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Morton’s Restaurant Group, Inc.

Mortons Restaurant Group, Inc.

325 North LaSalle, Suite 500
Chicago, Illinois 60610
U.S.A.
Telephone: (312) 923-0030
Fax: (312) 923-0105
Web site: http://www.mortons.com

Public Company
Incorporated: 1978 as Mortons of Chicago Inc.
Employees: 4,067
Sales: $322 million (2006)
Stock Exchanges: New York
Ticker Symbol: MRT
NAIC: 72211 Full-Service Restaurants

Mortons Restaurant Group, Inc., owns and operates Mortons the Steakhouse, a high-end steak house restaurant chain aimed at a business clientele; Bertolinis Authentic Trattorias, a smaller chain offering Italian specialties in a casual dining atmosphere; and Trevi, an Italian café-style restaurant. At the end of 2006 Mortons Restaurant Group owned and operated 73 Mortons the Steakhouse, three Bertolinis units, and one Trevi restaurant located in Caesars Palace in Las Vegas. Mortons the Steakhouse restaurants are similar in style, concept, and decor, and are located in retail, hotel, commercial, and office building complexes in major metropolitan areas and urban centers. Sixty-nine restaurants are located in 63 cities in the United States, San Juan, and Puerto Rico. Four restaurants are located internationally in Toronto, Vancouver, Singapore, and Hong Kong.

ARNOLD MORTONS CONCEPT: 197887

Born into a family of Chicago restaurateurs, Arnie Morton was director of food and beverages for Playboys clubs and resorts in the 1960s. Known, according to William Rice of the Chicago Tribune, as the man who pinned the tails on the bunnies, Morton found corporate management stultifying after Playboy founder Hugh Hefner moved to California. He left in 1973 to open a discotheque and several restaurants in the Chicago area. In 1978, with Klaus Fritsch as his partner, he opened Mortons, a Chicago steak house that was to serve as the prototype for the Mortons of Chicago chain.

Ted Kasemir, an employee, later recalled to Rice of Mortons, There wasnt much room for a kitchen, so he kept the menu short and simple enough to be done by a broiler cook instead of a chef. Instead of aging and cutting the meat on the premises, Morton bought meat that was cut and aged. Then he glamorized the front, gave it a classy, clublike feel. The aging process involved two to three weeks at 34 to 36 degrees Fahrenheit in climate controlled rooms.

By the time a Mortons of Chicago restaurant opened in Washington, D.C., in October 1982, the chain had developed an elaborate presentation of the menu during which a server wheeled a cart to the diners table and held aloft, for inspection, raw cuts of beef wrapped in cellophane, a raw chicken marinating in the wrap, a live Maine lobster crawling across its tray, and various other items, including gigantic specimens of Idaho potato and steamed asparagus. All items were à la carte.

Washington Post restaurant reviewer Phyllis C. Richman was not impressed. While conceding that the new Mortons was playing to a packed house and offering a good show, she wrote of the steaks that despite their highly touted aging, they have little flavor.

By 1987 there was another Chicago-area Mortons steak house and seven more in other cities, including Philadelphia, Dallas, and Boston. Entrées at the Boston unit, which opened in 1987, included prime rib, veal and lamb chops, and swordfish steak, as well as chicken, lobster, and the usual two-inch-thick steaks. That year, when Mortons of Chicago had sales of more than $15 million, the chain was sold for a reported $12.4 million to Lexington Investment Co., a venture capital firm, and Alex. Brown & Sons, a Baltimore brokerage house. Fritsch stayed on as president of the enterprise.

QUANTUM RESTAURANT GROUP, 198996

Mortons Steak Houses was sold in 1989 for $9 million in equity to Quantum Restaurant Group, Inc., a company founded by Allen J. Bernstein with venture capital from Castle Harlan, a private New York City merchant banking firm. Quantums first acquisition, in December 1988, had been an 89 percent stake in Peasant Restaurants Inc., an Atlanta-based, 14-unit restaurant firm, for $11.6 million. The Peasant chain began in 1973, when Stephan Nygren and Richard Dailey turned a Mexican restaurant on Atlantas Peachtree Street into the Pleasant Peasant, a continental New York bistro. Daileys Restaurant followed in 1984, and a unit later opened in Washington, D.C. Peasant Restaurants included a diner-style sister chain, Micks, which was founded in 1984 and consisted of four units in 1989.

Quantum Restaurant Group was not profitable in its early years. Although restaurant revenues rose from $50.2 million in 1989 to $78 million in 1991, a variety of nonoperating expenses raised its negative net income to $20.6 million in the latter year. The company made its initial public offering of stock in 1992, its first profitable year. One of the two new Mortons that year was a unit in Beverly Hillsnamed Arnie Mortons of Chicago, to distinguish it from the celebrity-studded, West Hollywood Mortons opened in 1980 by Arnold Mortons son Peter. Reviewing Arnie Mortons in the magazine section of the Los Angeles Times, Charles Perry called the three-pound double porterhouse (actually half T-bone, half sirloin strip), the most satisfying steak Ive had in years.

Mortons of Chicago made its New York City debut in October 1993, locating in midtown Manhattan. Are we too snooty, too myopic, too chauvinistic too rigid for Second City brassiness? New York restaurant critic Gael Greene asked rhetorically. This transplanted Midwesterner gave the new Mortons a mixed review but called the three-pound porterhouse spectacular. Really rare, fire glazed, tender but not too, bursting with flavor. As is the sirloin. And our two-and-a-half-pound lobster ($38.95) is cooked to a perfection rarely found in a steakhouse.

Another sophisticated city with a tradition of fine dining, San Francisco, received its own Mortons of Chicago a year later. San Francisco Chronicle food editor Michael Baueranother transplanted Midwesternerturned thumbs down on some of the side dishes, expressed outrage at the prices, and sneered at the food presentation. However, he called the steaks better than Ive had since my father sold his butcher shop in Kansas. Beef lovers will swoon over the buttery tenderness of the double-cut filet ($27.95), the richly marbled rib eye or even the melt-in-your mouth quality of the brochette ($19.95) skewered with onions and peppers.

COMPANY PERSPECTIVES

We are the worlds largest owner and operator of company-owned upscale steakhouse restaurants. Mortons steakhouses have remained true to our founders original vision of combining generous portions of high quality food prepared to exacting standards with exceptional service in an enjoyable dining environment. By owning and operating all Mortons steakhouses, each with a similar menu, we believe that we are better able to provide a consistently high quality dining experience across all our locations.

There were 10 Peasant and 25 Micks restaurants in 1994, when Quantum Restaurant Groupwhich wholly owned both chainsshifted to lower prices for the former, with most entrées in the $7 to $16 range. Chefs were recruited and trained to replace kitchen managers in executing Peasants new culinary strategy. The chain, although remaining Atlanta-based and -oriented, opened a Philadelphia unit in 1994. The Micks chain also was concentrated in the Atlanta area, but there were other units in Baltimore, Memphis, Miami, Minneapolis, Nashville, Philadelphia, and Washington. In December 1993, Quantum launched a new chain, called Bertolinis Authentic Trattorias, which featured northern Italian food at midscale prices. The original Bertolinis had opened in Las Vegas in 1992 and the second in Atlanta in September 1993. Four more opened in 1995.

Peasant and Micks were proving to be Quantum Restaurant Groups black hole, sucking out the profits earned by Mortons of Chicago. In 1995 Quantum put the two chains on the block and took a pretax charge of $15.5 million related to the closing of certain Micks and Peasant restaurants. As a result, the company lost $13.9 million during the year. In 1996 the two chains lost $11 million on revenues of $54.4 million, but Quantum nevertheless registered net income of $1.8 million.

Mortons of Chicago remained Quantums highend restaurant chain. Billing at an average rate of about $65 per person in 1996, the 34-unit Mortons was the most expensive major restaurant chain in the world. It also had the severest operating controls, with the emphasis on complete consistency for its businessoriented customers. Bernstein, who started out in the business as the owner of 17 Wendys units, was using fast food principles not only to manage cost and quality but also to recruit and train managers, chefs, and serving staff.

All Mortons of Chicago units were designed to be, in the words of one manager interviewed by Glenn Collins of the New York Times in 1996, a timeless place of refuge, with no windows, dark wood furnishings, photos of celebrities, Leroy Neiman prints, and canned music featuring Frank Sinatra. A large, mahogany paneled boardroom was set aside for business meetings by corporate clients. While the emphasis was on beef, Mortons also offered fresh fish, lobster, veal, and chicken. All units featured an open display kitchen where steaks were prepared. Each had a fully stocked bar with a complete line of name brands and an extensive premium wine list, offering about 175 selections.

The prime aged beefat a wholesale price of over $14 a poundwas shipped from Chicago, lobsters from New England, smoked salmon from Seattle, swordfish from New Yorks Block Island, and cheesecake from New York Citys borough of the Bronx. Chefs were trained to prepare and present every dish to exact company specifications, with the same ingredients and recipes. A color photo display depicted the desired presentation of each dish. Each Mortons of Chicago monitored inventory, sales, and profits with a point-ofsale computer system similar to those used by the fast food chains. If supplies were suddenly found to be running low, Mortons deployed couriers, air carriers such as Federal Express, and even taxicabs to make sure all the 500 kitchen items, sauces, and garnishes were available to diners. Downtown units remained open Sundays, despite little business, in order to cater to visiting out-of-town businesspeople. Nine Mortons were serving lunch as well as dinner in 1998.

MORTONS RESTAURANT GROUP, 199699

Quantum Restaurant Group renamed itself Mortons Restaurant Group in 1996. The company announced in early 1997 that it was selling 19 Peasant and Micks restaurants, for $6.8 million in cash and notes, to Gregory M. Buckley, former president of Quincys Family Steakhouse. Mortons retained a 20 percent stake in the two chains and kept the Washington units for itself, but closed, sold, or otherwise disposed of these by the end of the year. The transaction allowed Mortons to concentrate on its eponymous steak house chain, which accounted for 85 percent of its revenues. The first overseas Mortons opened in Singapore in 1998, followed by another in Toronto. Bernstein was hoping eventually to establish 60 to 70 Mortons units outside the United States.

KEY DATES

1978:
Arnie Morton and Klaus Fritsch open Mortons in Chicago.
1982:
Mortons opens in Washington, D.C.
1987:
The chain is sold for a reported $12.4 million to Lexington Investment Co. and Alex. Brown & Sons.
1989:
Mortons Steak Houses is sold to Quantum Restaurant Group, Inc.
1993:
The Bertolinis Authentic Trattorias chain is launched.
1996:
Quantum Restaurant Group renames itself Mortons Restaurant Group.
1997:
The company sells its Peasant and Micks restaurants.
2002:
Castle Harlan Inc. buys Mortons.
2006:
Mortons Restaurant Group goes public again.

Bertolinis opened another restaurant in 1996, one in 1997, and two in 1998. Like the steak house chain, it was being run on the principle of uniformity, with each unit offering the same menu, ingredients, ambience, and level of service. During 1998, however, Mortons Restaurant Group identified several underperforming Bertolinis units and authorized a plan for the closure or abandonment of certain ones. In early 1999 the company closed the units in Westbury, New York, and Contra Costa, California.

The revenues of Mortons Restaurant Group peaked at $193 million in 1996, just prior to the sale of underperforming Peasant and Micks restaurants. Net income rose from $1.8 million in 1996 to $6.9 million in 1997. The company lost $1.9 million in 1998, after taking a pretax charge of $19.9 million for a write down of Bertolinis assets. Despite this setback, Mortons high operating income$24.5 million in 1998attracted investors, who bid the stock as high as $25 a share in 1997 and 1998, compared to the $10 per share at which the company went public.

Alcoholic beverages accounted for about 32 percent of Mortons of Chicagos revenues in 1998. The onpremises private dining and meeting facilities referred to as boardrooms and available in all but the Chicago Mortons accounted for about 18 percent of the chains sales. During the year dinner service accounted for about 67 percent of Bertolinis revenues and lunch for about 33 percent. Alcoholic beverages accounted for about 20 percent.

FMR Corporation was Mortons Restaurant Groups largest stockholder in May 1999, with 12.8 percent of the shares. Bernstein held 6.3 percent of the shares. Several investment and venture capital firms held 6 percent or more of the stock. The companys long term debt was $40.3 million at the end of 1998.

MORTONS IN THE NEW MILLENNIUM

Mortons Restaurant Group faced several challenges in the new millennium. A sluggish economy in 2001 was made even worse by the terrorist attacks in the United States of September 11, 2001. With a widening debt load and falling revenues, Mortons found itself in a precarious situation. In May of that year, the company fended off hostile takeover attempts made by BFMA Holding Corp., an investment firm backed by Carl Icahn.

In March 2002, the company announced that it had accepted a bid made by Castle Harlan, Inc. Icahn and his investment group counter-offered and a heated battle for control of Mortons began. Icahn and financier Barry Florescue claimed Castle Harlans offer was too low and thus not in the shareholders best interests. Mortons management and board disagreed and in the end, majority ownership went to Castle Harlan in a $17 per share deal. Mortons was taken private as a result of the sale.

When the dust settled, Mortons Restaurant Group was left to focus on shoring up sales and profits. Thomas Baldwin took over as CEO in 2005 and under his leadership, the company continued to prepare itself for a public offering. With sales and profits back on track, Mortons Restaurant Group began selling shares to the public in February 2006. Five new restaurants were opened that year with several additional restaurantsnow operating under the Mortons the Steakhouse nameslated to open in 2007. Trevi, an Italian-themed restaurant, opened at Caesars Palace in Las Vegas in early 2007.

According to the company, the average Mortons diner during this time period was between the ages of 30 and 55 years old and earned more than $100,000 per year. The average check for a party of two was $170not counting sales tax or tip. To comply with consumer demand, Mortons added French fries to its menu for the first time in 28 years in 2007. Other new menu items included a wedge salad, lobster tails, Alaskan king crab legs, seared tuna, and tuna tartare. Restaurants also began offering black napkins to customers wearing dark clothes, a feature that kept a diners pants lint free.

Mortons continued to cater to its business clients and began offering videoconferencing in 2006. The dining suite offered a state-of-the-art high-definition screen, surround sound, and projection capabilities. A company spokesperson commented on the special suites in a November 2006 Westchester County Business Journal article. Having these capabilities and the equipment inhouse sets us apart and its less stressful than planning your own dinner meeting. The system is a very big investment that Mortons made because we really believe that it fits us. Its the best of the best out there and we think it fits our best of the best food.

Robert Halasz
Updated, Christina Stansell Weaver

PRINCIPAL SUBSIDIARIES

Quantum Restaurant Development Corporation; Mortons of Chicago Inc.; Santa Fe Steakhouse & Cantina Corporation; Porterhouse Inc.; Bertolinis Restaurants Inc.

PRINCIPAL COMPETITORS

Palm Management Corporation; Ruths Chris Steak House Inc.; The Smith & Wollensky Restaurant Group.

FURTHER READING

Bauer, Michael, Steaks Are Right, Service Is Rote, San Francisco Sunday Examiner & Chronicle, February 5, 1995, Datebook Sec., p. 38.

Bernstein, Charles, Ex-Le Peep Exec Bernstein Behind Peasant Acquisition, Nations Restaurant News, May 22, 1989, p. 4.

Carey, David, Mortons Goes to Castle Harlan, Daily Deal, July 24, 2002.

_____,Raising the Steaks, Daily Deal, June 19, 2002.

Collins, Glenn, A Big Mac Strategy at Porterhouse Prices, New York Times, August 13, 1996, pp. D1, D4.

Gabriel, Frederick, By Trimming the Fat, Mortons Is Attracting Investor Stakes, Crains New York Business, March 3, 1997, p. 4.

Greene, Gael, To Sirloin with Love, New York, November 8, 1993, p. 72.

Harrington, John, Mortons Feels the Heat, Crains New York Business, May 14, 2001.

Hayes, Jack, Pleasant Peasant Scales Prices, Hires Exec Chefs, Nations Restaurant News, August 15, 1994, pp. 1, 107.

_____, Quantum Leaps, Launches New Bertolinis, Nations Restaurant News, December 6, 1993, p. 3.

Healy, Peter, New Canaan CEO Beefs Up Morton,s Knight-Ridder/Tribune Business News, June 25, 2006.

Janofsky, Michael, On the Menu, Steak Bucks Trend, New York Times, January 25, 1993, pp. D1, D4.

Konig, Susan, A Fast-Food Strategy for a High-End Menu, New York Times, September 20, 1998, Sec. 14 (Long Island), p. 15.

Luna, Nancy, Mortons CEO, Its Anaheim General Manager Talk About Chains Growth, Knight-Ridder/Tribune Business News, February 23, 2007.

Occhipinti, Christina, At Mortons, Dinner Meetings Go Hi-Def, Westchester County Business Journal, November 20, 2006, p. 20.

Papiernik, Richard L., Battle for Mortons Heats Up, Nations Restaurant News, July 22, 2002.

Perry, Charles, Chicago Chops, Los Angeles Times Magazine, December 20, 1992, p. 58.

Rauscher, Susannah Vesey, Peasant Restaurants Sold, Atlanta Journal-Constitution, January 4, 1997, p. C1.

Rice, William, Check, Please, Chicago Tribune, Sec. 5, pp. 1, 4.

Richman, Phyllis C., Mortons of Chicago, Washington Post Magazine, February 13, 1983, pp. 2627.

Rosenberg, Hilary, The Operators at Castle Harlan, Institutional Investor, April 1993, pp. 57, 63.

Santangelo, Mike, Hes the King of Fine Dining, Newsday, April 28, 1997, p. C7.

Shearer, Brent, Mortons Restaurant Falters As Economy Slows, Mergers and Acquisitions, August 2001, p. 37.

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Morton’s Restaurant Group, Inc.

Mortons Restaurant Group, Inc.

3333 New Hyde Park Road
New Hyde Park, New York 11042
U.S.A.

(516) 627-1515
Fax: (516) 627-1898
Web site: http://www.mortons.com

Public Company
Incorporated: 1978 as Mortons of Chicago Inc.
Employees: 3,612
Sales: $189.8 million (1998)
Stock Exchanges: New York
Ticker Symbol: MRG
NAIC: 72211 Full-Service Restaurants

Mortons Restaurant Group, Inc. owns and operates Mortons of Chicago, a high-end steakhouse restaurant chain aimed at a business clientele, and Bertolinis Authentic Trattorias, a smaller chain offering Italian specialties in a casual dining atmosphere. At the end of 1998 Mortons Restaurant Group owned and operated 43 Mortons of Chicago and 12 Bertolinis units. All Mortons of Chicago restaurants were similar in style, concept, and decor, and were located in retail, hotel, commercial, and office building complexes in major metropolitan areas and urban centers. Catering primarily to business-oriented clients, Mortons of Chicago had an average per person check of about $65 in 1998. The Bertolinis restaurants offered white tablecloth service, with an average per person check of about $20. Mortons Restaurant Group also held a minority of stock in two other restaurant chains, Micks and Peasant.

Arnold Mortons Concept: 197887

Born into a family of Chicago restaurateurs, Arnie Morton was director of food and beverages for Playboys clubs and resorts in the 1960s. Known, according to William Rice of the Chicago Tribune, as the man who pinned the tails on the bunnies, Morton found corporate management stultifying after Playboy founder Hugh Hefner moved to California. He left in 1973 to open a discotheque and several restaurants in the Chicago area. In 1978, with Klaus Fritsch as his partner, he opened Mortons, a Chicago steakhouse that was to serve as the prototype for the Mortons of Chicago chain.

Ted Kasemir, an employee, later recalled to Rice of Mortons, There wasnt much room for a kitchen, so he kept the menu short and simple enough to be done by a broiler cook instead of a chef. Instead of aging and cutting the meat on the premises, Morton bought meat that was cut and aged. Then he glamorized the front, gave it a classy, clublike feel. The aging process involved two to three weeks at 34 to 36 degrees Fahrenheit in climate-controlled rooms.

By the time a Mortons of Chicago restaurant opened in Washington, D.C., in October 1982, the chain had developed an elaborate presentation of the menu during which a server wheeled a cart to the diners table and held aloft, for inspection, raw cuts of beef wrapped in cellophane, a raw chicken marinating in the wrap, a live Maine lobster crawling across its tray, and various other items, including gigantic specimens of Idaho potato and steamed asparagus. All items were a la carte.

Washington Post restaurant reviewer Phyllis C. Richman was not impressed. While conceding that the new Mortons was playing to a packed house and offering a good show, she wrote of the steaks that despite their highly touted aging, they have little flavor.

By 1987 there was another Chicago-area Mortons steak-house and seven more in other cities, including Philadelphia, Dallas, and Boston. Entrees at the Boston unit, which opened in 1987, included prime rib, veal and lamb chops, and swordfish steak, as well as chicken, lobster, and the usual two-inch-thick steaks. That year, when Mortons of Chicago had sales of more than $15 million, the chain was sold for a reported $12.4 million to Lexington Investment Co., a venture capital firm, and Alex. Brown & Sons, a Baltimore brokerage house. Fritsch stayed on as president of the enterprise.

Quantum Restaurant Group, 198996

Mortons Steak Houses was sold in 1989 for $9 million in equity to Quantum Restaurant Group, Inc., a company recently founded by Allen J. Bernstein with venture capital from Castle Harlan, a private New York City merchant banking firm. Quantums first acquisition, in December 1988, had been an 89 percent stake in Peasant Restaurants Inc., an Atlanta-based, 14-unit restaurant firm, for $11.6 million. The Peasant chain began in 1973, when Stephan Nygren and Richard Dailey turned a Mexican restaurant on Atlantas Peachtree Street into the Pleasant Peasant, a continental New York bistro. Daileys Restaurant followed in 1984, and a unit later opened in Washington, D.C. Peasant Restaurants included a diner-style sister chain, Micks, which was founded in 1984 and consisted of four units in 1989.

Quantum Restaurant Group was not profitable in its early years. Although restaurant revenues rose from $50.2 million in 1989 to $78 million in 1991, a variety of nonoperating expenses raised its negative net income to $20.6 million in the latter year. The company made its initial public offering of stock in 1992, its first profitable year. One of the two new Mortons that year was a unit in Beverly Hillsnamed Arnie Mortons of Chicago so as not to be confused with the celebrity-studded, West Hollywood Mortons opened in 1980 by Arnold Mortons son Peter. Reviewing Arnie Mortons in the magazine section of the Los Angeles Times, Charles Perry called the three-pound double porterhouse (actually half T-bone, half sirloin strip), the most satisfying steak Ive had in years.

Mortons of Chicago made its New York City debut in October 1993, locating in midtown Manhattan. Are we too snooty, too myopic, too chauvinistic... too rigid for Second City brassiness? New York restaurant critic Gael Greene asked rhetorically. This transplanted Midwesterner gave the new Mortons a mixed review but called the three-pound porterhouse spectacular. Really rare, fire-glazed, tender but not too, bursting with flavor. As is the sirloin. And our two-and-a-half-pound lobster ($38.95) is cooked to a perfection rarely found in a steakhouse.

Another sophisticated city with a tradition of fine dining, San Francisco, received its own Mortons of Chicago a year later. San Francisco Chronicle food editor Michael Baueranother transplanted Midwesternerturned thumbs down on some of the side dishes, expressed outrage at the prices, and sneered at the food presentation. However, he called the steaks better than Ive had since my father sold his butcher shop in Kansas. Beef lovers will swoon over the buttery tenderness of the double-cut filet ($27.95), the richly marbled rib eye or even the melt-in-your mouth quality of the brochette ($19.95) skewered with onions and peppers.

There were 10 Peasant and 25 Micks restaurants in 1994, when Quantum Restaurant Groupwhich now wholly owned both chainsshifted to lower prices for the former, with most entrees in the $7 to $16 range. Chefs were recruited and trained to replace kitchen managers in executing Peasants new culinary strategy. The chain, although remaining Atlanta-based and -oriented, opened a Philadelphia unit in 1994. The Micks chain also was concentrated in the Atlanta area, but there were other units in Baltimore, Memphis, Miami, Minneapolis, Nashville, Philadelphia, and Washington. In December 1993, Quantum launched a new chain, called Bertolinis Authentic Trattorias, that featured northern Italian food at midscale prices. The original Bertolinis had opened in Las Vegas in 1992 and the second in Atlanta in September 1993. Four more opened in 1995.

Peasant and Micks were proving to be Quantum Restaurant Groups black hole, sucking out the profits earned by Mortons of Chicago. In 1995 Quantum put the two chains on the block and took a pretax charge of $15.5 million related to the closing of certain Micks and Peasant restaurants. As a result, the company lost $13.9 million during the year. In 1996 the two chains lost $11 million on revenues of $54.4 million, but Quantum nevertheless registered net income of $1.8 million.

Mortons of Chicago remained Quantums high-end restaurant chain. Billing at an average rate of about $65 per person in 1996, the 34-unit Mortons was the most expensive major restaurant chain in the world. It also had the severest operating controls, with the emphasis on complete consistency for its business-oriented customers. Bernstein, who started out in the business as the owner of 17 Wendys units, was using fast-food principles not only to manage cost and quality but to recruit and train managers, chefs, and serving staff.

All Mortons of Chicago units were designed to be, in the words of one manager interviewed by Glenn Collins of the New York Times in 1996, a timeless place of refuge, with no windows, dark-wood furnishings, photos of celebrities, Leroy Neiman prints, and canned music featuring Frank Sinatra. A large, mahogany-paneled boardroom was set aside for business meetings by corporate clients. While the emphasis was on beef, Mortons also offered fresh fish, lobster, veal, and chicken. All units featured an open display kitchen where steaks were prepared. Each had a fully stocked bar with a complete line of name brands and an extensive premium wine list, offering about 175 selections.

Company Perspectives:

Mortons Restaurant Group was founded with the mission of identifying, acquiring and growing time-tested restaurant groups which are clearly distinguished in their market niches. This mission was refined to focus on two interrelated strategies: expanding and replicating the continuing success of our Mortons of Chicago steakhouse restaurants and Bertolinis Authentic Trattorias; providing Mortons Restaurant Group with the means to transition our company to new levels of competitiveness and growth.

The prime aged beefat a wholesale price of over $14 a poundwas shipped from Chicago, lobsters from New England, smoked salmon from Seattle, swordfish from New Yorks Block Island, and cheesecake from New York Citys borough of The Bronx. Chefs were trained to prepare and present every dish to exact company specifications, with the same ingredients and recipes. A color-photo display depicted the desired presentation of each dish. Each Mortons of Chicago monitored inventory, sales, and profits with a point-of-sale computer system similar to those used by the fast-food chains. If supplies were suddenly found to be running low, Mortons deployed couriers, air carriers such as Federal Express, and even taxicabs to make sure all the 500 kitchen items, sauces, and garnishes were available to diners. Downtown units remained open Sundays, despite little business, in order to cater to visiting out-of-town businesspeople. Nine Mortons were serving lunch as well as dinner in 1998.

Mortons Restaurant Group, 199699

Quantum Restaurant Group renamed itself Mortons Restaurant Group in 1996. The company announced in early 1997 that it was selling 19 Peasant and Micks restaurants, for $6.8 million in cash and notes, to Gregory M. Buckley, former president of Quincys Family Steakhouse. Mortons retained a 20 percent stake in the two chains and kept the Washington units for itself, but closed, sold, or otherwise disposed of these by the end of the year. The transaction allowed Mortons to concentrate on its eponymous steakhouse chain, which now was accounting for 85 percent of its revenues. The first overseas Mortons opened in Singapore in 1998, followed by another in Toronto. Bernstein was hoping eventually to establish 60 to 70 Mortons units outside the United States.

Bertolinis opened another restaurant in 1996, one in 1997, and two in 1998. Like the steakhouse chain, it was being run on the principle of uniformity, with each unit offering the same menu, ingredients, ambience, and level of service. During 1998, however, Mortons Restaurant Group identified several under-performing Bertolinis units and authorized a plan for the closure or abandonment of certain ones. In early 1999 the company closed the units in Westbury, New York, and Contra Costa, California.

The revenues of Mortons Restaurant Group peaked at $193 million in 1996, just prior to the sale of underperforming Peasant and Micks restaurants. Net income rose from $1.8 million in 1996 to $6.9 million in 1997. The company lost $1.9 million in 1998, after taking a pretax charge of $19.9 million for a writedown of Bertolinis assets. Despite this setback, Mortons high operating income$24.5 million in 1998attracted investors, who bid the stock as high as $25 a share in 1997 and 1998, compared to the $10 per share at which the company went public.

Alcoholic beverages accounted for about 32 percent of Morton of Chicagos revenues in 1998. The on-premises private dining and meet facilities referred to as boardrooms and available in all but the Chicago Mortons accounted for about 18 percent of the chains sales. During the year dinner service accounted for about 67 percent of Bertolinis revenues and lunch for about 33 percent. Alcoholic beverages accounted for about 20 percent.

FMR Corp. was Mortons Restaurant Groups largest stockholder in May 1999, with 12.8 percent of the shares. Bernstein held 6.3 percent of the shares. Several investment and venture capital firms held six percent or more of the stock. The companys long-term debt was $40.3 million at the end of 1998.

Principal Subsidiaries

Bertolinis Restaurants, Inc.; Italian Restaurants Holding Corp.; Mortons, Inc.; Mortons of Chicago, Inc.; Porterhouse, Inc.

Further Reading

Bauer, Michael, Steaks Are Right, Service Is Rote, San Francisco Sunday Examiner & Chronicle, February 5, 1995, Datebook section, p. 38.

Bernstein, Charles, Ex-Le Peep Exec Bernstein Behind Peasant Acquisition, Nations Restaurant News, May 22, 1989, p. 4.

Collins, Glenn, A Big Mac Strategy at Porterhouse Prices, New York Times, August 13, 1996, pp. D1, D4.

Gabriel, Frederick, By Trimming the Fat, Mortons Is Attracting Investor Stakes, Grains New York Business, March 3, 1997, p. 4.

Greene, Gael, To Sirloin with Love, New York, November 8, 1993, p. 72.

Hayes, Jack, Pleasant Peasant Scales Prices, Hires Exec Chefs, Nations Restaurant News, August 15, 1994, pp. 1, 107.

_______, Quantum Leaps, Launches New Bertolinis, Nations Restaurant News, December 6, 1993, p. 3.

Janofsky, Michael, On the Menu, Steak Bucks Trend, New York Times, January 25, 1993, pp. DI, D4.

Konig, Susan, A Fast-Food Strategy for a High-End Menu, New York Times, September 20, 1998, Sec. 14 (Long Island), p. 15.

Perry, Charles, Chicago Chops, Los Angeles Times Magazine, December 20, 1992, p. 58.

Rauscher, Susannah Vesey, Peasant Restaurants Sold, Atlanta Journal-Constitution, January 4, 1997, p. C1.

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Robert Halasz

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