It’s a crisp -10 degrees in the freezer, making the 45-degree temperature out on the dock of King’s Seafood Co.’s Santa Ana distribution center seem downright hospitable.
The 15,000-square-foot facility, opened in 2008, is kept at varying levels of cold to accommodate the 10 to 12 deliveries it sees daily. Mondays are typically a big day. There, workers intake everything from spiny lobster and scallops to Chilean sea bass and king salmon.
Skilled employees filet fish to the right weight and fulfill the group’s restaurant orders, packaging everything to send back out.
“It’s constant. Seafood, you take it when you can get it,” said Michael King, director of real estate and development, and son of CEO, Chairman and co-founder Sam King.
That’s particularly true with the ongoing supply shortage, a lingering challenge from the height of the pandemic last year that’s caused a surge in pricing and impacted nearly every industry.
And, yet, Sam King is taking the challenges in stride, with a rather optimistic outlook on what’s to come for the business—a mix of 22 restaurants that range from fine dining at the Water Grill spots in Costa Mesa and L.A. to premium casual dining in the 12-location King’s Fish House chain and steakhouses like San Diego’s Lou & Mickey’s.
Yes, the company ran out of basic items like ketchup, Coke and china at various points in time. The prime beef the company gets from an artisanal ranch in northern Washington has had an inventory shortfall causing prices to go up. Yet, the group’s restaurant customers have come back and they’re spending more. Chalk it up to pent-up demand after months of the DoorDash and Uber Eats experience.
“Business is good. It just poses a lot of challenges that we really did not think we’d have to be dealing with. So, it’s good, with an asterisk,” Sam King said.
Like many businesses, King’s Seafood Co. was not immune to all the fits and starts of last year: restaurants closing, restaurants reopening and then restaurants’ indoor dining shuttering.
There’s also a labor shortage that has rocked restaurant operators and other industries (see story, page 1).
“There’s always something,” King said. “Just interesting times. I’m not a complainer; we’ll get through it.”
Growth Mode
In fact, King’s Seafood Co. took a rosy outlook from the start of the pandemic.
The company opened a King’s Fish House in San Jose in mid-October of last year at the Westfield Valley Fair mall. It’s now one of the company’s busiest restaurants.
Water Grill is set to see the opening of a new restaurant in Denver at the end of this year and Bellevue, Wash., next year.
The openings speak to the growth King’s is plotting. The company will open more Water Grills likely at a rate of one a year, although it’s choosy about where it’s looking for real estate.
Sam King described the sweet spot for Water Grill as “iconic, long-term locations,” where there’s also a blend of tourism and convention center business. Its OC spot is next to South Coast Plaza, along Bristol Street.
The company’s King’s Fish House brand will also resume growth and remodels, the latter of which would likely begin next year at the existing King’s in Rancho Cucamonga, San Diego and Huntington Beach.
The company spares no expense in its buildouts.
The San Jose King’s was a roughly $7.5 million project. Remodels cost about a third of that, in the range of $2 million to $3 million and take between eight to 10 weeks.
“We’re at a point right now where next year we’re planning on achieving over $200 million in sales, so we’re morphing into a larger company in terms of having to think about using really good, quality strategic planning techniques to make sure we don’t lose opportunities or, at the same time, make sure we don’t grow too fast,” Sam King said.
The CEO projects growth of between 10 and 12 new restaurants over the next five years with an aim of revenue in the $300 million range.
Premium Leader
King’s Seafood Co. is one of the largest in the premium casual dining segment locally.
Locally within that industry segment, Huntington Beach-based BJ’s Restaurants Inc. (Nasdaq: BJRI) would be at the top of the list with $778.5 million in sales generated last year across 211 restaurants.
Costa Mesa-based Yard House USA Inc., owned by Darden Restaurants Inc. (NYSE: DRI), would be next with $426.6 million generated across 85 restaurants. Lazy Dog Restaurants LLC of Costa Mesa, whose 40 restaurants generated revenue of $187.5 million last year, would round out the top three in the segment locally.
The King’s group estimates sales will exceed $215 million next year, accounting for the Denver and Bellevue openings, which would place it near the top of full-service dining restaurants locally with its premium menu and experience offerings.
It’s also one of a handful of privately held restaurant groups in OC still owned and run by a founder.
Rooted in Fundamentals
Sam King is very much the embodiment of the kind of hospitality exuded in his restaurants—friendly, down-to-earth and someone who can strike up a conversation on subjects that go beyond his own business. He was raised in the industry and knows the ins and outs well.
The family business got its start in 1945 with Lou and Mickey King, restauranteurs who later sold their business to Tiny Naylor’s Inc. in 1982. The sons of Lou and Mickey (from which the group’s San Diego steakhouse gets its name), the late Jeff and Sam King started King’s Seafood in 1983 with the Long Beach steakhouse 555 East.
“I feel really fortunate to have started in the business. I worked for my dad throughout the years I was in high school and college. The core elements are the same,” Sam King said of the industry. “It’s great product served well in an environment that people enjoy dining in. It’s really a fundamental, foundational business, and I know that sounds cliché and canned, but it’s not.”
Certainly, technology’s changing things rapidly, there’s always new design elements and new products, such as wagyu beef, that come into play, he acknowledged. But at the end of the day, guests come in and they expect an experience, he said.
Meal Kits, Pop-Ups
The focus on quality food and good experiences are reasons why the company will not stray too far from what it does well, without remaining completely stagnant.
It experimented and got creative last year with its pop-up meat and seafood markets across its restaurants. The Water Grill at South Coast Plaza managed to generate a quarter of a million in sales in the first weekend of its pop-up market being opened, making it the most successful.
And, to that end, King’s is exploring the possibility of doing online ordering or finding a way of selling the raw product to guests to cook at home via offerings such as meal kits.
“We had $5 [million], $6 million in inventory. Cash was obviously king at that time, so we were able to monetize. We built great guest feedback and loyalty because so many of our guests can say ‘Now I understand why I love your restaurant so much,’” Sam King said of 2020.
The emphasis on quality is the same reason why the group’s Santa Ana distribution center will continue to service only its own restaurants for the foreseeable future, despite plenty of inquiries from other companies asking if King’s would sell them seafood.
“That’s a whole other business that we really, today, have not been interested in entering,” Sam King said.
“Maybe one day we will look at that, but today there’s such a shortage of great product.”
To start shifting its focus to servicing others and potentially risk its own restaurants not having the best product, doesn’t make sense in the current environment, the CEO said.
The Art of Simple
The company’s growth begs the bigger question of capital and whether an IPO or private equity deal could be in the cards, if the company’s now turning its attention to growth.
“That definitely is a good option for us if we choose to go out there and find professional money or even if we do look at becoming a public company. All of that is on the table for one day. We’ve got to make sure what we do is smart and, as I said, the one thing I don’t want is—I don’t want somebody to tell us how to operate our business,” Sam King said.
“There’s a graveyard of restaurants out there of companies that don’t make it because the investment bankers got involved. A few make it through. Yard House got bought by Darden and they stayed true. Lazy Dog right now is still operating pretty darn well,” King said.
The fear is the company could lose its way if outside influences enter the picture. King wants none of that. The reality is also that King’s Seafood Co. is, as he described, “solid” and not technically in need of raising additional capital.
“Sometimes people get too excited about the public thing or what have you. For us, we’re pretty conservative. We’re going to make sure we partner for the right reasons, rather than for some other reason,” King said.
Back in the Santa Ana distribution facility, the expertise involved in running a seafood operation is clear—something Wall Street analysts or private equity could learn from reading about, but appreciating a machine that makes flakes of ice, rather than cubes, from a brine solution or how a bloodline in a piece of fish indicates freshness is a different ballgame. It’s an art in the seeming simplicity of it all.
Said Michael King: “It’s not sexy, nothing crazy. It’s a pretty simple concept what we do.”
