Business World

The St. Louis area, which has a soft spot for mostaccioli and ravioli, has been one of the top-performing markets for Fazoli’s, the Italian quick-service restaurant chain based in Lexington, Ky.

That’s why Carl Howard, Fazoli’s chief executive, picked this region for the chain’s first new store in more than 3 years.

The new outlet, which opened this week in Edwardsville, is also the first to debut the chain’s new prototype. The new design is smaller than the old model, located in strip centers instead of a stand-alone building, and has a brighter, more modern decor.

"This is a fresh look for us," Howard said in an interview during a visit to the new store. "Our old facility is a little bit stale. We wanted to juice it up and have some fun."

Fazoli’s has undergone more than just a face-lift. In the last year, it has also overhauled about 80 percent of its menu, adding new items such as baked pasta dishes. It has also started using fresher ingredients and revamped everything, from the submarino sandwiches to the marinara sauce.

Fazoli’s had become quiet over the years, Howard acknowledged. Its menu hadn’t kept up with the growing sophistication of the public’s palate. And the previous leaders of the chain let the brand grow stagnant as they sought a buyer for the company, he said.

In 2006, Fazoli’s was finally sold to Sun Capital Partners. Howard came in as CEO two years later. When he took over, the chain had been grappling with declining customer counts for several years at its 280-plus locations. One of his first major decisions was to shut down dozens of underperforming stores. Fazoli’s now has closer to 240 outlets and does $239 million in sales.

"You get rid of your dogs and stick with your stars and all of a sudden your numbers and performance begins to improve," said Darren Tristano, executive vice president of Technomic, a Chicago-based food consultant group.

Now customer visits have been consistently rising since January 2009, Howard said, though he declined to say by how much.

The new Edwardsville site will be followed by six to eight other new Fazoli’s in the next year or so in other strong markets for the company such as Kansas City, and Dayton and

Columbus, Ohio, Howard said.

"We have a Midwest appeal." Howard said. "We have real comfort food."

St. Louis, which now has nine Fazoli’s locations, is the chain’s third-largest market in terms of number of stores, behind only Indianapolis and Lexington.

Kim Tucci, president of St. Louis-based The Pasta House Co., isn’t sweating it as Fazoli’s angles for a larger local presence.

The Pasta House has a very similar logo to Fazoli’s — a fat, red tomato — and has about 20 locations in the metro area and another dozen outside the region. Tucci said his competitors are more along the lines of Macaroni Grill — and not Fazoli’s, which he equated to a fast-food chain like McDonald’s.

"This is like apples and watermelons," he said. "You can’t compare it to what we have — nothing against them."

Tucci added that it makes sense for Fazoli’s to be aggressive in this economy because of their lower price points. The average bill per person at Fazoli’s is just under $6.

Like most other restaurants, Pasta House has been feeling the pinch of the recession as people eat out less. Tucci has responded by lowering his prices. In late December, Pasta House started a promotion offering six pastas for under $6.

"We’re hanging in there," Tucci said. "We’re hustling everyday, 24-7."

As a whole, fast food and fast-casual outlets have done well during the recession — better than the traditional, sit-down restaurants, Tristano said.

The prototype for the new Fazoli’s is about 2,100 square feet — roughly a quarter smaller than their older locations of between 2,700 and 3,100 square feet, Howard said.

"It’s a lot more efficient," Howard said.

By having these smaller stores in strip malls, Howard hopes this will be more attractive to franchises. The start-up costs associated with a new location will be closer to $500,000 compared with as much as $1.7 million for land and the building of the older standalone stores.

"It’s going to be easier to replicate," he said. "There’re a lot of shopping strips for us to go rather than fighting for the last great piece of real estate in a market."

Fazoli’s is also testing out some other innovations at the Edwardsville store — slightly lower prices on some items, a new line of pizzas and bringing back the "breadstick person" who goes table to table.

When it opens its new stores in Dayton in the next several weeks, Fazoli’s will try out other new ideas, such as having real tableware and silverware.

If the innovations do well in these new stores, Fazoli’s hopes to roll out the changes to its other company-owned stores. As for the franchises, Howard hopes that the new elements will be such a hit that they will be motivated to follow suit.

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