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The entertainer Featured

11:57am EDT March 17, 2004
Richard Melman's entrepreneurial career began about 40 years ago, with $3,500, a partner and an ad in the Chicago Tribune that said "inventions wanted will finance."

Ten years later, Melman opened R.J. Grunts, a trendy burger and shake joint, which became the first of more than 70 concept-based restaurants nationwide and in Japan that comprise Lettuce Entertain You Enterprises Inc. (LEYE).

Innovation and an unconventional management style have helped Melman grow LEYE into a privately held company with an estimated $210 million in sales in 2002, about 5,000 employees and more than 40 business partners.

"I sort of like to think of myself as the daydreamer of the company," says Melman, LEYE chairman of the board. "I don't sit in a lot of board meetings and stuff. I like to be where the public is. I like to be in the restaurants. I like to be working with the partners and their development."

Melman continues to expand and dream up new ideas for his restaurants, which feature everything from Spanish tapas (Café Ba-Ba Reeba) to French cuisine at the Eiffel Tower restaurant in the Paris Las Vegas Casino Resort. He says there are five or six developments in the works, including a new Café Ba-Ba Reeba in Las Vegas.

Melman spoke with Smart Business about the state of the restaurant business and how LEYE continues to expand in an increasingly competitive market.

 

With more than 40 corporate partners, what's the key to maintaining strong relationships with your associates?

A number of years ago, people would call me and say, 'How do you set up your partnerships? How are you able to make them work?' And I'd always turn them over to my lawyer.

He called me one day and he said, 'You know, Richard, what I do is not magic in the way we put together the deals for partners and so forth. It really has to do with the fact that you like partners.'

I think if you trace back in my history, you'd see that I like partners. Obviously, I had an opportunity to do things by myself but found that I could feel better about what we did if I had partners who cared. So I never minded sharing. My goal is not to be the richest guy in the world, and I think it really starts from the fact that I like partners and understand partners and partners have been good luck for me.

 

How do you manage disagreements with partners?

Often, I give up the stock but I don't give up the control. I think ultimately there needs to be a mechanism to be able to resolve disputes, and I keep control of that.

So I might be involved in a deal where I control 22 percent of the stock, but I'll have the voting rights.

 

Where do you get the ideas for your menus and styles of restaurants?

 

I've always paid attention to what people need. I also look for holes in the marketplace.

There's certainly a lot of Italian restaurants out there, but if I can figure out a way to do an Italian restaurant that hasn't been done in Chicago, I'm usually interested in it. My sons are traveling in Italy right now and have called me a couple times to tell me about things that they've seen and enjoyed, and I've picked up some ideas just from what they've said.

Let me put it this way; the hardest thing for me is to decide what type of restaurant I want, and I'm talking about going into details. That is the hardest decision to make.

Then I have to surround myself with the people who can make me realize that dream, and it usually starts with food people. So I'm never far away from our test kitchen. I'm never far away from the people who have the talent to make our idea come through, and it always starts with the food.

 

How do health trends, such as the recent low-carb craze, affect the restaurant business?

 

The first restaurant that I opened, R.J. Grunts, actually had fruit juices that were made to order, and we had natural biotic food and we had organic food, so I was aware of health and food early on. The funny part about it was the natural biotic food did not work very well.

What did work in those days was the vegetarian stuff. People didn't understand it so much. It wasn't that important to them. After all these years, it seems people are really serious about it, and so I think it's a very important thing, and I think it's important to have choices for people.

Whether it's the Zone diet or the South Beach diet or the Atkins diet, I don't know what's going to be en vogue a year from now, but I know people are certainly more concerned with what they eat.

 

How important is staff training with such diverse restaurants?

 

It's crucial. I also get involved with that a lot. We're always re-examining how we do things.

We made a decision that we want this company to go on for many years. We're not a public company; we're a privately held company, and we want to be around for another 33 years, and I think a lot of it has to do with our culture, and our culture has to do with the hiring, training and developing and keeping people happy.

The people are Lettuce Entertain You. The people are Richard Melman. I don't think there's a year that goes by where we don't change how we train and develop.

 

How have your personal business experiences helped you to consult at major restaurant chains such as McDonald's?

 

I always think that if I were to go to a real estate consultant, the guy that I would want to go to is a guy who was successful in the real estate business -- a guy that's really done it rather than somebody who's taught a real estate class or has no real experience.

So I thought that we should take our senior guys, and instead of them retiring, they can go into the consulting arm. We don't do a lot of it. We are very cautious about what we take. I take two or three projects a year.

 

What advice is sought by restaurant owners?

 

Some people have a concept that they think is stale. We are sort of farmers. We grow concepts, and sometimes people want to see what should be changing in their concept.

Sometimes people want to tighten up and want to know how we run things. Sometimes they need cultural help.

 

What's the most significant change you've noticed in the restaurant business since you started?

 

I think it's a more sophisticated business than it was. The Internet has made a gigantic difference.

The customers are more sophisticated. The competition is stronger. The ability to make money is more difficult. The government has made it more difficult -- there's more rules and regulations. I think back at it when I started -- I didn't know one-tenth of what I know now, and it was in many ways easier to be successful. I think everything is more advanced.

How to reach: Lettuce Entertain You, (773) 878-7340 or www.leye.com