Nation eating up 'Portland concept': McCormick & Schmick's is cookin'

PORTLAND — Tourists at the Boston Park Plaza Hotel & Towers, in the city's theater district, need reservations to be sure they'll get a dinner table at the packed restaurant on the first floor.

Three blocks from the White House, lobbyists and lawyers crowd one of Washington, D.C.'s, most popular seafood restaurants.

On Baltimore's inner harbor, a seafood restaurant opened in 1998 by the same chain — McCormick & Schmick's — grossed $11 million last year.

McCormick & Schmick's, established in Portland in 1979, has become one of the hottest chains in the restaurant industry.

Its second restaurant opened in downtown Seattle in 1984. The company has thrived even as other high-end restaurants have struggled since the terrorist attacks of Sept. 11, 2001.

McCormick & Schmick's executives say they are picking up market share because their restaurants are upscale but with prices below those of the high-end independent restaurants against which they compete.

"If you take clients to McCormick's, it's not like you're going downscale," said Scott Hume, managing editor of Restaurants and Institutions.

Consumer Reports magazine this month listed McCormick & Schmick's as one of the two best restaurant chains in the nation, along with First Watch Restaurants.

Bill McCormick and Doug Schmick started the chain in 1979 by opening McCormick & Schmick's Seafood Restaurant at Southwest First Avenue and Oak Street in Portland.

The two began working together when McCormick hired Schmick as a manager at Portland's historic Jake's Famous Crawfish Restaurant in 1972.

McCormick's Fish House in Seattle followed in 1977, predating the McCormick & Schmick's chain by two years.

In 1997, after they had expanded to 16 restaurants, McCormick and Schmick sold to Georgia-based Apple South for $68 million.

In June 2001, with the backing of two New York investment banks — which retain majority ownership of the chain — the Portland businessmen bought McCormick & Schmick's back from the company for $123.5 million.

Then came the Sept. 11 attacks. The pair's timing looked awful.

The chain's sales plummeted by 15 to 18 percent for three months as Americans stayed home. After about six months, sales returned to pre-9-11 volumes.

About a year ago, sales began climbing. McCormick & Schmick's restaurants have been filling while competitors have remained empty.

"It's been a good rebound," said Schmick, 54.

The privately held company does not disclose profits but says annual revenues have risen from $160 million in 2000 to $180 million in 2002. It projects 2003 revenues of $200 million.

It has 3,850 employees — 250 more than in September 2001 — including 688 in the Portland area.

Schmick attributes much of his chain's success to the fact it started in Portland. He and his partner realized quickly that they would have to appeal to a wide demographic if they wanted to flourish.

They designed restaurants to attract a range of people.

"We've taken a little Portland concept to a national level," Schmick said. "To be successful, we've had to be relevant to a wide range of consumers."

In Portland, in addition to the original McCormick & Schmick's, the company owns McCormick & Schmick's at the Harborside, Jake's Famous Crawfish Restaurant, Jake's Grill and The Heathman Restaurant in the Heathman Hotel. McCormick's Fish House & Bar is in Beaverton.

The owners of some of Portland's toniest restaurants said they are impressed by McCormick's & Schmick's operation.

"It's high-end mass appeal," said Kim Paley, co-owner of the intimate Paley's Place in Northwest Portland. "They've found the right formula and it works."

Five years after opening their First Avenue restaurant, McCormick and Schmick opened a restaurant at First Avenue and Spring Street in Seattle.

They expanded to Denver three years later, in 1987. Next was Southern California, with an opening in Irvine in 1989.

A key part of the chain's strategy is giving each of its restaurants a local feel. It does that by finding classic locations: 50 percent of its restaurants are in buildings on the National Register of Historic Places.

It also confers an unusual amount of authority to each restaurant manager and executive chef, which Schmick said helps each restaurant fit into its community. The local management team picks its staff, decides from whom it will buy fish and other food, sets the daily menu and chooses regional charities to support.

The goal, McCormick and Schmick said, is to create a chain of restaurants that doesn't feel formatted.

In Seattle, McCormick's Fish House, in the Bank of America Tower, caters to the downtown business crowd, while McCormick & Schmick's on First Avenue — with its "exhibition kitchen" and proximity to the waterfront — has a bit more of a touristy feel, said company spokesman Gregg LeBlanc.

"They've performed very well for us," he said. "Seattle is a very strong market. Both locals and tourists who understand seafood have really come to recognize where we're at."

McCormick & Schmick's Harborside on Lake Union, which opened in 1996, attracts a younger, leisurely clientele that pack in on Monday nights for the $17.95 lobster special, said general manager Catherine Mirabile.

"Our (restaurant) is a little bit more contemporary in the feel and the look," Mirabile said. "We have two stories and a full-sized banquet room."

McCormick & Schmick's is trying to expand its hometown feel from cities to the suburbs. With 80 percent of its restaurants in city centers, it is putting its newest restaurants in suburban malls.

The idea, said Schmick, is to become less dependent on the corporate and vacation customers who are key to downtown restaurants.

McCormick & Schmick's opened a restaurant one year ago in a Hackensack, N.J., mall called Riverside Square. Two months later, the company opened a restaurant in The Mall at Millenia in Orlando, Fla. More recently, McCormick & Schmick's opened a restaurant in Dallas' NorthPark Center and plans to open a restaurant on Labor Day in Bridgewater Commons in Bridgewater, N.J.

Growth carries a price.

The chain, said company Chief Executive Saed Mohseni, owes about twice what it generates in cash flow. He called that a more conservative debt load than carried by the most aggressively expanding restaurant chains.

Philippe Boulot, The Heathman Restaurant's executive chef, began working for McCormick & Schmick when the company bought the restaurant three years ago. Boulot called the McCormick & Schmick purchase "the best thing that ever happened to this restaurant."

The chain is finding the post-9-11 era good for growth, said McCormick, 56, because property owners are offering more favorable terms than five years ago.

Still, he said, he's worried about what another terrorist attack in the United States could do. The worst case, he said, would be growing rapidly and then watching sales drop sharply as diners once again stayed home.

"We don't want to be caught with other restaurants in the country that are half-full," he said. "We're continuing to grow, but with the rest of our business world, we're looking over our shoulders."

Seattle Times business reporter Pamela Sitt contributed to this report.