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A Fish Tale

Marking 25 years in business, Ralph Rubio, the founder of Carlsbad-based Rubio’s Restaurants Inc., which has 170 eateries in six states, is planning for its future, a process that is not without challenges. But Rubio is no stranger to challenge.

“Excuse me. I couldn’t help overhearing. I remember when you first opened, you used to sleep in the kitchen,” a gray-haired man said to Rubio as he was being interviewed about the chain’s history at his first eatery on Mission Bay Drive.

“Back in those days I often had to open and close by myself,” Rubio said as he reminisced about 80-hour workweeks spent getting the business going.

With $16,000 from his father, Rubio, a 1978 graduate of San Diego State University, launched the company that made the fish taco San Diego’s signature dish in January 1983.

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The idea for Rubio’s Fresh Mexican Grill came from excursions to Baja California, where Rubio and his college buddies dined in cantinas and at little stands lining the avenidas.

“My father and I talked about the concept for a long time, and then finally we did it,” he said.

Within a couple of years, customers were beating a path to their door, and in 1986 the family-run operation grew to three eateries.


Turnaround Strategy

While looking back fondly on the early days of the business, Rubio admits he handed over his title of chief executive officer in 2004 while keeping that of chairman as a turnaround strategy.

“I didn’t have the education and training for running a large, publicly traded company. So I changed roles because I was less interested in the job of CEO than in the value of the company’s shares,” said Rubio.

Carl Winston, director of SDSU’s School of Hospitality & Tourism Management, says Rubio’s plight is shared by many entrepreneurs.

“It’s not uncommon because what it takes to become an entrepreneur is not what it takes to run a large, multi-unit concern,” Winston said.

The tenure of the first CEO Rubio chose as his replacement was short. Then Daniel Pittard, who was previously with PepsiCo Inc., became CEO in August 2006. Rubio said he is confident that Pittard and a new team of key executives, including Chief Financial Officer Frank Henigman, will put the chain on a new course.

Since its initial public offering in 1999, Rubio’s has posted losses in five of the last eight years.

The company is scheduled to report 2007 year-end results on March 27.

The reasons for losses were different in each of those years, says Henigman.

For instance, some restaurant closures and some that underperformed contributed to the loss in 2003, while settlement of a class-action lawsuit regarding overtime pay for managers contributed to the 2006 loss, he pointed out.

Rubio’s has shown financial improvement. In the third quarter, the company’s net income rose 22 percent compared to the same quarter in 2006.

To continue to improve net income, “the strategic focus is on adding new stores in locations, the right locations, where our targeted guests live and work,” Henigman said.

Increasing sales at existing stores is equally important, he says.

Research that defined the chain’s core customer was one of the first steps in that direction, Rubio said.

“The research confirmed that our target demographic is between 25 and 49 and evenly split between men and women with a slightly higher educational level and slightly higher income than your typical fast-food customer,” Rubio said. “These people are willing to spend from $8 to $10 per meal for food that is fresh, high quality and healthy.”


‘Local Store Marketing’

Henigman said the company has also opted for “local store marketing” in which managers get involved in community organizations and fund-raisers to increase awareness “as opposed to a mass-media advertising approach.” Plans also include increasing the catering side of the operation, he added.

As chairman, Rubio now focuses on menu development and cuisine and the new findings on customer demographics have prompted him to work on what he calls “grilled gourmet tacos” with such ingredients as sirloin steak.

While targeting California, Arizona, Utah, Colorado and Nevada, where salsa is as common on dinner tables as ketchup, Rubio says he plans to eventually push eastward.

Winston says that while there are different foods that people appreciate more or less in different regions, he doesn’t see any reason why Baja-style Mexican cuisine couldn’t gain favor in the Midwest and East.

“Regional cuisines do move across regions,” he said. “Sometimes it just takes time for a market to embrace it.”

At present, the greatest potential for growth is within the state. But Las Vegas, Denver and Salt Lake City will likely see more restaurants soon, Rubio says.

“Does it matter if we stay in the West?” he said, echoing this reporter’s question. “I think Rubio’s should be successful from coast to coast.”

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Rubio’s Restaurants Inc.

Headquarters: Carlsbad.

Founder and chairman: Ralph Rubio.

President and CEO: Daniel Pittard.

Financial results: 2007: Latest report third quarter revenue $44 million; net income up 22 percent to $732,000.

2006: $152 million in revenue; net loss of $3.5 million.

Employees: 5,000.

Stock symbol and stock exchange: RUBO on Nasdaq.

52-week high: $12.98.

52-week low: $6.03.

Recent close: $6.49 on March 19.

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Rubio’s Timeline


1983:

Ralph Rubio opens first namesake restaurant on Mission Bay Drive.


1986:

Expansion begins with opening of a second restaurant near SDSU.


1988:

Rubio’s expands to six restaurants in San Diego County.


1991:

Company expands into Orange County.


1995:

Rubio’s completes a $3.5 million private placement.


1996:

Company completes additional $4 million private placement.


1997:

Company expands into Phoenix and Las Vegas and completes another private placement of $10.1 million.


1999:

Rubio’s Restaurants Inc. is listed on Nasdaq following initial public offering on May 21.


2000:

100th restaurant opens in Pasadena on May 27.


2008:

Rubio’s celebrates 25th anniversary, with 170 restaurants in California, Arizona, Colorado, Utah and Nevada.

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