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Olga's Kitchen, Inc.

Olga's Kitchen, Inc.

1940 Northwood Drive
Troy, Michigan 48084
U.S.A.
Telephone: (248) 362-0001
Fax: (248) 362-2013
Web site: http://www.olgaskitchen.com

Private Company
Incorporated:
1976
Employees: 1,240
Sales: $47 million (2005 est.)
NAIC: 722110 Full-Service Restaurants

Olga's Kitchen, Inc., is a chain of casual dining restaurants best known for a wide variety of sandwiches available on its trademarked pita-like Olgabread. The best-selling Original Olga features seasoned beef and lamb, onions, tomatoes, and a yogurt-based Olgasauce, while the Olga menu also offers spinach pie and Greek salads as side dishes. While the majority of Olga's restaurants in the chain are scattered throughout the Metropolitan Detroit area, some are found in Illinois and Ohio, and all are located in enclosed shopping malls or strip malls. One of the original investors in Olga's, Michael A. Jordan, heads up the company.

1970: ORIGINS

Olga's Kitchen was founded by Olga Loizon, who opened her first restaurant, Olga's Souvlaki, in 1970. During a family vacation to Greece a few years prior, Loizon had conceived the idea of transforming the Greek souvlaki sandwich that she enjoyed into her own Greek-inspired pita wrap. While in Greece, Loizon spent $300 on the vertical broiler necessary to cook the spiced beef and lamb, and then back home in Michigan she spent another couple of years perfecting her famous pita bread recipe. Discussing the unique sandwich, Elizabeth Rhein of Restaurant Business noted that "Only people who had eaten souvlaki in the street stalls of Athens had ever seen a sandwich like this before." Loizon's first sandwich shop, in upscale Birmingham, Michigan, offered one sandwich: The Olga Sandwich, comprised of thinly sliced strips of beef and lamb topped with onions and tomatoes and served on bread made from Olga's secret recipe. Loizon's son William helped with the fledgling enterprise, which provided the community a welcome alternative to the traditional burger and fries.

The Loizons' first day of business was March 14, 1970, and their total sales for the day were $15. Gradually the restaurant gained more customers; what reportedly kept original customers coming back was the Olgabread. The bread was sweeter than pita, and the Olga sandwich was not as spicy or garlicky as a traditional gyro. Also unique and popular at the Loizons' restaurant was the side of homemade yogurt sauce that came with the sandwich. Eventually, a hotdog wrapped in Olga's bread became part of the menu, along with a saladwhen Loizon had the time and inclination to make it.

Olga and William Loizon brought the locals into their 600-square-foot store regularly, where there wasn't even enough room for Loizon to bake bread; she reportedly made the bread at her home and then brought it in to the restaurant. The Loizons next expanded their business to include catering of private parties. Following one such party, Loizon was approached by some of the guests, a group of businessmen, who were so impressed with the Olga sandwich that they offered to invest in the concept and promote it. In 1975, this group of investors purchased Olga's Souvlaki and hired local restaurateur Michael Jordan to run the company. The following year, the restaurant's name was changed to Olga's Kitchen, and the parent company was incorporated.

Jordan had begun in the restaurant business with Greenfield Mills Restaurants in the early 1960s, which were scattered throughout the metropolitan Detroit, Michigan, area. Jordan had worked his way up from the kitchen to management and had remained there until he joined a food service consulting company in 1971. As president of Olga's Kitchens in the 1980s, Jordan would oversee a period of expansion.

While Olga Loizon held neither a position in the company nor any stock in it, she remained a presence in Olga's Kitchens, serving as "chief critic, chief customer and chief creator," according to vice-president of marketing, Ron Crews, as cited in Restaurant Business. By the early 1980s, every year Loizon made an effort to visit her Detroit-based restaurants to mingle with her customers, and while there she never merely sat on the sidelines but helped out.

EXPANSION

In an October 1987 issue of Restaurant Business Jordan reflected on his decision to expand the Olga's chain: "We were doing so much business and there was so much demand for the product that we decided to find out how good this could really be." In the late 1970s and early 1980s, the company established some 30 restaurants scattered throughout Michigan, Ohio, California, Texas, Missouri, Wisconsin, Illinois, Florida, and Pennsylvania.

In an effort to offset the cost of expansion, the company considered an initial public offering of stock but instead eventually settled on franchising the chain. To oversee those operations, it formed Olga's Kitchens Licensing subsidiary. In 1985, Olga's Kitchens began franchising, and outlets were opened in Oklahoma City, Oklahoma; Austin, Texas; Rochester, New York; and Gaithersburg, Maryland. Although the restaurants were well established and successful in Detroit, however, the company experienced its share of growing pains out of state, and some five underperforming Olga's Kitchens were shuttered.

Franchisees paid anywhere from $200,000 to $400,000 for the Olga's concept and six weeks of training at the Bloomfield Township, Michigan, restaurant. Then, Olga's management staff took an additional four weeks assisting the new franchisees with the hiring and training of approximately 45 employees. Jordan's long-term goal was for franchises to represent two-thirds of all Olga's Kitchens, a goal that was never reached due to operational issues.

On average, according to Jordan, Olga's Kitchens were generating $800,000 annually with some reaching an impressive million-dollar mark by 1985. The majority of restaurants during this time were located in shopping malls or their food courts, with only four freestanding locales. By 1987, there were 30 company-owned and another seven franchised Olga restaurants in operation, and the company's annual sales had reached $30 million. The menu now included a variety of salads, but the Olga bread was still credited for much of the chain's success. From a facility near corporate headquarters, the dough was prepared, rolled into balls, frozen, and distributed to each Olga's Kitchen unit, and the recipe remained a guarded secret.

In addition to the Original Olga, new fillings were introduced in the late 1980s and early 1990s. The Vegetarian Olga became popular, as did the chicken and steak fajita fillings for Olga sandwiches. The company even introduced a peanut butter and jelly Olga for kids. Soups proved a popular addition as did curly french fries. Fresh ingredients remained a priority at the restaurants. Advertising efforts, however, remained modest and consisted of coupons available in local newspapers and in-store promotions.

COMPANY PERSPECTIVES

Our unique, fresh, cooked-to-order food has proven to be a great tasty and affordable alternative to fast food; Olga Bread clearly distinguishes Olga's Kitchen from all of our competitors.

1997 BEGINS A PERIOD OF CONSOLIDATION

By the mid-1990s, there were 52 Olga's Kitchens in operation. Company profits, however, were suffering as same-store sales declined. By 1997, Jordan had instituted a consolidation plan that included shuttering some restaurants and renovating the most successful of its units. The number of Olga's Kitchens was slashed from 52 to 26. In 1998, Olga's was listed as 186 on Crain's Detroit list of the leading private 200 companies based on revenues.

By this time, the Olga's menu had expanded considerably. Variety set Olga's apart from its competitors, and there were some 20 different types of Olga sandwiches from which to choose, including the California-Style Olga; Bacon, Lettuce and Tomato Olga; Olga Burger; Smoked Sausage Olga; Stir-Fry Oriental Vegetable Olga; Three Cheese Olga; Turkey Club Olga; and the Chicken Oriental Olga. The restaurant also offered Olga's Salad, spinach and apple pie, frozen "Olgurt" and the trademark Orange Cream Cooler. The company introduced Kids' Surprize Meals, as well as an a la carte menu for children ten and under.

2000 AND BEYOND

In April 2004, Olga's entered into an agreement with Schostak Brothers & Company's restaurant division, Team Schostak Family Restaurants located in Southfield, Michigan, to put in place 15 restaurants over a five-year period. Schostak, already a large Burger King franchisee in the area, took part in locating and developing the new Olga's, while gaining the title of part owner of the properties. At that time, sales at each Olga's location were averaging about $1.8 million (on average customer tabs of $9), with each new restaurant costing some $750,000 to develop. The company began to focus on freestanding locales versus its typical mall-based outlets. The majority of these freestanding sites were located in Michigan and in Toledo, Ohio.

Responding to gourmet trends in the food industry, Olga's Kitchens introduced Suncoast Smoothies beverages and Olga wrap sandwiches. New fillings included such varieties as Thai Chicken, Roasted Veggie Pesto, and the Bleu Cheese Burger. Coupons for new fare and nutritional information were made available on the company's new web site. Another new trend, the low-carb diet, prompted Olga's Kitchens to introduce a new bread that was low in carbohydrates as well as another fat-free version. While these proved less popular than hoped, the company continued to offer them as an option on its menu.

In 2005, there were 23 Olga's in Michigan, two in Illinois, one in Ohio, and one in California. Despite a sluggish economy, some casual restaurants, including Olga's, seemed to be faring well in the Detroit Metropolitan area, and plans were underway for modest expansion including new sites in Allen Park, Bloomfield Hills, and St. Clair Shores, all in Michigan. In 2005, at a reopening of the Toledo restaurant originally established in 1982, Olga Loizon made a guest appearance. In her seventies, she resided in the Detroit area and continued to drop in at the restaurants to meet customers and ensure that everything was operating up to her standards.

PRINCIPAL COMPETITORS

Panera Bread Company; Arby's Inc.; Great Harvest Bread Company.

KEY DATES

1970:
Olga Loizon opens her first sandwich shop located in Birmingham, Michigan.
1976:
Olga's Kitchen, Inc., is incorporated with four additional restaurants in Metro Detroit.
1983:
Olga's Kitchens Licensing Inc. is formed.
1998:
Olga's Kitchen tops Crain's Detroit list of the top 200 privately held companies by revenue.
2004:
Olga's enters into an agreement with Team Schostak Family Restaurants to open 15 restaurants over a five-year period.

FURTHER READING

Bodwin, Amy, "Olga's Name, Secret Recipe Keys to Company Expansion," Crain's Detroit Business, February 18, 1985, p. 27.

"Crain's List," Crain's Detroit Business, May 31, 1999, p. 26.

"Crain's List," Crain's Detroit Business, May 1, 2000, p. 28.

Crumm, David, "Olga Turns a Little Dough Into Big Bucks From One Chain of 35," Detroit Free Press, January 5, 1984, p. 7A.

Deck, Cecilia, "Keeping on Top of Trends is the Meal Ticket for Olga's," Detroit Free Press, April 16, 1990, p. 1F.

Rhein, Elizabeth, "Olga's Finds a Niche," Restaurant Business, October 10, 1987, pp. 154-158.

Rogers, Monica, "Building on Tradition: Doug Hetherington Puts a Contemporary Spin on Olga's Kitchen's Culinary Heritage," Chain Leader, May 2006.

Snavely, Brent, "Eateries Take Second (and Third) Helpings," Crain's Detroit Business, July 4-10, 2005, p. 3.

, "Let Them Eat Bread," Crain's Detroit Business, February 14-20, 2005, p. 1.

, "Olga's Kitchen, Schostak Ink Deal for 15 Restaurants," Crain's Detroit Business, May 3-9, 2004, pp. 1-2.

, "Restaurant Operators Defy Slow Economy," Crain's Detroit Business, May 29, 2006, p. 14.

Strickland, Daryl, "Olga's Going to be a Part of it, New York," Detroit Free Press, July 21, 1986, p. 1D.

Walkup, Carolyn, "Olga's Poised to Resume Growth After Consolidating," Nation's Restaurant News, November 10, 1997, p. 98.

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