentatively into the word as if it were a slice of undercooked liver. "We happen to like the equity route. If hard times hit, we'll be here when a lot of these highly leveraged places are long gone." Already split (as of May 1) four times since '82, the value of the shares representing that equity has risen more than 2,000%.

How does Ryan's do it?

Not with brass bands, that's for sure. A new site's grand opening is as low key as an eighth-grade cotillion. No searchlights, no balloons, no coupons, no clowns, no give-aways. Instead, McCall pledges, "We put that money in the food budget, where it belongs." Simply through word of mouth, in less than a month a new store takes in at least the average unit gross of $38,000 per week, he claims. A recent exception was when Ryan's cautiously expanded from its eight-southern-states base to the Midwest. A few units there needed the extra boost of a paid announcement in local newspapers because "we had to overcome the bad reputation of a competitor when we first opened last spring. Customers said, 'Well, here comes another Ponderosa."

WORL'D MOST UNIQUE SALAD BAR NOW OPEN, read the streamer hoisted last April over the 43d company-owned store, referring to the 64-foot, U-shaped stretch of help-yourself eats that Ryan's was in the process of introducing throughout the chain. This gala opening, held in a cast-from-the-mold structure in Snellville, Ga., about 20 miles from downtown Atlanta, was the 26th for Ryan's full-time supervisor of debuts, Richard Forrest. It was the company's 9th in Greater Atlanta, an expanding part of the dining-out universe that its site-acquisition people favor because they make their biggest gross margins there.

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