Golden Corral readies entry into L.A. market.

Buffet style restaurant chain faces local competition

A buffet-style restaurant chain with more than $500 million in annual revenues and 425 outlets nationwide plans to soon lock horns with Sizzler International Inc. and other buffet-style eateries in the Southland.

Raleigh, N.C.-based Golden Corral plans to open 79 franchised eateries in Southern California over the next five years. Thirty of these will be in L.A. County, with the first outlet expected to open here this year.

The centerpiece of Golden Corral's restaurants is a buffet that offers patrons 140 hot and cold items, including baked goods and freshly carved turkey and ham, said Larry Tate, vice president of franchising.

It also sells steak, chicken and seafood entrees, but about 80 percent of its customers choose the buffet as their main course, he said.

Privately held Golden Corral has restaurants in 38 states, with the bulk in North Carolina, Florida and Texas.

The restaurants are family-oriented and cater to incomes of "Middle America," Tate added. The average tab per person runs about $6.

Rival to Sizzler

Its most direct competitor in L.A. County will be Sizzler, which operates 69 outlets here, sources say. But Sizzler places less emphasis on its buffet court, caters to slightly higher demographics and operates smaller restaurants, they say.

"It's not an apples-to-apples comparison, but there is clearly competition between the two," said David Leibowitz, managing director of New York-based Burnham Securities.

In the early 1990s, Marina del Rey-based Sizzler emphasized its extensive buffet court.

But lately it has encouraged patrons to buy entrees instead, and it has cut down on its buffet court offerings, Leibowitz said.

Also, Sizzler "is in a niche that's upscale from us," Tate said. However, Sizzler's average per-person tab is $7, only $1 higher than Golden Corral's, according to Sizzler Executive Vice President Christopher Thomas.

In addition, Sizzler's outlets average about 5,500 square feet in size, while Golden Corral's are considerable larger, 11,000 square feet.

Holding back

But Sizzler is still close competition and it dominated the Southland buffet court market until recently, which discouraged Golden Corral from penetrating it, said Janet Lowder, president of Restaurant Management Services, a Rancho Palos Verdes-based restaurant consulting firm.

Sizzler has lost some of its strength, though, she said. It has closed 24 outlets since 1993, but Thomas would not disclose how many of those were in L.A. County.

Thomas said there is room for both Golden Corral and Sizzler in the L.A. County market.

Golden Corral will have some other buffet-style competitors in the Southland as well, including San Diego-based Soup Exchange and San Diego-based Soup Plantation, Lowder said.

Tate said Golden Corral is choosing this time to come into the Southland because company officials believe there is room in the market for more buffet-style restaurants. "It's underserved with our concept," he said.

Furthermore, "land prices probably won't get much more affordable that they are today in Southern California," he said. The Business Journal has reported that many retailers believe real estate prices in L.A. County have hit bottom and are seizing the opportunity to come into the market.

Yet Golden Corral, which typically builds its own outlets, requires more than two acres of land for each one, Tate said. "That is not easy to find in this market," he said.

Thus, company officials would consider opening outlets in existing space if they find ones that are the right size and in the right location, he said.

Location constraints

There's a dearth of potential locations in L.A. County that have good visibility and access, though, and Golden Corral might have some trouble finding the right land or empty spaces, Lowder said.

Meanwhile, Golden Corral is searching for a franchisee to open outlets all over L.A. County, but hasn't found one yet, Tate said.

It already has franchisees in San Bernardino and Riverside Counties. The Riverside County franchise opened an outlet in Riverside last October.

Once the outlets are open, though, Golden Corral may have some difficulty retaining customer loyalty, analyst Leibowitz said.

Golden Corral usually makes a big bang with diners when it first enters a market. But after a year or so, some customers tire of the buffet concept and stop patronizing the eateries, he said.

"Initially they're going to get a very good traffic count. Whether they can maintain that traffic count remains to be seen," Leibowitz said.

But Tate said he didn't think customers were any more disloyal to Golden Corral over time than to other restaurant chains.

"There's a settling-down period every new restaurant experiences from the opening curve. We all like to try new restaurants," he said.