Rustler Steak House customers used to ride through TV commercials on their broken-down mules looking more like desperadoes than diners.
But times have changed for the once-ailing budget-restaurant chain, and so has the image it is trying to promote.
In the new commercials now airing from Virginia to New York, pin stripes and neat ties have replaced suede chaps and dirty kerchiefs, and diners are more likely to drive in with coworkers than to ride in with cowpokes from a week on the range.
Image isn't everything in the intensely competitive budget-restaurant business, but it is important, especially when it comes to luring diners inside for their first bite. And Tenly Enterprises Inc., a privately held Rockville firm that bought Rustler from Marriott Corp. in 1983, is counting on its new look -- including facelifts for the chain's 71 restaurants -- to reposition it for a shootout for customers with steak-house industry leaders Ponderosa, Bonanza and Sizzlers.
The excessively Western theme was "hokey," says James M. Sullivan, a former Marriott executive who is Tenly's chairman, president and chief executive officer. While the cowpoke commercials were "cute," says Sullivan, they were a classic case of bad marketing. "Can you imagine seeing these cowboys with these dirty clothes and missing teeth and wanting to dine in that restaurant?"
Tenly's strategy, says Sullivan, 41, is to "de-Westernize" and "contemporize" Rustler to capture sophisticated eastern diners, who want good value and cuisine a notch above fast food but are turned off by prairie decor and restaurant workers who chirp "Howdy" and "Happy Trails!"
Marketing problems have beset the entire budget steak-house industry since the recession of the late '70s and early '80s, when the escalating price of feed and cattle made it harder to find "budget" beef. Analysts say the industry leaders shifted their focus, adding chicken and seafood to their menus and going upscale -- with higher prices to match.
But Tenly, which has pared Rustler from a chain in 15 states into a smaller but financially sounder company operating exclusively in the Mid-Atlantic, has chosen a more cosmetic approach designed to play up the chain's basic formula. "We are a budget steak house chain, and we will remain a budget steak house chain. That is our strength," declares Sullivan.
Like its competitors, Tenly plans to broaden its menu, adding a chicken item, improving the fish selection, expanding the salad bar, and test marketing wine and beer. But budget beef -- ranging from lunch-time hamburger specials for $1.99 to 16-ounce strip steaks for $7.99 -- will remain the staples.
More important, in January Tenly will begin a two-year effort to renovate and redecorate every restaurant in the chain, at a cost of $150,000 a store. Even the Rustler logo has been redesigned so that it no longer resembles the mark a branding iron might make on a cow's flank. Marketing budgets for television and newspapers have increased to 10 percent of sales for the current year, from less than 4 percent of sales under former owner Gino's Inc., which Marriott bought in 1982.
So far, Sullivan contends, the results have been encouraging. Ad campaigns targeting the lunch crowd have boosted lunchtime customer counts 20 percent over last year. Overall sales are up 6 percent and overall customer counts have jumped almost 10 percent.
At the company's recently renovated Rockville flagship, sales have climbed 20 percent, and sales at more than one-third of the restaurants are expected to surpass $1 million for the year. The average Rustler store will have sales of almost $900,000 this year, comparable with the industry leaders and significantly higher than sales in the high $600,000s during Gino's ownership.
Last year, Sullivan says, the chain made its first profit in five years, and he expects sales to approach $67 million for the year ending March 31, 1985. He contends business will be good enough to easily absorb the approximately $10.6 million it will cost to renovate existing restaurants, and he plans to add 40 to 50 new restaurants in the Mid-Atlantic states over the next four to five years.
Industry analysts say the chain seems to have recovered from many of the problems that plagued it five years ago.
"It's doing much better," says David Zuckerman, a writer for Nation's Restaurant News, an industry trade journal. "It kind of languished for a while. They have instituted better management. Under Gino's and Marriott, there was not much in the way of management."
An analyst who follows Marriott adds that smaller chains such as Rustler have done best in recent years by concentrating in a specific region, as Tenly is seeking to do.
Rustler began as a small regional chain in Baltimore in the mid-1960s. Gino's, based in King of Prussia, Pa., acquired it five years later and expanded the chain rapidly into the Far West, the Southwest and the Midwest.
According to Sullivan, the chain eventually acquired more than 100 restaurants, many on "very good real estate" with inexpensive long-term leases. But penetration of individual markets was poor compared with the Bonanza, Ponderosa, Sizzlers and regional steak house chains.
Rustler restaurants were so widely scattered that television advertising -- the major marketing tool for the budget steak-house industry -- was not cost effective.
The recession intensified Rustler's problems, pushing prices up 12 percent in one year. Then, pressed for cash in the early 1980s, Ginos tried to slash costs by cutting back on marketing and staff. Service and facilities at the restaurants deteriorated so badly that customers stayed away, and the chain sustained heavy losses, Sullivan says.
According to figures supplied by Marriott, Rustler's sales fell from $92.5 million in 1978 to $79.4 million in 1980, the last year for which figures are available. Gino's did not break down Rustlers' net profits and losses separately in its annual report.
Marriott, where Sullivan was then in charge of developing restaurant strategies, bought Gino's in 1982 in a deal aimed at expanding the Bethesda restaurant and hotel comglomerate's Roy Rogers operations. Rustler came along in the $48.6 million merger.
Sullivan's background included stints as a controller at Heublein Inc., a liquor company that acquired the Kentucky Fried Chicken chain, and as a vice president of Holiday Inns. He decided Rustler, though losing money fast, "could probably be viable for someone willing to put in the time, effort, hard work. It would have to be someone who was excited about it, not someone who approached it as just another project." He recommended that Marriott sell the chain, preferably to a large company rich enough to pour in the necessary capital.
But the most attractive bid came from a group of five wealthy Pennsylvania entrepreneurs with what Sullivan calls "a flawless track record" in insurance and finance. Formed especially to buy Rustler, the group asked Sullivan to join them and run the new company. After some hesitation, Sullivan agreed, and after nearly nine months of negotiation, the deal was closed for a price that Sullivan will describe only as "substantial."
Marriott was more than helpful in establishing the new company, even giving Sullivan carte blanche to recruit managers from the top ranks of Marriott and Gino's, many of whose executives had been languishing since Marriott purchased the company. "It was like having your own private fishing pool," Sullivan says. "You didn't need a line, you just reached down and picked them out."
"We wanted to cooperate because we felt it was not in our company's strategy to keep the chain and we wanted to sell it," says Robert T. Souers, Marriott's director of corporate relations. "We thought Sullivan could make a go of it, and we wanted to help."
Sullivan points out, however, that he took "the cream of Gino's," skipping over those executives who might have been responsible for Rustler's earlier problems. Together, the new group conducted an extensive market analysis and customer survey. The result was the marketing program now being put into effect.
Practically the first move the company made was to sell off or close a total of about 40 restaurants located outside the Mid-Atlantic region. "We had to be on TV with constant marketing," Sullivan says. "In the Northeast, we had the adequate core in order to be on TV." The move, including the sale of a group of 16 stores to rival Sizzler, helped the company "pay off the entire acquisition debt in nine months, Sullivan says.
One restaurant Rustler chose to hold on to was Curly's Garage, a conventional, moderately priced restaurant with a car theme that did a booming business in Charlottesville, Va. The restaurant has been sosuccessful -- sales of $1 million last year are up by 10 percent so far in 1984 -- that Tenly opened a new Curly's garage in Salisbury, Md. last month, across from Salisbury State College.
Sullivan says his company will expand substantially over the next few years, and his management team -- top heavy for its approximately 2,600 employes -- was picked with that in mind. In addition to three more Curly's Garages planned in New Jersey, and the 40 to 50 new Rustlers, planned mostly for New York, New Jersey and Pennsylvania, Sullivan is thinking of acquiring a new line of restaurant business in the future.
The only market that has really eluded Tenly and Rustlers so far, he says, is the Washington area; the Baltimore market -- the chain's most successful -- may be saturated. Washinginton's "demographics are veryambiguous," he says. "We still haven't completely figured it out." Of the 71 existing restaurants, 11 are in the D.C. area, Sullivan says, but none are in Washington itself.