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Tuesday, May 24, 2022

Daphne’s Boss Eyes Revival From San Clemente Base

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Bill Trefethen is looking to breathe life into a floundering Greek restaurant chain.

Trefethen acquired Daphne’s Greek Cafe through a bankruptcy sale in August. Since then he’s been commuting from his office in San Clemente to Carlsbad to work on the chain of 59 company-owned restaurants spread through California, Arizona, Oregon and Colorado.

Trefethen moved the chain’s headquarters to Carlsbad from San Diego earlier this year. That’s a midway point between his office and the chain’s management team, much of which remains from pre-bankruptcy days.

His goal: returning Daphne’s to financial health while overseeing an overhaul of restaurants, menus and marketing.

“Part of Daphne’s troubles started with the recession,” said Trefethen, who remains managing director of Arizona investment bank Trefethen Advisors LLC. “But also the company got so overleveraged it didn’t have the money to reinvest in the brand.”

Meanwhile, Daphne’s has lost ground to rivals such as Panda Express, Chipotle Mexican Grill and Panera Bread.

Daphne’s yearly same-store sales have been off 10% to 15% during the past three years. That’s after a strong run that saw the chain peak at $75 million in yearly sales just prior to the downturn, according to Chicago-based restaurant industry consultant Technomic Inc.

Drawing more evening diners is a part of Trefethen’s comeback strategy.

“We found we do about 65% of our business during lunch and only 35% during dinner,” he said. “We’re hoping to alter the look and feel of the brand to attract more of a dinner crowd.”

A prototype of the new look debuted in San Diego earlier this year. It features a more upscale design, new menu items and beer and wine.

“The remodel is the W Hotel meets Starbucks with a Mediterranean motif,” Trefethen said.

OC Makeovers

The makeover is set to roll through Orange County in 2011, with the Daphne’s at the Aliso Viejo Town Center likely going first and 17 other local spots following throughout the year.

“We’re looking very hard at Orange County for the remodels,” Trefethen said. “Our OC stores are some of the strongest in the system and are in high-profile areas.”

Daphne’s originally opened in 1991 in San Diego and grew to more than 80 restaurants.

The recession hit the chain hard. San Diego-based parent Fili Enterprises Inc. filed for Chapter 11 reorganization in early 2010.

Trefethen took an interest in Daphne’s when Bank of America Corp. was looking to sell the chain’s debt.

“We were contacted that the debt was up for sale and the bank wanted to get out of the paper,” Trefethen said. “At first, I didn’t believe that it was Daphne’s.”

Trefethen first was introduced to the chain when he ran American Commercial Capital LLC, which he later sold to Wells Fargo & Co.

Trefethen met Daphne’s founder, George Katakalidis, in the 1990s when he was looking for financing.

“We didn’t end up doing the financing for whatever reason, but I became a fan,” Trefethen said.

He went from fan to owner after buying the chain’s debt this year. He worked out a deal with creditors and replaced Katakalidis as chief executive.

Trefethen said he plans to obtain “additional equity capital” and a line of credit to finance the chain’s makeover.

The menu is set to keep Daphne’s contemporary Greek style, with dishes such as hummus, grilled meats, salads, kababs and pita sandwiches.

Plans call for adding a Californian flavor with the addition of burgers, pizzas and salads inspired by Greek cuisine.

“Everything we do will be Greek-inspired,” Trefethen said. “We’re going to create our own genre—like Fresh-Mex is to Mexican food.”

The company doesn’t plan to open any restaurants while undertaking the renovations.

“The plan is to create some energy behind the brand and get the remodels right,” Trefethen said. “First we have to fix everything at home.”

One exception, according to Trefethen, will be a bid to increase the catering side of the business.

“We’ve considered opening a couple stores in Los Angeles near law offices and the like because our catering business is a huge growth driver,” Trefethen said. “If the right location opened up, we wouldn’t hesitate.”

Future Franchises?

The long-term goal is to expand, perhaps with franchises.

“We think this concept has legs to develop nationwide,” Trefethen said.

The chain is working on several marketing efforts locally as a way to drive sales, including a deal with San Juan Capistrano’s JSerra Catholic High School.

“We’ve issued students, faculty and parents partnership cards so they go to Daphne’s and we give a certain percentage back to the school,” Trefethen said.

If the partnership spurs sales, Trefethen said he expects to do the same with other schools.

“Part of my idea is, if we’re going to coupon, we might as well coupon for a good cause,” he said.

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