When business is about tortoises and hares, Habit Restaurants Inc. Chief Executive Russ Bendel is quite content to be the turtle.
The Irvine-based burger chain burst on the wider scene in 2014 amid a hot market for publicly traded restaurants.
Its shares (Nasdaq: HABT) boosted from an initial public offering price of $18 to as high as $44 in 2015 before slowly going below $10 in 2017. The shares last year almost doubled to more than $17 in September before descending to $10.37 and a $271 million market cap at press time.
The current stock price doesn’t reflect the company’s growing popularity.
Revenue reached $332 million in 2017, almost double the $175 million of 2014. It projected 2018 revenue will climb another 20% to $397 million to $399 million. Analysts are forecasting sales will grow about 13% this year to $451 million.
Its restaurant count has surged in the past decade from about 25 before Bendel became chief executive to almost 250 in about a dozen states and six international locations.
For these reasons, Bendel is the Business Journal’s choice for Orange County’s Businessperson of the Year in the restaurant category.
He is a 30-plus-year industry vet whose resume includes president of The Cheesecake Factory Inc. and chief executive at Mimi’s Café. He’s director emeritus of the California Restaurant Association.
Bendel, who became the Habit’s top executive in 2008, has carefully, even assiduously, avoided the limelight. It’s easy to see his passion is his work.
“We have a responsibility to be good stewards of capital, invest in people [and processes], and generate appropriate returns,” Bendel told the Business Journal.
Going Steady
Habit, which began in 1969 in Santa Barbara, grew to about 25 locations by 2007 when a majority stake was sold to an investor group led by Greenwich, Conn., private equity firm Karp Reilly LLC.
The fast casual chain prepares fresh, made-to-order chargrilled burgers and sandwiches featuring USDA choice tri-tip steak, grilled chicken and sushi-grade tuna cooked over an open flame. In addition, it features fresh made-to-order salads, as well as the usual sides, shakes and malts.
That concept won many fans as it reported 54 consecutive quarters of same-store sales growth through late 2017 before the first of three down periods amid an industry contraction.
Comps have returned to growth of between 1% and 3% in recent quarters.
The company does what others chains do but at its own pace, in its own way.
Last year, it introduced more drive-through sites, increased the number of franchised stores, moved deeper into food delivery and continued tinkering with a mobile app.
It built its first drive-through in 2010 and one a year for several years until the concept proved itself to Bendel. He had held off because such sites were identified more with fast food—which is not his aim at Habit.
“We don’t start cooking until someone orders, but people are now more willing to wait a little longer [even in cars] for customized orders,” he said.
It has three dozen drive-throughs now and more than half of the approximatly 22 locations planned for this year will have them.
The same thought process governs franchising, a concept that Habit hasn’t pursued with gusto. It owns about 90% of its restaurants and is planning to franchise a bit more so it will reduce its company ownership to about 70% to 80 during the next few years.
Meanwhile, Habit says its mobile app isn’t a generic “white label” version. It’s in a “very limited test” of a “feature-rich, flexible” offering that can be “customized later with more functionality.”
Food delivery? Habit works with one company—DoorDash Inc.—and is testing Postmates.
Slow and steady.
As He Goes
One 2018 move where Habit was ahead of a curve was adding female representation to its board: Habit began looking for a female director in 2017, a year before California required it for public companies based in the state.
Three months ago it added Marriott International Inc. Global Marketing Officer Karin Timpone, as a director.
Even when Habit’s looking ahead Bendel takes his time.
“Long before the California requirement we recognized we needed more diversity,” he said. A national search “narrowed it down to a number of highly qualified people.”
Timpone is the board’s first woman out of eight members and first outsider to Habit and the restaurant industry. As a former senior vice president of digital media at The Walt Disney Co., she leads Marriott’s lauded storytelling efforts, among other duties.
The board gave Bendel a 6.3% rise in compensation to $1.62 million for 2017. He also owns 718,958 Class B shares, which can be exchanged one for one for Class A shares at the option of the company, according to the latest proxy. As of April, Bendel owned 78,343 Class A shares worth almost a million dollars.
An indication of the company’s executive bench strength occurred early last year when Chief Marketing Officer Matt Hood resigned to become the chief executive and president at the Border Mexican Grill & Cantina, an Irving, Texas-based chain with more than 150 restaurants in the U.S.
In October, Habit named Iwona Alter as its chief brand officer. She’s been chief marketing officer at San Diego-based Jack in the Box Inc. (Nasdaq: JACK), known for edgier marketing fare. Alter also has operational experience, having managed 300 locations for Jack in the Box, or more than Habit has currently.
“We don’t do a lot of traditional marketing and advertising,” Bendel said. He’s moving Habit gradually into a more active “digital strategy and social media” program.
Pack Leader
All this makes few headlines and Bendel is just fine with that, heading a fast casual chain with operational upgrades, fresh marketing coming and expectations of growth.
Truth be told, OC has fierce competition in this area, such as Chipotle Mexican Grill Inc. (NYSE: CMG), which moved its headquarters from Denver to Newport Beach last year under the leadership of Chief Executive Brian Niccol. Other restaurant chains that also get attention include Lake Forest’s Del Taco Restaurants Inc. (Nasdaq: TACO) and Costa Mesa’s El Pollo Loco Holdings Inc. (Nasdaq: LOCO), as well as Irvine’s Taco Bell Corp. and In-N-Out Burgers Inc.
And there’s Bendel—standing out in a crowded field by not being noticed.
Don’t be fooled. He’s clearly planning on growth.
“Comp store sales are by the most profitable; you don’t have to deploy capital,” Bendel said. “The best way to manage costs is to continue to build sales.”
