RARE Hospitality International, Inc. and subsidiaries (the “Company”)
operates and franchises 239 restaurants as of March 3, 2004, including 194
LongHorn Steakhouse restaurants, 17 The Capital Grille restaurants and 26
Bugaboo Creek Steak House restaurants, as well as two additional restaurants
(the “specialty restaurants”), Hemenway’s Seafood Grille &
Oyster Bar (“Hemenway’s”) and The Old Grist Mill Tavern. The
Company was incorporated in Georgia in December 1982.
CONCEPTS
LongHorn Steakhouse restaurants are casual dining, full-service establishments serving
both lunch and dinner amidst an attractive and inviting atmosphere. With
locations spread throughout 23 states in the Eastern half of the United States,
LongHorn Steakhouse restaurants feature a variety of top quality menu items
including signature steaks, as well as salmon, shrimp, chicken, ribs, pork
chops, burgers and prime rib. Designed with an inviting décor reminiscent
of the classic American West, LongHorn Steakhouse restaurants appeal to all ages
with a unique combination of hospitable, attentive service, moderate price, high
quality dishes and a comfortable atmosphere.
The Capital Grille, with locations in major metropolitan cities in the United
States, boasts an atmosphere of power dining, relaxed elegance and style.
Nationally acclaimed for dry aging steaks on premises, The Capital Grille serves
classic steak house offerings such as chops, large North Atlantic lobsters and
fresh seafood. The restaurants feature an award-winning wine list offering over
300 selections, personalized service, comfortable club-like atmosphere and
premiere private dining rooms. The Capital Grille is the ideal dining choice for
business meetings and social occasions.
Bugaboo Creek Steak House restaurants are designed as attractive, family-friendly
establishments featuring moderately priced, flavorful food items and an offering
of full liquor service. Primarily located in states on the Eastern seaboard,
Bugaboo Creek Steak House restaurants attract guests of all ages with a rustic
décor reminiscent of a Canadian Rocky Mountain lodge. Stressing a friendly
and attentive service style, Bugaboo Creek Steak House restaurants offer a
variety of menu offerings including signature seasoned steaks, prime rib, smoked
baby-back ribs, spit roasted half chicken, grilled salmon and shrimp.
RESTAURANT LOCATIONS
The following tables set forth the location of each existing restaurant and
restaurants under construction by concept at March 3, 2004 and the number of
restaurants in each area.
LONGHORN STEAKHOUSE RESTAURANTS
EXISTING COMPANY-OWNED/JOINT VENTURE RESTAURANTS
ALABAMA
Birmingham 1
Dothan 1
Huntsville 1
Mobile 2
Montgomery 2
FLORIDA
Daytona Beach 1
Destin 1
Ft. Myers 2
Jacksonville 7
Miami/Ft. Lauderdale 7
Ocala 1
Orlando 7
St. Augustine 1
Tallahassee 1
Tampa/ St. Petersburg 9
West Palm Beach 4
GEORGIA
Albany 1
Athens 1
Atlanta 29
Augusta 1
Cartersville 1
Columbus 1
Dalton 1
Macon 1
Rome 1
Savannah 1
Statesboro 1
Tifton 1
Valdosta 1
Warner Robbins 1
ILLINOIS
Fairview Heights 1
INDIANA
Indianapolis 3
KANSAS
Kansas City 2
KENTUCKY
Bowling Green 1
Florence 1
Lexington 1
Louisville 1
MAINE
Portland 1
MARYLAND
Baltimore 3
Waldorf 1
MASSACHUSETTS
Boston 6
Springfield 1
MICHIGAN
Detroit 1
MISSOURI
Kansas City 4
Jefferson City 1
St. Louis 5
NEW HAMPSHIRE
Concord 2
Nashua 1
NEW JERSEY
Edison 2
Flanders 1
Howell 1
Parsippany 1
Rochelle Park 1
NORTH CAROLINA
Burlington 1
Charlotte 7
Greensboro 1
Hickory 1
High Point 1
Winston-Salem 1
OHIO
Cincinnati 5
Cleveland 10
Columbus 5
Dayton 1
Toledo 1
PENNSYLVANIA
Erie 1
Philadelphia 3
RHODE ISLAND
Warwick 1
SOUTH CAROLINA
Anderson 1
Charleston 2
Columbia 3
Greenville 1
Spartanburg 1
Hilton Head 1
Rock Hill 1
TENNESSEE
Chattanooga 1
Jackson 1
Nashville 5
VERMONT
Montpelier 1
VIRGINIA
McLean 1
WEST VIRGINIA
Charleston 1
Total Existing Company-Owned/
Joint Venture Restaurants 191
EXISTING FRANCHISEE-OWNED RESTAURANTS
PUERTO RICO
Bayamon 1
Carolina 1
San Patricio 1
Total Existing Franchisee-Owned Restaurants 3
Total LongHorn Steakhouse Restaurants 194
BUGABOO CREEK RESTAURANTS
EXISTING COMPANY-OWNED RESTAURANTS
CONNECTICUT
Manchester 1
DELAWARE
Newark 1
DISTRICT OF COLUMBIA
Washington 1
GEORGIA
Atlanta 5
MAINE
Bangor 1
Portland 1
MARYLAND
Gaithersburg 1
MASSACHUSETTS
Boston 7
Seekonk 1
Shrewsbury 1
NEW HAMPSHIRE
Newington 1
NEW YORK
Albany 1
Poughkeepsie 1
Rochester 1
PENNSYLVANIA
Philadelphia 1
RHODE ISLAND
Warwick 1
Total Bugaboo Creek Steak House Restaurants 26
THE CAPITAL GRILLE RESTAURANTS
EXISTING COMPANY-OWNED RESTAURANTS
ARIZONA
Phoenix 1
COLORADO
Denver 1
DISTRICT OF COLUMBIA
Washington 1
FLORIDA
Miami 1
GEORGIA
Atlanta 1
ILLINOIS
Chicago 1
MASSACHUSETTS
Boston 2
MICHIGAN
Troy 1
MINNESOTA
Minneapolis 1
MISSOURI
Kansas City 1
NORTH CAROLINA
Charlotte 1
PENNSYLVANIA
Philadelphia 1
RHODE ISLAND
Providence 1
TEXAS
Dallas 1
Houston 1
VIRGINIA
McLean 1
Total The Capital Grille Restaurants 17
SPECIALTY RESTAURANTS
EXISTING COMPANY-OWNED RESTAURANTS
MASSACHUSETTS
The Old Grist Mill Tavern, Seekonk 1
RHODE ISLAND
Hemenway's Seafood Grille & Oyster Bar, Providence 1
Total Specialty Restaurants 2
RESTAURANTS UNDER CONSTRUCTION
FLORIDA
LongHorn Steakhouse, Jacksonville
LongHorn Steakhouse, Palm Harbor
The Capital Grille, Ft. Lauderdale
GEORGIA
Bugaboo Creek Steak House, Newnan
LongHorn Steakhouse, Dawsonville
INDIANA
LongHorn Steakhouse, Evansville
KANSAS
LongHorn Steakhouse, Speedway
LongHorn Steakhouse, Topeka
KENTUCKY
LongHorn Steakhouse, Frankfort
MAINE
LongHorn Steakhouse, Augusta
MARYLAND
LongHorn Steakhouse, Hagerstown
MICHIGAN
LongHorn Steakhouse, Auburn Hills
MISSOURI
LongHorn Steakhouse, Jefferson City
LongHorn Steakhouse, St. Peters
NEW HAMPSHIRE
LongHorn Steakhouse, Newington
NEW JERSEY
LongHorn Steakhouse, Woodbridge
NEW YORK
The Capital Grille, New York
NORTH CAROLINA
LongHorn Steakhouse, Wilmington
OHIO
LongHorn Steakhouse, West Chester
VIRGINIA
LongHorn Steakhouse, Chantilly
Total Restaurants Under Construction 20
UNIT ECONOMICS
LongHorn Steakhouse
The Company’s prototypical LongHorn Steakhouse has an average seating capacity
of approximately 188 seats in approximately 5,400 square feet of space. The
prototype has been modified over the years with the objective of increasing the
Company’s return on investment on new LongHorn Steakhouse restaurants by
increasing the sales capacity and reducing capital expenditures as a percentage
of revenue. The Company purchases land in those circumstances it believes are
cost-effective; however, most commonly, the owners of proposed restaurant
locations have a strong desire to lease rather than sell. Accordingly, the
Company currently leases the sites for all but 52 of its LongHorn Steakhouse
restaurants in operation. The Company also owns five sites for restaurants under
construction and owns the site for one restaurant with construction scheduled to
begin later in 2004. Five of the 21 LongHorn Steakhouse restaurants opened in
2003 were located on property purchased at an average cost of approximately
$932,000 per location. The average cash investment to construct a LongHorn
Steakhouse restaurant in 2003 was approximately $1,702,000 excluding real estate
costs and excluding pre-opening expenses of approximately $197,000.
The Capital Grille
The Capital Grille restaurant development strategy includes the use of sites that
are historic or unique in nature. Accordingly, the Company utilizes methods to
balance control of the construction costs with the retention of the unique
ambiance of each location. The Company currently leases all of its The Capital
Grille sites, but intends to purchase land in those circumstances it believes
are cost-effective. Two The Capital Grille restaurants were opened in 2003. The
average cash investment to construct a Capital Grille restaurant in 2003 was
approximately $2,487,000 (net of landlord allowances of $547,000) and excluding
pre-opening expenses of approximately $364,000.
Bugaboo Creek Steak House
The Company has continued to develop and refine the Bugaboo Creek Steak House
restaurant design with the objective of reducing the capital expenditure
required for new restaurant construction and reducing ongoing operating costs at
new restaurants opened in 2003. This modified design is smaller than earlier
designs and utilizes approximately 6,400 square feet with a capacity of
approximately 230 seats. The Company continues to refine this prototype for
restaurants to be opened in the future.
Three Bugaboo Creek Steak House restaurants were opened in 2003. The average cash
investment to construct a Bugaboo Creek Steak House in 2003 was approximately
$2,503,000, excluding real estate costs and excluding pre-opening expenses of
approximately $221,000. Two of the three Bugaboo Creek Steak House restaurants
opened in 2003 were located on leased property. The Company paid approximately
$856,000 for the one property purchased for a Bugaboo Creek Steak House site in
2003.
The
Company purchases land in those circumstances it believes are cost-effective;
however, most commonly, the owners of proposed restaurant locations have a
strong desire to lease rather than sell. Accordingly, the Company currently
leases the sites for all but three of its Bugaboo Creek Steak House restaurant
in operation. The Company also owns the site for one restaurant under
construction.
EXPANSION STRATEGY
LongHorn Steakhouse and Bugaboo Creek Steak House restaurants:
The
Company plans to expand through the development of additional Company-owned
LongHorn Steakhouse and Bugaboo Creek Steak House restaurants in existing
markets and in selected new markets in the Eastern half of the United States.
The Company believes that clustering in existing and new markets enhances its
ability to supervise operations, market the Company’s concepts and
distribute supplies. The Company, however, also intends to open single
restaurants in smaller markets in sufficiently close proximity to the
Company’s other markets to enable the Company to efficiently supervise
operations and distribute supplies. LongHorn Steakhouse restaurants are
currently located in the Eastern half of the United States, and Bugaboo Creek
Steak House restaurants are located primarily in states on the Eastern seaboard.
The Capital Grille:
The
Company plans to expand through the development of additional Company-owned The
Capital Grille restaurants in selected metropolitan markets nationwide.
Overall:
The
Company’s restaurant development objective is to increase earnings by
expanding market share in existing markets and by developing restaurants in new
markets. The Company currently plans to open 28 to 31 Company-owned restaurants
in 2004; 23 or 24 LongHorn Steakhouse restaurants; three or four Bugaboo Creek
Steak House restaurants and two or three The Capital Grille restaurants. Of the
restaurants proposed for 2004, the Company has opened four LongHorn Steakhouse
restaurants, one Bugaboo Creek Steak House restaurant and has 20 restaurants
under construction in Florida, Georgia, Indiana, Kansas, Kentucky, Maine,
Maryland, Michigan, Missouri, New Hampshire, New Jersey, New York, North
Carolina, Ohio and Virginia, and has signed leases, purchased land, or signed
agreements to purchase land for 17 additional restaurants as of March 3, 2004.
The Company expects that all of the restaurants to be opened in 2004 will be
Company-owned.
The
Company will continue to evaluate suitable acquisitions in the restaurant
industry as they are identified. The Company will continue to evaluate
franchising of either LongHorn Steakhouse restaurants or Bugaboo Creek Steak
House restaurants in markets in which the Company would not otherwise expand.
SITE SELECTION AND RESTAURANT LAYOUT
The
Company considers the location of a restaurant to be a critical factor to the
unit’s long-term success, and the Company devotes significant effort to the
investigation and evaluation of potential sites. The site selection process
focuses on trade area demographics, the success or failure of relevant
competitive restaurants operating in the area, population growth rates, as well
as specific site characteristics, such as visibility, accessibility and traffic
volumes. Senior management inspects and approves each restaurant site. It
typically takes approximately 120 to 140 days to construct and open a new
LongHorn Steakhouse restaurant, approximately 140 to 160 days to construct and
open a new Bugaboo Creek Steak House restaurant and approximately 170 to 185
days to construct and open a new The Capital Grille restaurant. Currently the
Company owns 63 of its restaurant sites (including one specialty restaurant
site, six Company owned sites for restaurants currently under construction and
one Company owned site for a restaurant with construction scheduled to begin
later in 2004).
The
Company has modified its LongHorn Steakhouse prototype restaurant design over
the years to an average of approximately 188 seats in approximately 5,400 square feet of space
for prototypical LongHorn Steakhouse restaurants opened in 2003. An expanded
kitchen design incorporating equipment needed for a broader menu is also part of
the prototype. The Company believes its kitchen design simplifies training,
lowers costs and improves the consistency and quality of the food. The prototype
restaurant design also includes cosmetic changes that provide a total restaurant
concept intended to be inviting and comfortable while maintaining the ambiance
of a Western-style steakhouse.
The
Company has renovated and remodeled some of the older LongHorn Steakhouse
restaurants to include cosmetic improvements such as repainting and refinishing,
new booths, new lighting and various decor adjustments. Exterior improvements
encompassed repainting and additional lighting designed to convey a more
inviting image.
The
Company developed a Bugaboo Creek Steak House restaurant design, which served as
the prototype for the three Bugaboo Creek Steak House restaurants constructed in
2003. This modified design is smaller than earlier designs and utilizes
approximately 6,400 square feet with a capacity of approximately 230 seats. The
Company continues to refine this prototype, with the objective of reducing the
capital expenditure required for new restaurant construction and reducing
ongoing operating costs at new restaurants to be opened in the future.
RESTAURANT OPERATIONS
Management
and Employees
. The management staff of a typical Company restaurant consists of
one general manager or managing partner, one to four assistant managers and one
or two kitchen managers. In addition, a typical LongHorn Steakhouse restaurant
employs approximately 40 to 80 staff members, a typical Bugaboo Creek Steak
House restaurant employs approximately 50 to 85 staff members, and a typical The
Capital Grille restaurant employs approximately 60 to 80 staff members. The
general manager or managing partner of each restaurant has primary
responsibility for the day-to-day operation of the restaurant and is responsible
for maintaining Company-established operating standards. The Company employs
LongHorn Steakhouse regional managers, who each have responsibility for the
operating performance of four to eight Company-owned LongHorn Steakhouse
restaurants or joint venture restaurants, and report directly to one of the five
Regional Vice Presidents for the LongHorn Steakhouse concept. The Regional Vice
Presidents report to the Vice President of Operations of the LongHorn Steakhouse
division. The Vice President of Operations of the LongHorn Steakhouse division
reports to the President of the LongHorn Steakhouse division. The Company
employs Bugaboo Creek Steak House regional managers, who have responsibility for
the operating performance of three to five Bugaboo Creek Steak House restaurants
and The Old Grist Mill Tavern. All of these regional managers report directly to
the Director of Operations for the Bugaboo Creek Steak House concept. The
Director of Operations for the Bugaboo Creek Steak House concept reports to the
President of the Bugaboo Creek Steak House division. The Company also employs
regional directors who have responsibility for four to five The Capital Grille
restaurants and Hemenway’s Seafood Grille & Oyster Bar, all reporting
directly to the Director of Operations for The Capital Grille. The Director of
Operations for The Capital Grille reports to the Vice President of The Capital
Grille.
The
Company seeks to recruit managers with appropriate restaurant experience. The
Company selects its restaurant personnel utilizing a selection process which
includes psychological and analytical testing designed to identify individuals
with traits the Company believes are important to achieving success in the
restaurant industry. The Company requires new managers to complete an intensive
training program focused on both on-the-job training as well as a rigorous
in-house classroom-based educational course. The program is designed to
encompass all phases of restaurant operations, including the Company’s
philosophy, management strategy, policies, procedures and operating standards.
Through its management information systems, senior management receives daily
reports on sales, and weekly reports on guest counts, payroll, cost of sales and
other restaurant operating expenses. Based upon these reports, management
believes that it is able to closely monitor the Company’s operations.
The
Company maintains performance measurement and incentive compensation programs
for its management-level employees. The performance programs reward restaurant
management teams with cash bonuses for meeting sales and profitability targets.
The Company has also implemented a managing partner program in which qualifying
general managers receive cash compensation and restricted stock awards based
upon individual performance. During 2003, restricted stock awards were made to
107 restaurant-level managing partners in compliance with their respective
managing partner agreements.
Management
Information Systems.
The Company utilizes a Windows-based accounting software
package and a network that enables electronic communication throughout the
Company. In addition, all of the Company’s restaurants utilize touch screen
POS systems and the LongHorn Steakhouse and Bugaboo Creek Steak House
restaurants employ a theoretical food costing program. During 2003, the Company
completed the installation of a new point-of-sales system in each of its
restaurants and implemented satellite communication and electronic gift card
systems. The Company utilizes its management information systems to develop
pricing strategies, identify food cost issues, monitor new product reception and
evaluate restaurant-level productivity. The Company expects to continue to
develop its management information systems in each concept to assist restaurant
management in analyzing their business and to improve efficiency.
Purchasing.
The Company establishes product quality standards for beef and other protein
products, then negotiates directly with suppliers to obtain the lowest possible prices for the
required quality. The Company also utilizes longer-term contracts on certain items to avoid
short-term cost fluctuations. For the LongHorn Steakhouse and Bugaboo Creek Steak House
restaurants, beef is aged at the facility of the Company's supplier or distributor, who
delivers the beef to the LongHorn Steakhouse and Bugaboo Creek Steak House restaurants when the
age reaches specified guidelines. This arrangement is closely monitored by Company personnel,
and management believes it provides for efficient and cost-effective meat processing and
distribution, while maintaining the Company's control and supervision of purchasing and aging.
The Company purchases a majority of its protein products under fixed price contracts with its
primary suppliers. The failure of any of these suppliers to honor the prices under these contracts
would have an adverse effect on the Company's results of operations to the extent that the then
current market prices exceed the prices under the contracts. The Company's management
negotiates directly with suppliers for most other food and beverage products to ensure uniform
quality and adequate supplies and to obtain competitive prices. The Company purchases these
other products, and supplies from a sufficient number of approved suppliers such that the loss
of any one supplier would not have a material adverse effect on the Company's results of
operations or financial condition.
The
Company utilizes one primary distributor for all of its restaurants, which
delivers approximately 70-75% of the products (other than alcoholic beverages)
and supplies that the Company utilizes in the operation of its restaurants. In
the event of a disruption of service from the Company’s primary
distributor, management believes that alternative distribution channels could be
arranged such that there would not be a material adverse effect on the
Company’s financial condition.
Seasonality.
Although individual restaurants have seasonal patterns of performance that
depend on local factors, aggregate sales by the Company's restaurants have not displayed
pronounced seasonality other than lower sales during the Company's third fiscal quarter.
Extreme weather, especially during the winter months, may adversely affect sales.
OWNERSHIP STRUCTURES
The
Company’s interests in its restaurants are divided into three categories:
(1) Company-owned restaurants, (2) joint venture restaurants and (3) franchised
restaurants.
Company-owned
restaurants.
As of March 3, 2004, 188 LongHorn Steakhouse restaurants, all
Bugaboo Creek Steak House restaurants, all The Capital Grille restaurants,
Hemenway’s Seafood Grille & Oyster Bar and The Old Grist Mill Tavern
are owned and operated by the Company. The general manager or managing partner
of each of these restaurants is employed and compensated by the Company. See
“Restaurant Operations - Management and Employees” above.
Joint
Venture Restaurants.
The Company is a partner in joint ventures that, in the
aggregate, operate three LongHorn Steakhouse restaurants as of March 3, 2004.
These restaurants are located in Central Florida and owned by joint ventures
managed by the Company. The joint venture pays management fees to the Company at
the rate of 4% of monthly restaurant sales, and the Company controls its joint
ventures’ use of the Company’s service marks.
Franchised
Restaurants.
The Company has one unaffiliated franchisee with an area
development agreement with the right to operate franchised LongHorn Steakhouse
restaurants in Puerto Rico. As of March 3, 2004, this franchisee operated three
LongHorn Steakhouse restaurants in Puerto Rico.
The
franchise agreements are granted with respect to individual restaurants and are
either for a term of ten years with a right of the franchisee to acquire a
successor franchise for an additional ten-year period if specified conditions
are met or for a period of twenty years. The franchise agreements provide for a
franchise fee of $60,000, which amount is reduced for subsequent franchises
acquired by the same franchisee. The franchise fees are payable in full upon
execution. The franchise agreements provide for royalties with respect to each
restaurant of 4% of gross sales and require the franchisee to expend on local
advertising during each calendar month an amount equal to at least 1.5% of gross
sales and, if the Company establishes an advertising fund, to contribute an
additional amount of 0.5% of gross sales to such fund or up to 4.5% of the
restaurant’s gross sales during the conduct of a market, regional or
national advertising campaign.
The
franchisee has the right to terminate its franchise agreements upon default by
the Company. The Company also retains the right to terminate a franchise for a
variety of reasons, including the franchisee’s failure to pay amounts due
under the agreement or to otherwise comply with the terms of the franchise
agreement.
An
important element of the Company’s franchise program is the training the
Company provides for each franchisee. With respect to each new franchisee
restaurant, the Company provides the same training program provided to the
Company’s management and employees. In addition to this initial training,
the Company provides supervision at the opening of the franchisee’s
restaurants, beginning one week prior to opening, and routine supervision
thereafter.
Franchisees
are required to operate their restaurants in compliance with the Company’s
methods, standards and specifications regarding such matters as menu items,
ingredients, materials, supplies, services, fixtures, furnishings, decor and
signs. The franchisee has full discretion to determine the prices to be charged
to all customers. In addition, all franchisees are required to purchase food,
ingredients, supplies and materials that meet standards established by the
Company or which are provided by suppliers approved by the Company. The Company
does not receive fees or profits on sales by third-party suppliers to
franchisees.
The
franchise laws of many jurisdictions limit the ability of a franchisor to
terminate or refuse to renew a franchise.
SERVICE MARKS
The
Company has registered LONGHORN STEAKS and design, LONGHORN STEAKHOUSE and
design, BUGABOO CREEK STEAK HOUSE and design, THE CAPITAL GRILLE and design, and
HEMENWAY’S SEAFOOD GRILLE & OYSTER BAR and design as service marks with
the United States Patent and Trademark Office. The Company has additional
registered marks used in connection with the operation of its various
restaurants. The Company regards its service marks as having significant value
and as being important factors in the marketing of its restaurants. The Company
is aware of names and marks similar to the service marks of the Company used by
other persons in certain geographic areas; however, the Company believes such
uses will not adversely affect the Company. It is the Company’s policy to
pursue registration of its marks whenever possible and to oppose vigorously any
infringement of its marks.
COMPETITION
The
restaurant industry is intensely competitive with respect to price, service,
location and food quality, and there are many well-established competitors, both
steakhouses and non-steakhouses, with substantially greater financial and other
resources than the Company. Such competitors include a large number of national
and regional restaurant chains. Some of the Company’s competitors have been
in existence for a substantially longer period than the Company and may be
better established in the markets where the Company’s restaurants are or
may be located. The restaurant business is often affected by changes in consumer
tastes, national, regional or local economic conditions, demographic trends,
traffic patterns, and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and benefits costs
and the lack of experienced management and hourly employees may adversely affect
the restaurant industry in general and the Company’s restaurants in
particular.
GOVERNMENT REGULATION
The
Company is subject to various federal, state and local laws affecting its
business. Each of the Company’s restaurants is subject to licensing and
regulation by a number of governmental authorities, which may include alcoholic
beverage control, health, safety, sanitation, building and fire agencies in the
state or municipality in which the restaurant is located. In addition, most
municipalities in which the Company’s restaurants are located require local
business licenses. Difficulties in obtaining or failures to obtain the required
licenses or approvals could delay or prevent the development of a new restaurant
in a particular area. The Company is also subject to federal and state
environmental regulations, but they have not had a material effect on the
Company’s operations.
During
2003, approximately 14.1% of the Company’s restaurant sales were
attributable to the sale of alcoholic beverages. Alcoholic beverage control
regulations require each of the Company’s restaurants to apply to a state
authority and, in certain locations, county or municipal authorities for a
license or permit to sell alcoholic beverages on the premises and to provide
service for extended hours and on Sundays. Typically, licenses must be renewed
annually and may be revoked or suspended for cause at any time. The Company has
not experienced and does not presently anticipate experiencing any significant
delays or other problems in obtaining or renewing licenses or permits to sell
alcoholic beverages; however, the failure of a restaurant to obtain or retain
liquor or food service licenses would adversely affect the restaurant’s
operations.
The
Company and its franchisees are subject in each state in which they operate
restaurants to “dram shop” statutes or case law interpretations, which
generally provide a person injured by an intoxicated person the right to recover
damages from an establishment which wrongfully served alcoholic beverages to the
intoxicated person. The Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance.
The
Company is also subject to Federal and state laws regulating the offer and sale
of franchises administered by the Federal Trade Commission and various similar
state agencies. Such laws impose registration and disclosure requirements on
franchisors in the offer and sale of franchises. These laws often apply
substantive standards to the relationship between franchisor and franchisee and
limit the ability of a franchisor to terminate or refuse to renew a franchise.
The
Federal Americans With Disabilities Act prohibits discrimination on the basis of
disability in public accommodations and employment. The Company designs its
restaurants to be accessible to the disabled and believes that it is in
substantial compliance with all current applicable regulations relating to
restaurant accommodations for the disabled.
The
Company’s restaurant operations are also subject to federal and state laws
governing such matters as wages, working conditions, citizenship requirements,
overtime and tip credits. A significant number of the Company’s food
service and preparation personnel receive gratuities and are paid at rates
related to the federal minimum wage. Significant additional government-imposed
increases in minimum wages, paid leaves-of-absence, mandated health benefits or
increased tax reporting and tax payment requirements with respect to employees
who receive gratuities would have an adverse effect on the profitability of the
Company.
The
Company operates under a Tip Rate Alternative Commitment (“TRAC”)
agreement with the Internal Revenue Service. Through increased educational and
other efforts in the restaurants, the TRAC agreement reduces the likelihood of
potential Company-wide employer-only FICA assessments for unreported tips.
EMPLOYEES
As
of March 3, 2004, the Company employed approximately 15,000 persons, 209 of
whom were corporate personnel, 1,186 of whom were restaurant management personnel
and the remainder of whom were hourly personnel. Of the 209 corporate
employees, 134 are in management positions and 75 are administrative or office
employees. None of the Company’s employees are covered by a collective
bargaining agreement. The Company considers its employee relations to be good.
AVAILABLE INFORMATION
The
Company’s primary website can be found at www.rarehospitality.com. The
Company makes available, free of charge, on or through its website, its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934.
These reports are made available on the website as soon as reasonably practical
after their filing with, or furnishing to, the Securities and Exchange
Commission. Furthermore, the Company also makes available on its website, and in
print to any shareholder who requests it, the Company’s Corporate
Governance Policy, the Committee Charters for Audit, Compensation, and
Governance/Nominating Committees, as well as the Code of Conduct that applies to
all directors, officers, employees and those that do business with the Company.
Amendments to these documents or waivers related to the Code of Conduct will be
made available on the Company’s website as soon as reasonably practicable
after their execution.
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