ORLANDO, Florida — Romano's Macaroni Grill could soon have a third brand under its platform. The company has an acquisition in the works that could close by the end of the first quarter if all goes well, CEO Nishant Machado told Restaurant Dive on Tuesday during the ICR Conference.
"I think we have the potential to be a $1 billion company based on the infrastructure and team we have built," he said. "Getting this acquisition done gets us half the way there, potentially."
This is a far cry from where the brand stood in 2017, when Machado took over as CEO. The company was emerging from bankruptcy and closed 37 units after several years of same-store sales declines. His challenge was to develop a turnaround strategy.
The company put together a team that was better equipped to think through potential acquisitions and the value it could bring to the brand. In 2018, Macaroni Grill grew same-stores sales after years of negative comps and acquired Sullivan’s Steakhouse from Del Frisco’s for $32 million.
The potential acquisition for this quarter would be a transformational brand that is performing well within the full-service space and will fit with Macaroni Grill and Sullivan's, Machado said.
During Q1 2019 under Macaroni Grill, Sullivan had one of its best years in terms of same-store sales and margins of the last decade, he said.
Going forward, the company's acquisition targets are full-service brands that have 35 to 65 units, good average unit volumes and a somewhat consistent performance overall. It will consider underperforming brands if Macaroni has a strategy in place, Machado said.
"Our focus is to be smart and to continue to add on concepts that we believe have the potential to add overall value to the enterprise," he said. "I've seen all too often people get acquisition hungry and make a mistake and the entire system struggles as a result of that poor decision."
Capitalizing on organic growth drivers
Aside from acquisitions, the company plans to grow both its existing brands organically. For Macaroni Grill, the company is exploring asset light models through licensing and building its international footprint, Machado said. It plans to do licensing for beverage and ready-to-eat groceries this year, for example, he said.
The company also found a lot of white space opportunities for Sullivan’s and is targeting A-locations in tier-B markets. So instead of targeting Chicago, it has a location in the suburb of Naperville, Illinois, which coincides with the company branding of being a neighborhood steakhouse, he said.
Machado expects to build more units in these markets going forward while also entering the international space. It signed its first franchisee agreement in Asia and is entering the Philippines, which it views as a way to get a foot in the door for the Asian region.
Growing within the airport space will also be an important aspect for both Macaroni Grill and Sullivan's Steakhouse in 2020, he said.
Going forward, the company's focus will be on leveraging its core asset, Macaroni Grill, while growing Sullivan's and making strategic acquisitions that build on its existing platform, he said.