Serving new customers
Piccadilly Cafeterias grows its food service division
Tom Sandeman signed a contract to join Piccadilly Cafeterias Inc. the day after Hurricane Katrina ravaged the Gulf Coast. It was fitting, perhaps, as the company’s response to the storm and several after it sowed the seeds for what is now a rapidly growing division.
The Baton Rouge company is in the seventh year with its food service division, providing food by contract to schools, companies and other institutions, ranging from as small as feeding 25 people per day to 1,400 per day for its largest customer.
“It’s a new way to sell the same things we’ve been selling,” Sandeman said, “a new distribution channel.”
Sandeman, who became the company’s president and chief executive officer six months ago, said the division has doubled in size during the last three years and he expects it to double again this year to hit $12 million in revenue.
He would not say how that compares to overall revenue; Piccadilly ceased being a public company when it was bought by a private equity firm in 2004. Sandeman did say Piccadilly has 70 total accounts across the South — schools, manufacturing plants and a college.
Piccadilly is serving 28 schools compared to two three years ago.
“We could not be more pleased about the progress that we’re making,” he said. “We think this is a great potential growth vehicle. It allows us to grow again, and we haven’t had an opportunity to do that in several years.”
Sandeman has been in the restaurant business since he was 18 and worked at a country club in his home state of Wisconsin. He’s worked as a consultant and turnaround specialist with Blimpie, Ponderosa and Wall Street Deli. He does have a connection to Louisiana, through his wife, and he’s had a house in Metairie for 30 years.
Sandeman said he saw in Piccadilly a restaurant that “perhaps had great potential but had been lying sleeping for some time.”
But he arrived at the company at a troubled time. Piccadilly had struggled through the late 1990s and early 2000s to stem declines in same-store sales and a foundering stock price, with management changes, branding initiatives and new concepts failing to do the job.
It declared bankruptcy in 2003 and was finally sold in 2004 to a California private equity partnership and taken private.
When Sandeman signed on, Katrina had just struck the Gulf Coast and the levee protecting New Orleans had broken. By the end, Piccadilly had 56 stores damaged or their sales affected in some way.
“It literally took us two years to rebuild the company and the restaurants,” he said, noting three New Orleans locations were not rebuilt.
It was in the aftermath of Katrina that Piccadilly started its emergency feeding division, serving 100,000 people after the 2005 storms that also included Hurricane Rita.
Sandeman said the experience of feeding police officers and firefighters on Veteran’s Boulevard and in Slidell after Katrina gave the company confidence to “go outside the four walls and succeed.”
In addition to Katrina, Rita, Wilma, Gustav and Ike, Piccadilly has had to deal with flooding in Tennessee and tornadoes in Alabama.
“We’ve had a lot of adversity and if there’s anything I could describe about this organization is our ability to deal with adverse circumstances,” he said.
Sandeman said Chris Sanchez, senior vice president of operations, has been the “driving force” behind the food service division. Sanchez, he pointed out, lost everything in Hurricane Andrew in 1992.
“We’re passionate about this,” he said. “This is something that’s part of our corporate being.”
When Gustav hit in 2008, the state asked if Piccadilly could be part of the response effort. It was a Saturday at 2 p.m.; there was no electricity. The state called and asked if the company could feed 10,000 people by noon the next day.
Sandeman said he looked at Sanchez: “I said ‘Can you do it?’ and he said ‘You bet.’”
They gathered managers from all over the South, met in the Gretna store and cooked all night. The next morning, the trucks rolled to the feeding center in Houma and they fed 10,000 people and then 10,000 more five hours later.
“I’m the luckiest guy in the whole world,” Sandeman said. “I get to work with heroes ….”
Piccadilly, he said, “deserves to grow again.”
Piccadilly has contracts for 22 sites in Louisiana, and a national contract with the Red Cross.
Schools make up a significant portion of contract customers — in Louisiana alone the company serves 10 in New Orleans, three in Baton Rouge (including Catholic High School), one in Alexandria and one in Lafayette.
“Every account is designed for the specific needs for that account,” he said, “and we will serve our customer in one of three ways.”
Customers can pick up the food at the restaurant, have Piccadilly deliver it or have it prepared on site.
“We’ll do it whatever way it is required by the administration; we can meet any state or federal (nutritional) guideline,” he said.
One new customer is Trinity Episcopal Day School, which started using Piccadilly this school year.
Kim Jones, Trinity’s head of school, said parents had indicated they wanted a change. After Piccadilly was able to meet Trinity’s price, the choice for a one-year contract was an easy one.
“We’re very, very happy so far,” she said. “It’s great food, the people are very friendly. It’s been a great experience.”
Jones said Piccadilly has done a good job of estimating the right amount of food for Trinity’s 120 students, and that the food strikes a balance between being nutritionally complete, but still kid-friendly.
“When you think about it, they’re really a common sense choice for school lunch,” she said. “It’s what they do.”
Piccadilly has been using open houses as a model to attract prospective customers, and Sandeman said they have been paying off. The company has had 10 open houses and 24 more are scheduled.
In addition to its experience feeding large numbers of people in disaster areas, Sandeman said Piccadilly has 3,000 recipes and the second-highest name recognition in the Southern states, at 91 percent.
Piccadilly may never join the giant’s of the $44 billion contract services industry — Compass Group, Sodexo, Aramark — but Sandeman said it can get enough market share to help diversify the company and make it better able to weather the ups and downs of a volatile restaurant industry.
The years since the financial crisis have not been kind to the restaurant industry. Sandeman said the fast-casual segment — Panera, Chipotle — is doing alright, but even McDonald’s has been posting same-store sales drops.
“When you have high food prices, people have choices,” he said. “They don’t have to go out to eat. They can cook at home.”
“Many of the competitors have fallen away,” he said of the cafeteria segment. “They’re worthy competitors, but this economy has taken the wind out of the sails of many, many companies.”
Piccadilly continues to operate 82 of its traditional restaurant locations and has 3,500 employees from Houston to Tampa and up the East Coast to Virginia.
Sandeman said Piccadilly has tried to diversify in ways that haven’t worked — going into Wal-Mart distribution centers, for example, and the Piccadilly Express concept. However, he said every experience provides valuable lessons.
Many of the products developed for the Piccadilly Express concept, smaller stores with drive-throughs, are still being used today. “It was part of an evolution,” he said.
According to figures from the National Restaurant Association, Piccadilly may have picked the right segment to diversify into.
After adjusting for inflation, the cafeteria business is projected to be flat at $8.47 billion this year, while growth in the managed-services segment is projected to grow by 1.4 percent to $44.42 billion.
Within that category, growth in the primary and secondary education market is expected to outpace inflation by 1.4 percent; hospitals and nursing homes by 2.7 percent; and manufacturing and industrial plants by 2.1 percent.
Association spokeswoman Annika Stensson said that while the association does not track individual companies in the managed-services segment, companies are looking to increase sales anywhere they can.
“Generally, restaurant companies tend to focus on their core business model, but it’s not unheard of to diversify, especially as the economic operating environment is still recovering from the recession and growing sales is one of the industry’s biggest challenges,” she said.