Why Rich Melman Is Really Cooking

It's noon at Scoozi's, his popular Italian eatery in Chicago, and Richard Melman is scribbling circles and jagged lines on the sheet of white butcher's paper draped across his table. Huddled with six others over the blueprint for a gourmet fast-food court at Chicago's tony Water Tower Place shopping mall, Melman is trying to illustrate his ideas for a Chinese takeout joint his colleagues want to call Need Some Dim Sum. The circles, he explains, are woks. The lines represent a cooking surface tiered so that the customers can view the chefs stir-frying their orders. Thankfully, Melman doesn't try to draw the chefs themselves. So far, his sketch looks more like a ball of string than a place to buy dinner.

Melman, 50, is no Rembrandt, but he is an artist of sorts. Chicago's preeminent restaurateur has demonstrated an ability to spin out Windy City hot spots almost at will. His concept-laden company, Lettuce Entertain You Enterprises Inc., has developed 32 restaurants with annual revenues of about $110 million. Mostly in Chicago but also in Arizona, New York, and Minnesota, their cuisines range from seafood to Italian, Greek to Spanish. Decor spans 1950s kitsch at Ed Debevic's diner to crystal and white tablecloths at the elegant Ambria. "Rich Melman is the Andrew Lloyd Webber of the restaurant industry," says food-industry consultant Ronald N. Paul of Technomic Inc. "He doesn't just produce food, he produces theater."

HANGING DRAWERS. Largely unnoticed, however, is what happens backstage at Melman's organization. It's as tightly managed as McDonald's Corp., but without the stultifying standardization. Melman has created a string of discrete restaurants that thrive on individuality. Equity stakes, employee training, rich benefits, and expanding opportunities have kept the company devoutly entrepreneurial while developing employee loyalty that is unusual in a business notorious for high turnover. The result is a company with the resources and staying power of a chain and the spirit of a corner bistro. Most of Melman's restaurants are perceived as hip. The cookie-cutter Houlihan's at your local shopping center is not.

At the center of it all is Melman. His ideas drive expansion, and he takes an active role in designing each of the restaurants. But he's also careful to let others in on the action. Each restaurant is a creation unto itself, with a team of chefs, managers, designers, and artists who concoct a "history" of the new eatery to keep the group focused. So, Tucci Benucch resembles an outdoor Italian village cafe, complete with a pair of men's drawers hanging from a line overhead, while Tucci Milan has the sophisticated look of a big-city trattoria.

Each restaurant also has its own set of partners--often longtime Lettuce employees rewarded with the opportunity of ownership. Partners share profits and enjoy an internal market for their shares in case any of them leaves or dies. Melman now has 23 partners in his restaurants, an eclectic mix of administrative and operational people, including several chefs who helped develop successful restaurants. Susan Southgate-Fox, vice-president for human resources, worked her way up from waiting tables at Bones, a chicken-and-ribs joint. Now, she owns shares in several restaurants--the first mother to make partner.

TEAMWORK. Melman trusts his workers to be partners largely because Lettuce has trained them. Nobody is promoted unless he or she has prepared a replacement, and many people started at the bottom and rose through management. Luis Garcia started at Tucci Benucch in 1987 as a dishwasher who spoke no English. Lettuce adjusted his work schedule so he could take English classes and promoted him through a series of jobs. Now, he's a manager at Tucci. Says Garcia: "If you want to become someone, Lettuce opens the door for you."

For Melman, treating employees well is simply good business. "If people are happy and able to make a decent living, you can have teamwork," he says. "That falls apart when individuals are unhappy." Perhaps that credo emanates from Melman's disgruntlement with his first boss: his father. Morrie Melman ran a popular deli-style restaurant in the Chicago suburb of Skokie. As a teenager, Rich helped out on weekends and after school. He attended and dropped out of three colleges, before joining his father full-time. But a few years later, when dad wouldn't make him a partner, Melman struck out on his own.

He got his big break when he teamed up with local real estate agent Jerry Orzoff to open R.J. Grunts in 1971. Grunts, a burger-and-chili place, remains Melman's favorite restaurant, in part because he met his wife there. Orzoff, who became Melman's mentor, died of a heart attack in 1981--but not before the pair started several restaurants with such names as Fritz That's It and Lawrence of Oregano. In 1976, they bought Chicago's famous Pump Room restaurant, much to the chagrin of Chicagoans who thought it would fall victim to another Melman theme. It didn't. Melman hired a renowned European chef to improve the menu, while keeping the Pump Room's classic ambience intact. Since then, his restaurants have run the gamut from elegant to goofy.

TOUCHY-FEELY. Melman has had his stumbles. He outright failed when Playboy Enterprises Inc. hired him in 1986 to turn around the ailing Playboy Clubs, which have since folded. Ditto for an attempt to revive a bar and restaurant owned by former Chicago Bears quarterback Jim McMahon. There's also some question as to how well his ideas travel. By 1991, he had pushed Ed Debevic's into six U.S. cities, including New York, and sold the restaurants as a package to a group of investors. Burdened by too much debt and sagging interest in the restaurants' '50s decor, the minichain has filed for bankruptcy.

Melman's success seems to come from sticking to his basic formula: defining an idea and assembling a team to implement it. And as Lettuce has grown, he has done his best to avoid the big-company syndrome. He doesn't like offices and regularly conducts business in the restaurants. Around Chicago, where his fame inspired a short-lived tv sitcom called Jack and Mike, Melman is known for his accessibility. A high school baseball standout, he's in love with softball. He both coaches and plays on the Lettuce softball team, which won the 1992 national 16-inch softball championship.

Melman's populist management philosophy often extends to the touchy-

feely. He firmly believes, for instance, that psychological counseling helps him manage better. He has been seeing a psychotherapist every few months for more than 25 years, and, he says, "most of our key executives have been in therapy." Indeed, any of the more than 4,000 Lettuce employees are entitled to two free therapy sessions if they get divorced, and there's a fund employees can apply to for more extensive counseling in the event insurance doesn't cover their needs. "He's experimenting. He runs the corporation with the same creativity he puts in his restaurants," notes Michael Weinstein, president of New York's Ark Restaurants Corp. Now, if he can only learn to draw.

      NOVEL CONCEPT  `You don't just open an Italian restaurant, you open one with a 
      bakery attached to it or with a portion of the menu devoted to vegetarian 
      DETAILS  Executing down to the smallest details--even minutiae such as lighting 
      and aromas--makes a concept come to life
      PEOPLE  Training programs, operations manuals, and thoroughly thought-out 
      recipes translate into employees who do the right thing
      DATA: BW