Bob Evans Farms, Inc. - Company Profile, Information, Business Description, History, Background Information on Bob Evans Farms, Inc.

3776 South High Street
Columbus, Ohio 43207-4000

Company Perspectives:

Bob Evans specializes in bringing farm-fresh foods to our customers through our restaurants and retail food products. The philosophy behind both segments of our business is the same one we've had since the very beginning: quality food and great service at a fair price.

History of Bob Evans Farms, Inc.

Bob Evans Farms, Inc. owns and operates more than 520 full-service, family restaurants in 22 states, mainly in the east north central, mid-Atlantic, and southern regions of the United States. Most of these operate under the Bob Evans Restaurant banner, but there are a handful of Bob Evans Restaurant and General Store outlets, which are combined restaurants and gift shops, as well as nine Owens Restaurants located in Texas. About 83 percent of the company's revenues are generated by its restaurant operations. The remaining sales come from Bob Evans's food products operations, which include seven production facilities in Hillsdale, Michigan; Galva, Illinois; Bidwell, Springfield, and Xenia, Ohio; and Richardson and Sulfur Springs, Texas. These operations also are supported by a distribution center in Springfield, Ohio. The company produces and distributes fresh, smoked, and fully cooked pork sausage and ham products under the Bob Evans, Owens Country Sausage, and Country Creek Farm brands, as well as a variety of other complementary food items sold in the refrigerated and frozen sections of grocery stores. The company's food products are distributed through more than 15,000 grocery stores in 30 states.

Early Years

Bob Evans Farms got its start when founder Bob Evans began preparing farm fresh sausages for the 12-seat, 24-hour restaurant--the Bob Evans Steak House--he opened in 1946 in Gallipolis, Ohio. Although the restaurant was a success, the difficulty Evans experienced in obtaining high-quality sausage prompted him in 1948 to start making his own from hogs raised on the farm. Favorable reports from his customers, many of whom were truck drivers who bought ten-pound tubs of the sausage to take home to their families and friends, prompted Evans to take some time away from his restaurant and concentrate on building a business to distribute the sausage products. He delivered the product himself and operated his sausage business only during the cool months of the year when storage was possible. Eventually distribution was expanded to grocery stores and, as the popularity of his sausage grew, Evans invited grocery store managers to come to the family farm, known as the Homestead, in Rio Grande, Ohio (Gallia County), to witness the sausage-making process.

The Homestead, where Evans and his wife Jewell raised their six children, was once an inn and stagecoach stop and is now on the National Register of Historic Places. Visitors may hike or ride horses on the farm's 1,100 acres of rolling hills or visit the farm's museum and authentic log cabin village. Craft fairs and other special events are held at the farm on many weekends during the tourist season, which runs from Memorial Day weekend through Labor Day weekend.

In 1953 a group of friends and family recognized the growing demand for Bob Evans Farms Sausage and became business partners. When a packing plant in Xenia, Ohio, came up for sale, the partners, led by founding Chairperson Emerson E. Evans, bought it and went into the sausage business on a larger scale. Sausage distribution was expanded into southwestern Ohio. The Xenia plant not only allowed for increased production of Bob Evans Farms Sausage but also gave many of the company's current top management their start in the business.

By 1957, the year that the company was incorporated as Bob Evans Farms Sales, Inc., 14 delivery trucks delivered fresh Bob Evans Farms Sausage overnight to central and southern Ohio outlets. By 1963, when the company changed its name to Bob Evans Farms, Inc., the sales territory covered most of Ohio. That same year, the firm went public, offering 160,000 shares of stock on the NASDAQ exchange at $9 per share. The first move out of Ohio was into Michigan in 1964. In conjunction with that year's introduction of sausage into Detroit, the company opened a third sausage plant in nearby Hillsdale, Michigan. The company also expanded west, beginning sausage distribution in Indiana in 1966 and in Illinois in 1968, and in 1974 Galva, Illinois--a concentrated hog producing area--became the site of Bob Evans Farms' fourth sausage production plant. The corporate headquarters were shifted from Gallipolis to 3776 South High Street, Columbus, Ohio, in 1968. There was also expansion of sausage distribution to the east, to West Virginia in 1969, to Pennsylvania in 1971, and to New Jersey in 1973. Bob Evans's cousin, Daniel E. Evans, became company chairman and CEO in 1971; Bob Evans continued serving as president.

First Bob Evans Restaurant: 1968

As the reputation of Bob Evans Farms Sausage grew, and more people began coming to his farm, Evans built another restaurant at the family farm in Rio Grande in 1962. The success of the Sausage Shop encouraged the company to open the first of what would become the Bob Evans restaurant chain in 1968. A further incentive to opening a restaurant was to maintain consistent returns for shareholders amid the ups and downs of the sausage business. Located in Chillicothe, Ohio, the pilot restaurant featured a design reminiscent of the farm, including a red exterior with white trim, which would eventually serve as the model colors for the entire Bob Evans chain. The restaurant's first menu, however, was not quite as successful as the building design. The Chillicothe restaurant was initially intended as a fast-food outlet featuring sausage sandwiches, hamburgers, french fries, and milk shakes. When business started to decline, a team of employees, including top management, closed the restaurant for one weekend, redesigned the interior as a sit-down, full-service facility, hired waitresses, put in a new menu, and reopened with great success.

Bob Evans Restaurants were initially known for their hearty breakfasts, available at the restaurants at all hours of the day. The company's reputation for high-quality breakfasts, however, began to overshadow the lunch and dinner hours, and some restaurants were so slow after 2 p.m. that they had trouble keeping staff. In response to this problem, management sought to develop and refine its menu to meet changing consumer tastes and lifestyles. To build the dinner business, platters of charbroiled ribs, chicken, and catfish were added, nightly dinner specials were offered, and advertising targeted both adults and families with children. Moreover, a greater variety was eventually introduced into the Bob Evans dinner menu, including such dishes as veal parmigiana, spaghetti with meat sauce, and the Mexican-inspired Skillet Breakfasts and taco salad. Bob Evans was also active in promoting healthier menus by introducing a new summer menu with lighter, health-oriented foods such as grilled chicken salad, egg substitutes, and a new skillet breakfast line.

The Bob Evans Restaurant chain was built gradually over the years, financed completely through the company's own earnings and without any franchising or independent operators in order to ensure chainwide consistency. After expanding to Columbus in 1969, the company opened its first restaurant outside of Ohio in Florence, Kentucky, in June 1974. During the remaining years of the 1970s, the chain expanded to Indiana, West Virginia, Michigan, and Pennsylvania. It then moved into Illinois (1980), Tennessee (1984), Florida (1985), Missouri (1986), Maryland (1988), and Virginia (1989). The 100th restaurant opened in Schaumburg, Illinois, in November 1983, while the 200th began operations in Port Charlotte, Florida, in February 1988.

In the meantime, Bob Evans Farms reached an agreement in September 1980 to be acquired by nationwide food conglomerate Beatrice Foods Inc. The deal fell apart, however, three months later. At the end of 1986, Bob Evans retired as president of the company, which continued to be run by his cousin Dan. By the fiscal year ending in April 1988, the company was reporting net profits of $29 million on revenues of $395 million.

Establishment of Foodservice Division: 1991

In June 1991 the company established Bob Evans foodservice division, which sold food products directly to distributors and institutions. Items such as gravies, burritos, sausage and biscuit sandwiches, soups, ham, and specialty sausages were sold to convenience stores, restaurants, and noncommercial foodservice segments. In 1993, the food products segment made up 30 percent of sales for Bob Evans Farms. Bob Evans had established a position of market leadership in sausage products and a major competitive advantage based on the direct-store delivery system. The company distributed many types of sausage produced at its manufacturing plants, and its products gained a reputation for premium quality based on whole-hog ingredients, proprietary recipes, and unparalleled freshness. With a fleet of trucks making deliveries to more than 14,000 grocery stores each week, Bob Evans had a unique ability to place refrigerated products on grocery store shelves within 24 hours of making the products, circumventing the distributors and chain warehouses.

In order to maintain its market share and market success, the food products segment introduced many new items. For customers looking for products lower in fat, Country Lite Sausage was test-marketed in Chicago, St. Louis, Buffalo, Houston, and Dallas in the early 1990s, and was soon available in much of the company's marketing territory. Plans were also underway to enter the gourmet food market as several new items were in development and were slated for testing in the mid-1990s.

Several other new products included bratwurst, Italian dinner links, and smoked sausage. Moreover, Bob Evans Harvest Salads were targeted to consumers looking for a high-quality prepared item. The Harvest Salad line included tuna salad, macaroni salad, Italian pasta salad, and others. This salad line complemented the sausage business, because sausage volumes were highest in the fall, whereas the salad business was at its best in the spring and summer.

Late 1980s-Early 1990s Acquisitions

The Bob Evans Farms food products division grew not only through new products but also through acquisitions. Owens Country Sausage, Inc., based in Richardson, Texas, was purchased by Bob Evans Farms on January 16, 1987, in a stock transaction worth nearly $16 million. Bob Evans Farms acquired all Owens's outstanding common stock in exchange for shares of Bob Evans Farms stock. Until the Bob Evans Farms acquisition, Owens was a privately held company.

Owens Country Sausage was founded in 1928 by Clifford Boyce Owens and was chaired by his son, Jerry Owens, in the early 1990s. Selling a variety of food products in the Southwest, Owens offered a new market for Bob Evans Farms and provided the company with a wealth of opportunities for restaurant expansion. The first Owens Family Restaurant, opened in Irving, Texas, in March 1988, retained the Owens name, but resembled the Bob Evans design and menu concept. By 1993 there were 13 Owens Family Restaurants in the Dallas/Fort Worth area.

Bob Evans Farms acquired Mrs. Giles Country Kitchens--a food production company operating in Lynchburg, Virginia--on September 13, 1991, from an affiliate of the Campbell Soup Company, for $2.9 million. Mrs. Giles, founded by Zena Giles in 1933, produced refrigerated deli salads and distributed most of its products in bulk, unbranded, to delicatessens around the United States. In May 1992, Bob Evans Farms upgraded several of the Mrs. Giles recipes and marketed them under the Bob Evans brand in Columbus and Cincinnati, Ohio.

Another acquisition occurred in March 1992, when Bob Evans Farms bought Hickory Specialties, Inc. for $3 million. Hickory specialized in charcoal products, grills, liquid smoke seasonings, and application systems. The company had two major divisions, Nature-Glo Charcoal and Zesti Smoke Flavor. Nature-Glo produced several lines of grills (under the Champion brand) as well as charcoal, hickory, and mesquite wood smoking chips. The charcoal and smoking chips were sold under the Mr. Quick, Old Hickory, and Mountain Hardwood names. The company also manufactured the Jack Daniel's line of charcoal and smoking chips. The company patented technology to produce a new line of gas grill briquets that provided a hickory or mesquite flavor. The Zesti Smoke Flavor division produced liquid smoke flavorings to the meatpacking and the processed food industries. Major customers included Nabisco, Kraft, Carnation, and Heinz. The commercial flavor products were used in the manufacture of such items as potato chips, pet foods, nuts, pharmaceuticals, smoked hams, and barbecue sauces.

Bob Evans continued its growth in foodservice sales as it increased its product line and marketed its products to more schools, hotels, convenience stores, and other foodservice customers. The food production operation expanded as well, opening another production facility in Springfield, Ohio, in August 1992, and the Bob Evans Restaurant chain moved into New York and South Carolina in 1990, Iowa in 1992, and New Jersey and Delaware in 1993.

New Restaurant Concepts and Strategies for Improvement in the Early 1990s

In the early 1990s, Bob Evans Farms management realized that in order to enhance future growth while retaining the commitment to quality, the company had to diversify. Although it developed a strong network of restaurant and sausage operations through a coordinated marketing and expansion strategy, the company needed to minimize dependence on the breakfast business and sausage products. The sausage business remained subject to volatile hog costs and, because of health concerns, continual declines in U.S. pork consumption. For this reason the company increasingly emphasized new developments in its restaurant business. Consequently, the restaurant segment generated approximately 70 percent of total revenues in 1993, up from approximately 52 percent in 1982.

In April 1992, Bob Evans opened its first Cantina del Rio, a Mexican-style restaurant and bar, in Columbus, Ohio. Bob Evans's entry into the Mexican food market was well planned. The Mexican food business was the fastest growing segment in the restaurant industry in 1991 at 18.3 percent. In order to create a quality restaurant and menu, Bob Evans chose Phillip Torres, the owner of the successful Guadalajaran Mexican Grille and Bar (located in Houston, Texas) to head the operations. Management was pleased with the initial results and anticipated further success because of the restaurant's atmosphere and recipes. Six more Cantina del Rios were scheduled to open in the Midwest in 1994.

Further expansion of the restaurant business included the development of Bob Evans General Store and Restaurants. Designed to recall the country stores of the mid-1800s, the stores were constructed of red oak and wooden pegs and featured ceiling-high shelves displaying country crafts and homemade goods. The adjacent restaurants featured gift shops that sold pottery and other craft goods, a restaurant with a new country-style menu, and an in-house bakery. The first General Store and Restaurant opened in April 1991 near Kings Island Amusement Park in Mason, Ohio, and over the next three years seven more went into operation. Intended for high-traffic sites near tourist attractions, resorts, and junctions of interstate highways, the Restaurants and General Stores were in direct competition with Cracker Barrel Old Country Stores, another restaurant and gift shop chain whose territory Bob Evans attempted to penetrate.

Another development in the restaurant segment was the launching of the Bob Evans "small town" restaurants. "Small town" outlets were smaller versions of the traditional Bob Evans family restaurants, featuring 90 percent of the chain's traditional menu and targeting locals in cities of fewer than 50,000 residents, many of whom used to travel up to 50 miles to enjoy a Bob Evans meal. The first unit was opened in Bellefontaine, Ohio, in the spring of 1993. It was hoped that this 3,200-square-foot, 96-seat version of the traditional restaurant would provide a boost to the company as it was less expensive to build and operate than traditional Bob Evans Restaurants and that it would allow the company to expand to smaller towns where building a traditional restaurant would not have been feasible. Several dozen of these smaller restaurants were subsequently opened, but these were all later converted to full-size Bob Evans Restaurants.

Even though the new restaurant concepts were certainly in the spotlight during the early 1990s, Bob Evans realized that the traditional Bob Evans and Owens Family Restaurants were the strength of the company. These restaurants generated average unit sales of $1.6 million annually, and all were company owned, with no plans to franchise. Bob Evans owned the buildings and equipment at every location and owned the land for nearly all sites. For these reasons the company focused on several strategies to improve these restaurants.

First, as part of its long-term strategy, Bob Evans was involved in a continual remodeling, renovating, and redesigning plan. All existing units, on a three-year basis, were given new coats of paint and were furnished with new carpeting and drapes. About every eight years the company purchased new furniture as well as new kitchen equipment. Renovation or remodeling costs per unit ran approximately $50,000 to $75,000.

Beginning March 4, 1991, a new Bob Evans prototype restaurant was unveiled, from a design featured in an Indianapolis restaurant. The new design was larger, consisting of 5,500 square feet, compared with 5,000 square feet in the original building. The dining room had more than half of the 150 seats designed for nonsmoking customers, a large foyer was added, and the restrooms were moved to the front of the building for the customers' convenience. While the new prototype featured an interior decorated in oak wood and light country colors, the Bob Evans style of food and logo remained the same.

Another pivotal change at Bob Evans was the enhancement of the restaurant manager position. As a result of the 1990 management restructuring, managers received higher compensation, stock options, and better training. Unit managers were given greater autonomy and increased accountability for the performance of their individual units. Managers were encouraged to localize their operations--from menu items to service strategies and in-store decorative accents--reflecting the taste of the community served, and were asked to send new product ideas and management approaches on to headquarters.

These company innovations resulted in a sharp decline in management turnover and an improvement in customer satisfaction. Bob Evans continually strove to enhance its benefit packages, providing medical coverage and paid holidays and vacations. Consequently, hourly employee turnover in 1993 was about half of the 300 percent industry average. In return, the company expected a commitment from its employees. Each new management employee underwent comprehensive training, including a 14-week program for new Bob Evans Restaurant managers, which helped to ensure that Bob Evans's standards of quality were upheld.

Another strategy aimed at enhancing the profitability of the restaurant segment and heightening customer satisfaction was the development of a point-of-sale (POS) computer system, which increased accuracy and efficiency in the restaurants. This highly specialized computer program handled customer orders and inventory, tracked sales trends, monitored buying patterns by region and unit, and kept a tally of store costs.

Refocusing on Core Restaurant Operation: Late 1990s and Beyond

In January 1994 Stewart K. Owens, grandson of the founder of Owens Country Sausage, was named chief operating officer and executive vice-president of Bob Evans Farms, having previously served as group vice-president of food products and president of Owens Sausage. In August 1995 he was named Bob Evans Farms' president and chief operating officer. Bob Evans Farms continued to expand on all fronts during this period. In February 1994 the company's 300th restaurant opened in Kent, Ohio. The food product line grew with the additions of maple sausage links and frozen biscuits and rolls in 1995, and bacon, ham steaks, and frozen entrees the following year. Distribution of Bob Evans Farms Sausage in Wisconsin began in early 1995.

Fierce competition in the restaurant sector hit the company's dining operations hard in the mid- to late 1990s. Same-store stores (sales at stores open more than one year) declined for much of 1995 and 1996, leading to depressed earnings of $29.2 million and $36.1 million for fiscal years 1996 and 1997, respectively. Seeking to turn around the core family-style restaurants, the company in 1996 closed down its 14-unit Cantina del Rio chain, which never quite met expectations. Late that same year, Bob Evans Farms reached an agreement to sell off Mrs. Giles Country Kitchens to an investment banking company, but the deal soon fell apart. In September 1996 the menu at Bob Evans Restaurants was revamped to replace some pasta dishes and contemporary American cuisine with more traditional and heartier items such as chicken pot pie, charbroiled catfish, and pork chops. The company also worked hard to improve service and cleanliness at the restaurants and to slow down turnover in staff. Backing this effort was an advertising campaign with a "We're family" theme. In the fall of 1997 Bob Evans began adding Carry Home Kitchens and Corner Cupboards to some of its restaurants; the former offered carryout customers home-meal replacement menu options, and the latter were small areas featuring a variety of gifts and novelties for sale. Early results from these changes were encouraging as same-store sales for the fiscal year ending in April 1998 were up 4.6 percent. Profits that year increased to $45.7 million on revenues of $886.8 million. Meantime, an accelerated pace of new restaurant openings--though slowed down in 1997--meant that the company's 400th restaurant, located in Columbia, Missouri, opened in August 1997, less than three and a half years after the 300th. The first restaurants in North Carolina and Massachusetts debuted in 1997, and Kansas got its first Bob Evans Restaurant in 1998.

To heighten its focus on its core restaurants, Bob Evans Farms divested two more peripheral businesses in April 1999: Mrs. Giles and the charcoal manufacturing business of Hickory Specialties (the liquid smoke portion of the latter company was retained), which sold for a combined $29.2 million; the two businesses generated less than $50 million in annual revenues. The restaurants now accounted for nearly 80 percent of total revenues for Bob Evans Farms, compared with the 75 percent figure that had prevailed for some time. During 2000, the company opened another two dozen restaurants and spent about $85 million as part of a remodeling effort that aimed to revamp about 60 percent of the existing restaurants. At the end of that year, Dan Evans, who was suffering from a heart ailment, retired from the CEO position, remaining chairman, with Stewart Owens replacing him and becoming the first non-Evans family member to hold that office.

Owens's tenure got off to a somewhat rocky start when he had to organize opposition to three shareholder resolutions that were voted on, and ultimately defeated, at the September 2000 annual meeting. Bob Evans Farms shareholders were an increasingly disgruntled lot. At the time of the annual meeting, the stock traded for about $17 per share, only a little better than what it sold for in 1987, and $6 less than the peak that was hit in early 1994. One of the defeated proposals, which called on the company to sell itself to the highest bidder, was initiated by Deborrah Donskov, daughter of founder Bob Evans. Evans supported his daughter's proposal and also offered to return to his previous role as advertising spokesperson for the company, a proposal quickly spurned by Bob Evans Farms. There was much discussion in the press about a reported rift between Bob and Dan Evans that had developed over the years. The cousins apparently did not always agree on the way the company should be run.

Dan Evans retired as chairman in April 2001, having served 30 years in that position. He remained on the board of directors, however, while Owens added the chairmanship to his duties. That same month the company opened a restaurant in its 22nd state, Mississippi. For the fiscal year ending that month, Bob Evans Farms reported that its revenues surpassed the $1 billion mark for the first time.

Although the company maintained a much slower growth rate over the next two years, profits jumped from $50.8 million to $75.1 million in 2003, while net profit margins increased from 5 percent to 6.9 percent. Bob Evans Farms opened 27 restaurants in 2002 and 29 the following year. In October 2002 the company's 500th restaurant opened in Canton, Michigan. Also during 2003, a new restaurant prototype was tested in Zanesville, Ohio, that cost about $150,000 less to build than the previous version because of a smaller footprint, fewer decorative elements, and a smaller porch. The new design also sported a separate entrance for carryout orders, a design element that was increasingly common among casual-dining restaurants.

On the food products side, the firm successfully rolled out a new refrigerated potato product line, which included home fries, hash browns, and regular and garlic-flavored mashed potatoes. In May 2002 a new line of frozen, microwavable products called Brunch Bowls debuted. This line included such selections as country gravy and sausage with potatoes, and grilled chicken and potatoes. The Bob Evans Express line was introduced into grocery stores in February 2003. This product line featured three varieties (original, maple, and lite) of fully-cooked, microwavable sausage links. Another significant development on the food products side was the September 2002 opening of a $6 million, 55,000-square-foot distribution center in Springfield, Ohio--the company's first such facility. Also during 2002 Hickory Specialties, the smoke flavorings subsidiary, was sold to Kerry Group plc, an Irish food product manufacturer, for $16.3 million.

In June 2003 the company purchased a 56,000-square-foot food production plant in Sulphur Springs, Texas. In November of that year the company reopened the plant, where it began producing its SnackWiches line of convenience sandwich items for the retail, foodservice, and convenience store markets. Also during the fall of 2003, the Bob Evans Restaurant chain rolled out its Dinner Sensations line of entrees in an effort to boost dinner business. The line included four protein-rich choices: T-bone steak, grilled chicken, pork chops, and salmon fillet. Another effort to increase dinner business came via the testing of a curbside carryout service in which customers parked in designated spaces where they could pick up and pay for their orders from their cars. Such efforts made it clear that Bob Evans Farms was determined to remain one of the key players in the U.S. family-dining sector, while keeping its commitment to quality and "down on the farm" hospitality.

Principal Subsidiaries: Owens Country Sausage, Inc.; Owens Foods, Inc.; Owens Country Foods, Inc.; BEF Aviation Co., Inc.; Bob Evans Restaurants, Inc.; Bob Evans Restaurants of Michigan, Inc.; Bob Evans Restaurants of Indiana, L.P.; Bob Evans Transportation Company, LLC.

Principal Competitors: CBRL Group, Inc.; Shoney's, Inc.; Applebee's International, Inc.; Denny's Corporation; Brinker International, Inc.; Waffle House, Inc.; IHOP Corporation; The Restaurant Company; American Hospitality Concepts, Inc.


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