Retailers Still See Value in Mixed-Use Settings →

The factors that have long enticed Texas retailers and restaurants to locate in mixed-use environments are back in full force, such that these users are once again willing to pay a premium for spaces built-in density and walkability. In some ways, this trend never really disappeared in Texas, one of the fi rst states to reopen during the early months of COVID-19. Through measures passed in 2020 like sanctioning to-go alcohol sales and allowing businesses to stay open, albeit at reduced capacities, Texas has worked to minimize retail and restaurant closures and prevent large volumes of these spaces from being returned to markets. Neither has the state’s job and population growth slowed during the 22-month global health crisis, allowing developers across all asset classes to push forward. In addition, the newfound desire from consumers and businesses to work, shop and dine outdoors as much as possible has kept trains rolling on mixed-use projects, which inherently connect different uses through external features like trails, open streets, pocket parks and plazas. From a design standpoint, those connective features remain critically important, says Barry Hand, principal at the Dallas office of global architecture firm Gensler. “Pocket or linear parks are viewed positively by stakeholders and developers as a way to spread the open space horizontally,” he says. “They can also work as arteries that link pedestrians back to the commercial cores. Small event lawns and water features surrounded by outdoor dining are urban attractors that are effective at containing energy, event programming and holding consumers longer.” Collectively, these factors have laid the groundwork for demand for brickand-mortar retail and restaurant spaces in mixed-use developments to flourish. But if the last two years have proven anything, it’s that market conditions can change in a flash. “The recovery in late 2020 and throughout 2021 has far surpassed industry expectations,” says Terry Montesi, CEO of Fort Worth-based Trademark Property Co. “Retailers are expanding and sales are strong — we just don’t know yet how sustainable it is. Some of the strong leasing activity is due to pent-up demand, and some could be overreaction from retailers and restaurants needing to make up ground from 2020.” Montesi does believe that certain pandemic-related trends within the space are here to stay. These include consumers’ desire for incorporating the outdoors into the shopping, dining and entertainment ventures as much as possible, as well as further solidification of the symbiotic relationship between e-commerce and physical stores. The former trend especially bodes well for mixed-use settings. “More public spaces and outdoor seating for food and beverage (F&B) will be the norm,” he says. “People want to be in walkable environments, and most walkable developments have multiple uses. At the same time, it’s becoming obvious which retail properties are emerging as winners and survivors, and those are the ones that are anchored by true omnichannel retailers in locations that facilitate omnichannel distribution.” To that end, Trademark, the developer of mixed-use projects like Victory Park in Uptown Dallas and Market Street in The Woodlands, is adjusting its brickand-mortar philosophy a bit. Banking on the ideas that pent-up demand will fizzle out and that less ground-up, pureplay retail development will be needed in the future, Trademark is getting into the multifamily development game. Tenant Mix Evolves Yet other developers still view retail, restaurant and entertainment uses as the connective tissues that link other components of mixed-use projects, including office, multifamily and hotels. Mixed-use developments cater to people who are exclusively residents, office workers or hotel guests, but it’s within the shopping, dining and socializing arenas that these three groups are most likely to come together and interact. “Retail is still the means by which we add character and uniqueness to a project,” says Lacee Jacobs, vice president of leasing and advisory services at Houston-based Midway. “It plays a big part in the type of office and multifamily tenants we can attract, in terms of price point and lifestyle.” Midway’s latest major mixed-use project is East River, a 150-acre development in Houston’s Historic Fifth Ward, and the company recently announced new tenants for Phase I of East River. Broham Fine Soul Food & Groceries, a concept by James Beard Award-winning chef Jonny Rodes, has leased 4,000 square feet; the owners of The Astorian will debut a new 20,000-square-foot private event space and rooftop bar; Austin-based Lick Honest Ice Creams has committed to 1,124 square feet; and URBN Dental has inked a deal for 2,612 square feet. “There are a few different categories of retail in mixed-use that you really need to have to be successful,” says Jacobs. “There’s the obvious daily-use retail, including class-based fitness or medical services, which isn’t as glamorous but is important because multifamily residents and office tenants expect those kinds of tenants.” “Within the F&B space, there are a couple boxes you want to hit, including the quick-service and fast-casual lunch, the bar- and nightlife-oriented concepts and the impulse purchases like coffee or ice cream,” she continues. “All of those categories have to be represented and come together, because if you’re going to have residents and office workers onsite, they need all of those things.” Jacobs also says that when it comes to attracting visitors who have no ties to the residential, office or hospitality components of the property, the full-service restaurant and entertainment segments of the retail market are the key drivers. “The key to F&B success in a mixed-use project lies in the ability to draw certain groups: lunch traffic, dinner traffic and weekend dinner and brunch consumers,” concurs David Littwitz, head of Houston-based restaurant brokerage firm Littwitz Restaurant Real Estate. “You want to try to lease F&B spaces to tenants that are not multiple-location concepts in your marketplace, essentially giving customers a reason to come to your mixed-use project because you have F&B concepts no one else has.” Littwitz also says that in terms of rent for these spaces, tenants’ negotiating power is limited, especially when landlords know they have an ideal space and location for the concept. “Our big problem today is that [rents for] triple-net leases in mixeduse projects tend to be higher than alternative locations, and you really can’t negotiate changes to triple-net rates,” Littwitz explains. “But if a landlord wants an F&B concept badly enough because it would give them the only location for that concept, the idea of a tenant paying a premium rent sometimes disappears quickly,” he continues. “On the other hand, if the landlord knows that they have the right location for a certain F&B tenant — and the tenant knows it too — then a rent premium is in play as part of an overall occupancy cost discussion.” The use of full-service restaurants lies at the center of the retail-within-mixeduse strategy of Centurion American Development Group. The Dallas-based firm is perhaps best known for its ongoing effort to redevelop Collin Creek Mall, a regional mall in Plano, into a mixed-use destination with a heavy residential component. Centurion American owns several full-service restaurant brands that can be found in its communities throughout the metroplex. These include Primo’s, a Tex-Mex concept with a 30-year operating history, and Sfereco, a classic Italian restaurant that serves lunch and dinner. The company also recently launched a steakhouse concept. “At our properties, aside from our restaurants, we’re predominantly focused on city-service tenants like hair and nail salons,” explains company vice president Sean Terry. “While these tenants don’t generate substantial income, they engender loyalty and engagement with our guests. They bring people out to our communities who are then much more likely to stay and eat at our restaurants.” At Bright Realty’s flagship mixeduse development, the 324-acre Realm at Castle Hills in the northern Dallas suburb of Lewisville, the retail tenant mix is designed to promote convenience for the multifamily residents and office users. “The types of retailers and restaurants we target haven’t changed much due to COVID,” says Lucas Patterson, executive vice president at Bright Realty. “We try to position our merchandise to reflect a certain type of lifestyle, which also overlaps with the kind of tenant we want in our multifamily and office buildings. For soft goods, that means athleisure, outdoor goods and sporting goods, alongside service tenants like hair salons and dry cleaners.” To that end, Salon Bellus, a hair salon for women, has committed to a 1,804-square-foot store at The Realm at Castle Hills, as has Coolheads Salon for Men. The latter’s footprint is 1,350 square feet. Both users hope to open their stores during the first quarter. In terms of restaurants, the goal is to provide F&B offerings at a price point that multifamily and office users can afford on a daily or weekly basis, as opposed to just a few times per year, Patterson says. The London Baker opened a 1,983-square-foot store in August, while two other F&B users — Salubrious Juice & More and Mochinut Donuts — have respectively signed deals for 1,390 and 1,033 square feet, respectively. Lastly, Tex-Mex restaurant El Patio opened a 1,237-square-foot rooftop patio this summer where guests can enjoy food and drinks, as well as live music. Worth the Pour, a liquor store that provides wine tastings and delivers throughout the property, opened in September 2021. Both of these concepts and openings reflect Bright Realty’s effort to elevate convenience and daily usability of its F&B offerings for its office workers and multifamily residents. New Modes of Transit Terry says that at some Centurion American properties, particularly those on the outer suburban rings of the metroplex, restaurants now offer charging stations for golf carts — the primary way in which residents travel about the property. While it’s not quite the same as walking, the use of such a vehicle undoubtedly captures the spirit of walkability and pedestrian friendliness that is pivotal to so many mixed-use communities. “We’re now designing our streets to have that flexibility of travel that golf carts allow,” Terry says. “It’s part of creating the sense that these communities are like one big family.” “Flexibility remains a key characteristic in successful mixed-use environments,” concurs Hand of Gensler. “Curbless streets that can be blocked off for pedestrian festival settings allow for streets to be utilized for specific or seasonal events. It’s also important to have zoning that allows for on-street parking that can flex from head-in parking to parallel parking to valet or pickup zones or pop-up outdoor dining/retail zones over time.” While walking, biking and riding on golf carts all are part of the easygoing, connected experience that mixed-use destinations strive to craft, those modes of transit do not negate the need for dedicated, makeshift and overflow parking spaces. This holds particularly true for mixed-use properties that are heavy on full-service restaurant and entertainment uses, as these tenants tend to attract more visitors from outside the development. “It’s always a fine line between how we monitor surface parking that’s readily accessible for retailers and restaurants,” says Patterson. “We don’t want to overly enforce parking, but rather make it easy for people to go back and forth between various uses.” Like most other mixed-use developers and operators, Bright Realty is also working to figure out the most economical ways to create patio space and dedicated parking for curbside pickup and third-party delivery operations for these tenants. Patterson says that understanding parking requirements for each specific use gets easier as lease-up progresses and traffic patterns become more clear. Use of valet services, creation of short-term parking spaces and the ability to seamlessly convert common space to overflow parking are all key solutions to managing this critical development consideration. Centurion American is building 2,400 underground parking spaces as part of its redevelopment of Collin Creek Mall. These spaces will not only serve the 15,000 or so residents who the company expects to ultimately live onsite, but also the retail component, which is going to be heavily rooted in experiential concepts and users. Terry says it’s still too early to announce tenants at Collin Creek Mall, but calls are being made and received, and tenant profiles are starting to take shape. Grocery, boutique fitness and experiential electronics showrooms are among the main categories represented in this mix.

Texans' tastes changed. Luby's didn't.

Chris and Harris Pappas began amassing stock in Luby’s Inc. in October 2000 in an ambitious bid to wrest control of the iconic Texas cafeteria chain famous for its Southern comfort foods such as fried fish, broccoli rice casserole and liver and onions.

The Pappas brothers had no experience running cafeterias or leading a public company, but they were seasoned restaurateurs boasting a proven track record of success with popular Houston restaurants including Pappasito’s Cantina, Pappadeaux Seafood Kitchen and Pappas Bar-B-Q. They thought they could turn around a tired cafeteria concept and make it pay.

The Pappases took the helm of the company in 2001. A couple of years later, they moved Luby’s to Houston from San Antonio and came up with a plan to streamline operations while focusing on what endeared Luby’s to generations of Texans.

“We are confident that with this new business plan, Luby’s will be in a stronger position to focus on our core Texas markets and continue to provide our customers with delicious, home-style food, value pricing and outstanding customer service,” CEO Chris Pappas said in 2003.

Nearly two decades later, the Pappas family is letting go of the company’s reins, putting Luby’s up for sale in an economic downturn driven by the global coronavirus pandemic. Luby’s on Wednesday said it would sell its restaurant businesses and assets, including its real estate, to pay off $35 million of debt and distribute the rest of the proceeds to stockholders long disappointed by the company’s financial performance.

The future of the 73-year-old cafeteria chain, which survived recessions and a 1991 mass shooting at its Killeen location, now hangs in the balance.

“Chris and Harris looked at Luby’s and thought, ‘We’re good operators, we can turn this thing around,’” said David Littwitz, a Houston restaurant broker and consultant. “You could be the best businessperson in the world, but the cafeteria concept is unfortunately a part of Americana that’s past. There was nothing that the Pappas family could do to update that concept enough to make it work.”

Casual, affordable

Luby’s was the brainchild of Bob Luby and Charles Johnston, who opened their first cafeteria in a basement near The Alamo in 1947. Cafeterias, born shortly after Ford popularized the assembly line in the late 19th century, offered America’s growing middle class a casual but nice restaurant the whole family could enjoy at an affordable cost.

The cafeteria chain grew steadily, becoming the go-to restaurant for many Texas families after Sunday church services. But after a decade of expansion in the 1990s in which Luby’s doubled its footprint to more than 200 locations in 11 states, the company found itself floundering.

Luby’s sales began to fall as consumers shifted toward a healthier diet. The first fast-casual restaurants, such as Panera Bread and Chipotle, got their start around then and started their meteoric rise in popularity.

Under the Pappases, Luby’s closed underperforming restaurants, tinkered with the menu and redesigned some locations, even turning some cafeterias into all-you-can-eat buffets. In 2010, it bought Fuddrucker’s for $61 million and three years later acquired Cheeseburger in Paradise for $11 million in moves intended to diversify the business. It also launched a culinary services division catering to office and hospital cafeterias.

But Luby’s continued to struggle to draw diners amid changing consumer tastes and growing competition from fast casual restaurants.

On Wednesday, it reported a loss of $3.8 million for the quarter ended March 11, down from earnings of $6.6 million the same period last year. The chain reported second-quarter revenue of $68.6 million, down 7.8 percent from the $74.4 million revenue a year ago. Same store sales were up 1.7 percent during the second quarter.

Luby’s stock fell to 56 cents a share in April, during the depths of the pandemic. Its shares were trading at $1.61 per share on Friday morning, down nearly 14 percent from the day before.

The coronavirus pandemic, which forced Luby’s to close three-quarters of its restaurants for three months, compounded the company’s financial woes and highlighted its challenges.

“The average Luby’s customer is older, and they’re the ones most worried about the virus,” Littwitz said. “And the younger customers aren’t going to cafeterias. The last cafeteria they’ve been to was the one in their college dorm. It’s a double whammy.”

Limited options

Luby’s began exploring a possible sale in September, several months after facing a contentious proxy fight from an activist investor, Bandera Partners of New York, which pushed for changes in leadership and the company direction in the face of lagging sales.

Jeff Gramm, a Bandera co-founder and son of former Texas Sen. Phil Gramm, in a public letter to shareholders criticized Luby’s strategy of selling real estate to fund its ailing cafeteria business, saying it was “simply not working.” Luby’s, which owns most of its real estate, has sold dozens of restaurants over the years, selling its most valuable asset to pay down debt and keep the cafeteria business afloat.

“It is brutally painful to watch the company chisel away at its real estate portfolio to fund low-return investments into the business,” Gramm said in the Nov. 2018 letter. “Since fiscal 2008, Luby’s has sold $88 million of assets. This capital, more than double the current market capitalization, is gone and forever lost to shareholders.”

Luby’s, which on Friday had a market value of $39.4 million, said its remaining 74 properties were appraised at $211 million last year, according to its annual report filed with the Securities and Exchange Commission.

Question of survival

Gerald Bodzy, Luby’s chairman, said in an interview that the company believes it can get the biggest return for its shareholders by selling the business and assets separately, but would entertain an offer for the entire business.

The company hired Duff & Phelps Securities of New York to help sell Luby’s Cafeteria and Culinary Contract Services, and Brookwood Associates of Atlanta to help sell Fuddruckers.

“We’re in the seventh consecutive year of losses,” Bodzy said. “Shareholders are looking for a different approach than what we’ve taken the last six-plus years. We hope to find better capitalized operators to take these great brands on.”

A Luby’s spokesman did not return requests for comment from the Pappas brothers.

Littwitz said it’s unlikely the Pappases would want to take a big chunk of their net worth and double down on Luby’s as they near retirement age.

“Chris and Harris Pappas felt they could turn the Titanic around all the way until the ship started listing and they realized it was going to sink,” Littwitz said. “The iceberg for them was COVID, but the ship started leaking earlier.

Luby’s to explore 'strategic alternatives,' including possible sale

Luby's is considering several "strategic alternatives" to maximize shareholder value, which could include a possible sale of the iconic Texas cafeteria chain.

The Houston company late Tuesday said its board has formed a special committee of six independent members tasked with identifying and examining "a range of strategic alternatives available to the Company with the objective of maximizing shareholder value."

The company did not specify the strategic alternatives under consideration, but said the board has not made any decision to sell the company at this time and that there is no guarantee the special committee will recommend a sale.

"The steps we are taking represent our commitment to maximizing value to our shareholders over the long term," Luby's Chairman Gerald Bodzy, an independent member of the special committee, said in a statement.

The special committee comes less than a month after Luby's announced a new chairman and two independent members to its board, a concession it made earlier this year as it won a contentious proxy fight brought on by one of its investors who pushed for leadership changes amid lagging sales.

"This reconstituted board is under the gun to do something to prove to the public and to stockholders that they're trying to make some changes," said David Littwitz, a Houston restaurant consultant and broker. "One would have to assume a sale is one of the alternatives under consideration."

Other alternatives that Luby's special committee could consider include finding more profitable tenants for its real estate and continuing its current strategy of selling its real estate to fund operations, Littwitz said.

Luby's, known for its cafeteria-style comfort meals such as the LuAnn Platter, has struggled to draw diners in recent years amid growing competition from fast-casual restaurants and changing consumer tastes.

The company reported a $5.3 million loss on $65.6 million in revenue during the third quarter ended June 5. Sales fell 15.7 percent from the prior year while same-store sales fell by 4 percent. Guest traffic during that quarter fell 1.2 percent year over year at Luby's Cafeterias and 8.7 percent at its Fuddruckers restaurants.

Chris Pappas, Luby's longtime chief executive and the company's largest shareholder, said he supports the special committee's work and said there is no timeline for a decision. Any decision regarding a potential sale of the company will be put to a shareholder vote. Pappas and his brother Harris Pappas together own 33 percent of the company, a sizable voting bloc.

"One of the things this special committee wanted to do was let the market know that we're looking at shareholder value and if there's anything here that makes sense internally or externally," Pappas said. "At this point, there's been nothing decided."

Pappas declined to say whether Luby's had been approached in the past by prospective buyers, nor would he speculate on what kinds of buyers might be interested in the company.

"The company always had a possibility that some suitor might come here with an offer," Pappas said. "We have very good assets and good brands."

After Chicago investment firm BDT Capital announced it was acquiring a majority stake in Whataburger -- a Texas fast-food icon -- the sale triggered an outpouring of reactions on social media, including Texas-themed memes decrying the sale of the Lone Star brand to an outsider.

Pappas said he wouldn't compare Luby's and Whataburger, but said whatever is decided, Luby's will continue to retain its Texas connection.

"I think Luby's will always be an iconic Texas brand and keep its Texas roots," Pappas said. "I think brands that start here tend to have their Texas connection forever."

Luby's plans to continue its turnaround efforts as it considers strategic alternatives.

The company eliminated most of its discounts in favor of straight-forward pricing, with meals starting from $7 to $9. The chain also increased its marketing spending by $600,000, running online ads that emphasized the company's Texas roots and guests' memories of dining at the cafeteria chain over the decades.

Luby's over the past two years also closed 39 underperforming restaurants and sold its real estate to fund operations. The company earlier this year cut its general and administrative expenses by more than 10 percent and is currently selling its company-owned Fuddruckers restaurants to franchisees.

Luby's operates 125 restaurants nationally, including 79 Luby's Cafeterias, 45 Fuddruckers and one Cheeseburger in Paradise. The company also is the franchiser for 102 Fuddruckers locations across the U.S., Canada, Mexico, Columbia and Panama. The company also operates a culinary services division, which provides food to hospitals, corporate cafeterias, sports stadiums and grocery stores.

Salad-making robots are coming to Houston

Houstonians can order salads from restaurants, grocery stores and, soon, salad-making vending machines.

The Salad Station, a Louisiana-based fast-casual chain, is planning to open dozens of restaurants and place salad-making vending machines across the Houston area over the next several years. With the tap of a few buttons, its salad-making machines drop portions of pre-chopped and refrigerated ingredients into a bowl and serve it fresh to customers.

“We’re seeing a nationwide change in eating habits,” said John Mike Heroman, Salad Station’s head of franchise development. “We see growth as people are looking for healthy meal options.”

Robotics and automation are poised to transform the restaurant industry just as it has other sectors, from automotive to retail. Restaurants and tech startups nationally are experimenting with robots and vending machines that make a variety of meal and dessert options.

California-based chain CaliBurger partnered with Miso Robotics to develop Flippy, a burger-flipping robot hailed as the world’s first autonomous kitchen assistant. Spyce, a Boston restaurant, features a robotic kitchen that collects orders from self-service kiosks, stir-fries ingredients in a hot wok and drops the hot meals into a bowl. Pizza Touch is piloting pizza vending machines in Florida. At Tipsy Robot in Las Vegas, two factory-arm robots mix 120 drinks every hour.

In Houston, Reis & Irvy’s Frozen Yogurt vending machines have popped up in the Texas Medical Center and the Art Institute of Houston.

To be sure, restaurants have been tinkering with technology since the heyday of the automat and the advent of fast food chains. However, the development of foodservice robots has accelerated in recent years amid rising labor and food costs.

The rise of robots in the kitchen has raised concern over the future of restaurant workers. Food preparation and service jobs are among the most vulnerable to replacement by machines due to restaurant work’s predictable and physical nature, according to a McKinsey Global Institute study.

“These robots are all about the dollars,” said David Littwitz, a Houston restaurant broker and consultant. “If you have a robot that can make X amount of burgers and pizzas, you’re not having to pay a person wages or benefits, like health insurance.”

Heroman with Salad Station said he isn’t worried about robots taking jobs away from the chain’s more than 300 employees, who run 20 restaurants across Louisiana. The company’s 2,000-square-foot restaurants, which each employ about 15 workers, offer more than 100 salad items and toppings, a spread that would be difficult to replicate in a vending machine.

“We don’t see these robots as a threat to our existing Salad Stations and employees,” Heroman said. “There’s always going to be a need for the restaurant experience.”

Moreover, the vending machines — which are targeted for hospitals, office towers, apartment complexes and sports arenas — will complement the Salad Station restaurants. The machines would offer nurses working the overnight shift at a hospital an option for healthy food when restaurants are closed, said Joe Benson, chief executive of RoboFresh, a Houston company contracted by Salad Station to service the vending machines.

“Houston is a 24/7 city, so we wanted to bring a healthy option that’s available 24/7,” Benson said.

Staying fresh

Salad Station’s vending machines are the size of a large ATM, featuring a clear window so customers can view the ingredients inside. Customers can choose either a romaine lettuce or spinach base topped with chicken or ham, three types of dressing and 17 salad toppings ranging from cherry tomatoes to edamame beans. The ordering and salad-making process typically takes less than three minutes, Benson said.

The ingredients are held in 22 clear canisters, which will be chilled to 38 degrees and switched out for fresh ingredients twice a day. Although prices are yet to be determined, each 32-ounce salad bowl from the vending machine will cost less than $9, Benson said.

The vending machines are made by Chowbotics, a California company, and each costs north of $40,000. Salad Station plans to purchase and place 10 of the so-called Sally machines in Houston by early 2020, Benson said.

RoboFresh, the Salad Station contractor, plans to open a commercial kitchen near the Texas Medical Center to serve the vending machines. The company has five employees, and plans to hire more as the number of salad vending machines grow.

Salad Station has signed an agreement to open its first Houston-area restaurant, a franchise location in Friendwood, next year. The chain plans to open 40 stores in the Houston area, entering a competitive turf held by Houston-based Salata, a made-to-order salad chain that is undergoing a major rebrand to court customers.

Salad Station’s salad-making vending machines won’t make an appearance inside its restaurants, however. The company operates five machines in Louisiana, which have been popular, Heroman said.

Will robots and vending machines take over kitchens across Houston? Littwitz, the Houston restaurant consultant, isn’t convinced that will happen.

“It’s entirely possible, but I’m not so bullish,” Littwitz said. “People like going to restaurants because they like the idea that a human being is cooking and customizing their meal.”

Snap Kitchen shifts business online as food deliveries, prepared meal takes off

The days of calling the local pizza parlor to order dinner for home delivery may soon be over.

Consumers accustomed to shopping online are increasingly expecting the same click-and-ship convenience from grocery stores, restaurants and food retailers. New technologies, improved logistics, the advent of the gig economy and changing consumer tastes have given rise to a slew of food delivery companies such as GrubHub, Instacart and Nuro that aim to deliver groceries and restaurant meals to consumers whenever and wherever they want them.

“In the old days, the only thing delivered was pizza and Chinese food,” said David Littwitz, a Houston-based restaurant broker and consultant. “Now you can get almost anything delivered if you want to pay for it.”

The growing popularity of food deliveries is now forcing legacy retailers to change longstanding business models.

Snap Kitchen, an Austin-based retailer selling prepared meals, is the latest company to pivot to e-commerce, recently expanding its direct-to-consumer shipments to 15 markets nationally. The company can now reach 80 million people in cities such as San Antonio, Oklahoma City, New York and Washington, D.C., and plans to grow its online footprint.

What Snap Kitchen won’t be doing, at least for now, is to open new stores, Chief Executive Jon Carter said. The company has 34 locations across Texas and Philadelphia, including 10 in the Houston area, its largest market.

“Our model moving forward is to be asset light in our retail presence,” Carter said. “This is a key inflection point for our business.”

Explosive growth

Snap Kitchen began in 2010 as a brick-and-mortar retailer selling fresh and healthy grab-and-go meals catering to a variety of diets such as vegetarian, low carbohydrate, high protein and, more recently, Paleo, Keto and Whole30.

The company expanded into e-commerce, allowing customers to order online or via a smartphone app and have meals delivered on demand or through a subscription service. Customers can customize a six- to 12-meal box, ranging in price from $3.99 to $12.99 per meal, and have it delivered in one-to-two days.

“Both have seen explosive growth over the last couple of years,” Carter said. “Consumers are increasingly more comfortable with buying food digitally, and sometimes prefer it, so we’ve moved to where the consumer is.”

Indeed, the market for online food ordering and delivery is poised for robust growth.

Swiss investment bank UBS estimates the global market for food deliveries could expand more than tenfold over the next decade to $365 billion by 2030, up from $35 billion today. Consulting firm McKinsey & Co. estimates the food delivery market will grow at an annualized rate of nearly 15 percent between 2018 and 2020.

Millennial consumers and affluent families are driving the surge in food deliveries as young adults spend less time in the kitchen than did previous generations and busy families outsource household chores. In 2015, restaurant sales surpassed grocery sales for the first time, according to the National Restaurant Association.

“People don’t have the time and the cooking skills,” Phil Lampert, food industry analyst and editor of SupermarketGuru.com, said. “They’d rather just order or heat something up rather than make it from scratch.”

Crowded market

Meal kit companies such as Blue Apron and Hello Fresh introduced thousands of Americans to online food deliveries in recent years. However, prepared meals such as the ones sold by Snap Kitchen are expected to eclipse meal kits, which take more time to cook and clean up than ready-to-eat meals.

As a result, a multitude of e-commerce companies, such as Freshly, Sakara and Kettlebell Kitchen, have cropped up, shipping prepared meals direct to consumers, and grocery chains are starting to devote more shelf space to ready-to-eat meals.

H-E-B developed a product it calls Meal Simple; Albertsons, which owns Randalls, bought Plated; and Kroger acquired Home Chef, all to provide ready-to-eat meals that can be reheated in a microwave or conventional oven. Whole Foods partnered with Snap Kitchen in 2016 to offer its prepared meals in its grocery stores.

Even restaurant chains are starting to offer frozen meals in grocery stores. Houston-based Luby’s has been selling its fried fish, mac and cheese and chicken tetrazzini meals in H-E-B stores.

To be sure, ready-made meals have been a staple inside American fridges since Swanson popularized TV dinners 65 years ago. However, prepared meals have evolved from frozen trays of Stouffers and Lean Cuisine meals.

Snap Kitchen’s meals are chilled, never frozen, and do not contain any gluten, antibiotics, added hormones or artificial preservatives, flavors or colors. The meals are designed by a team of dietitians, and are made from scratch by chefs in two commercial kitchens, one in Fort Worth and the other in Philadelphia. Together, they produce as many as 60,000 meals daily, which are shipped directly from the kitchens through FedEx and arrive to customers in compostable packages and recycled cardboard boxes that are cooled with ice packs.

“The consumer wants frictionless living in the form of ready-to-eat meals that are healthy and have clean ingredients, and they want the comfort of ordering food through their phones,” Carter said. “We’re all excited to help more people live healthier lives.”

Snap Kitchen has more than 500 employees nationally, including 75 locally. Carter declined to share revenue or earnings figures, but said the company’s stores have some of the highest sales per square foot in the industry. Snap Kitchen is backed by Connecticut-based private equity firm L Catterton.

Loss leader

Still, the question remains: Can Snap Kitchen and other food retailers profit from food deliveries, which burdens them with additional costs such as drivers and vehicles?

“The problem with food delivery, whether it’s grocery, restaurant or Snap Kitchen, is that nobody is making any money from it,” Lampert, of SupermarketGuru.com, said. “While delivery is nice and a lot of people like it, it’s not sustainable until we have a more efficient operation, whether it’s autonomous vehicles or whatever it is.”

Littwitz, the restaurant consultant, said many Houston restaurateurs begrudgingly offer their food on demand despite losing a cut of the profits to delivery platforms such as GrubHub and DoorDash. Some restaurants, such as Carrabba’s corporate locations, have even installed special delivery windows and redesigned takeout boxes to adapt to the growing popularity of food deliveries.

On the grocery side, Kroger has partnered with robotics companies Nuro from San Francisco and Ocado from the United Kingdom to automate its food warehouses and use self-driving grocery delivery vehicles at two Houston-area grocery stores. H-E-B is now testing an autonomous delivery van in San Antonio through a partnership with California-based Udelv.

“They all realize food delivery is a necessary evil and a way for them to expand their base,” Littwitz said.

Tilman Fertitta, the billionaire owner of Landry’s restaurants, recently invested in Waitr, a startup that focuses on food deliveries because customers are demanding it.

“It’s not as profitable a business, but you have to do it right now,” Fertitta said. “We tend to make things better and figure things out, and I think that’s what’s going to happen.”

Digital shift

Carter doesn’t dispute the challenges facing Snap Kitchen and the rest of the food industry as it adapts to food deliveries.

The former Union Bank of California and Live Nation Entertainment executive said he has seen how e-commerce has transformed the banking and entertainment worlds, and is prepared to help lead Snap Kitchen as it makes the pivot. Carter joined Snap Kitchen in 2015 as its chief digital and technology officer to help others live healthier lives after losing his father to diabetes. He was named chief executive in January.

“I’m an e-commerce guy through and through,” Carter said. “Everyone’s trying to figure out how do we respond to this internet thing. Having done this in other consumer sectors, I can say disruption has sped up in every case.”

As it began shifting its brick-and-mortar operations toward e-commerce, Snap Kitchen consolidated its two Houston-area and two Austin-area kitchens into a 30,000-square-foot central kitchen in Fort Worth and laid off more than 160 employees in Texas in 2017.

To handle e-commerce orders, Snap Kitchen is prepared to increase its kitchen production by 50 percent to 100 percent, and is looking to expand its meal subscriptions to make production more predictable and reduce waste, Carter said.

“The proliferation of smartphones and new technology has collectively contributed to the large-scale adoption of this way of transacting and food consumption,” Carter said of food deliveries. “I think it’s only going to continue and speed up. I think the impact of this will be felt widespread over the next five to 10 years.”

Hugo Ortega arrived in Houston in the trunk of an Impala. How a smuggled immigrant became a top chef

Editor’s note: Hugo Ortega ranks among the nation’s top chefs. He won the 2017 Best Chef: Southwest Award from the James Beard Foundation and has received accolades for his culinary brilliance from a variety of publications, including Bon Appétit, Forbes Travel Guide and Smithsonian Magazine. He and his wife Tracy Vaught own and operate several restaurants including: Backstreet Café, a neighborhood bistro she opened in 1983; Hugo’s, which features the traditional cuisine of Mexico’s various regions; Caracol, a showcase for Mexican coastal dishes; and Xochi, celebrating the flavors of Oaxaca. But before all the kudos, Hugo arrived in Texas a hungry immigrant teenager. Here, he tells the story of his American journey. This was originally published by the Center for Houston’s Future in “Houston’s Economic Future: Immigration.”

I was born in Mexico City. At the age of nine, I went to live with my grandmother, at the border of Oaxaca and Puebla in the mountains, a town called Progreso. I can say now, more than 40 years later, that was where I received my culinary education.

When I got there, by my surprise, there was not electricity, running water or all the necessities we have in today’s life. I found that intriguing, very primitive. But full of love on my grandmother’s side, and knowledge of my ancestors, and her ancestors. Our ancestors researched every day just to figure out what to cook. So, literally, they just lived to eat. That was pretty much the daily living for my grandmother and me. You had your little house, surrounded by animals ... like pigs, and chickens for eggs, and goats, cattle for milk and so on, and bulls to work the land.

She and I were a tremendous team. I was young, full of energy and the ability to do many things, and with her knowledge I always accommodated myself to be her prep cook. And her dishwasher, her get-to-go boy. We used to come to a little town once a week, on a Sunday, to the market. From time to time the local butcher would butcher a pig or a cow, and with a little bit of fresh meat, we’d go back to living again.

I went through eighth grade, didn’t finish ninth grade. That’s all I could afford at that moment. I stayed in Progreso until I was 14 or 15. Then my dad decided to move the family back to Mexico City. I worked for an American company called Procter & Gamble. I was part of the maintenance team, changing light bulbs and cleaning. It was a factory where they made Crest toothpaste, soap, and many cleaning products and chemicals. I learned a little bit about the company and realized there was some opportunity over here in the United States.

At the time, some friends had come already. Some were in California. I had a cousin in Houston. From time to time he would send some letters, and I would read those letters he sent to his mom. One of the things that opened my eyes was that from time to time he would send $20 or $50 ... I don’t remember what was the exchange rate, but it was like thousands of pesos to the dollar. That was eye opening for a 16-year-old man, teenager, or whatever.

At the age of 19, I finally made it to the States. One day, my dad just basically told me, “This is all I can do for you, so from this point on, if you want to be homeless, or you want to be a punk, whatever you want to be is up to you.” That may sound heartless, coming from someone who means so much in your life, but I also respected him. I respect what he told me.

One beautiful spring day, we organized ourselves — a friend and a couple of other people — and bought bus tickets north from Mexico City. We found a coyote who could pass us across the border.

We tried five times. The first, we were over 120 people trying to cross at once. Adults, senior citizens, young kids. The immigration police caught us five times, and they took me back. But there was no going back.

The fourth or fifth time they figured out crossing so many was not going to be possible. So, they divided us. They put the young people in one group. In my group, we were 14 young women and young men. On the sixth try is when we crossed. We came across the river. It was deep. I struggled, because I don’t know how to swim. I managed, and made it, and that was wonderful.

We were young and agile and jumped many fences. At some point, they put us in a train car. They told us, “People will be inspecting the cars. You make any noise and they capture us, whoever makes that noise is going to be dead.” They were not fooling around. I can laugh now, but it was terrifying.

Eventually around two in the morning or so we started moving, faster and faster. Then they told us, “Hey we made it!” We started celebrating in the car, which was pitch black. As we were about to reach San Antonio, someone made a hole in the side of the car. We started jumping one by one, like that. Out the hole. They told us, “As soon as you are on the ground, hide where people can’t see you.” It was around six or seven in the morning. That’s what we did.

Around seven that night, they picked us up and kept 14 of us in a house for about a day and a half. On the second day, they put us in a Chevrolet Impala. They put some pieces of wood on the shocks so the car wouldn’t sink under all the weight. They said stay low and put 14 people in that car. Many in the backseat. I was in the trunk with another two people. The first pothole we passed, the trunk opened. I was closest to it so I reached up and closed it, so I was a hero for a moment!

We arrived in Houston in the Wayside area, between 10 and midnight. That’s when the transaction happened. My cousin, he paid for us, $500 apiece.

This was in the early ’80s. My cousin did not recognize us at first. I had lost a lot of weight after 20 days on the streets of Laredo. From the time that we got there to the time that we crossed it was something like that. The coyotes were feeding us potatoes and eggs, and we didn’t have much clothing, we were very dirty and skinny. We really broke down crying. It was a beautiful time.

My cousin lived down there on Wayside, so he took me over there. Then we moved right near West Gray and Taft. That’s where we lived for probably a year or so.

Then we would find a job and went on our own and rented an apartment. I was a janitor at a restaurant in Montrose called Motherlode, then I became a busboy. My cousin gave me the opportunity to cook there. Things were going great until that restaurant closed. It was a gay restaurant, so I saw for the first time in my life two men kiss each other. That was eye opening, too. All those wonderful memories, they’re there. It was my new culture, my new city. It was all new to me.

After Motherlode closed, I worked in the Esperson Building. I was a janitor during the evenings and in the mornings, I was a busboy in a restaurant called Bull & Bear. When the restaurant closed, I worked part-time jobs. Those were very depressing times. My cousin, the one who lived with me, moved to California, and I had to be by myself in the city. I was very depressed. I was in trouble.

I ended up living on the streets, over by Richmond and Dunlavy. There was a grocery store nearby. Sometimes people gave me food and helped me out. One day I saw a man approaching the store, and he had equipment to cut grass. I explained what happened, and he said, “For heaven’s sake!” His name was Luis, and he asked me if I wanted to work with him. And I said, “Sure!” He taught me how to work in landscaping.

Luis was the manager of a soccer team. That’s something I was really good at when I was a young person. Luis introduced me to the players, and said, “This is Hugo. He’s by himself and he’s looking for a house.” One was from El Salvador, and said, “He can live with us.” Three brothers. I went to live with them.

Then I was getting on the streets every day looking for work. I used to walk back and forth along Westheimer. The funny thing is that I remember crossing the street many times by the building where Hugo’s is today. At some point I pointed and thought, I wonder what it would take, how much it would cost to own a building.

I would say to myself, “One day I want to own a building like this!”

Finally, my break came through in 1987. We used to play soccer at Wilson Elementary School (just a few blocks from where Hugo’s is now). One time a couple people appeared. They were dressed like cooks, with white jackets. One had the name “Backstreet” on the shirt. A friend went to them, Julio and Francisco, and said, “Hey listen, this Mexican guy is looking for work and he says he can wash dishes. Do you have anything over there where you work?

They gave me the address, and I wrote it down. They said, “Tomorrow you come around 9 o’clock.” The next morning I was there sharp, at 8:30 or 8 o’clock in the morning. I was sitting outside in the parking lot. I had anxiety, saying, “I hope I can work here, I hope I can get a job.”

Inside, the owner of the restaurant asked Julio, “Dónde está tu amigo?” Where is your friend who wants to wash dishes? And Julio responded, “He’s outside!” And she told him, “Well, tell him to come in!” And Julio said, “He’s kind of shy.”

Then she came to the step. She saw me. She said, “Hello, my name is Tracy,” and she shook my hand, kind of a hard shake. And I said, “I’m Hugo.” She said, “Well, come in!”

To be honest, when I saw my future wife for the first time, I thought she looked like a Spanish lady, from Spain. Her beauty intrigued me. I fell in love with her that moment! I absolutely loved her. I was very happy. You don’t have to speak the language to fall in love with somebody. I didn’t speak any English at first.

That day, they found me an apron and I started washing dishes.

One of the things I tell young people who come here and don’t speak English is, “Say, ‘Yes,’” to everything.” I didn’t know what Tracy was telling me, but I always said, “Yes, yes, yes!”

One day she said, “Would you like to cook?” I said, “Yes!” I remember my first duty as a cook was to slice a 10-pound tube of provolone on the slicer.

Eventually, I believe around 1989, she asked me if I would be interested in enrolling in cooking school. Of course I said, “Yes!” My English had improved a little. I was sure I could understand, so I enrolled myself in the culinary program at Houston Community College. The problem came when I had my first test. I told the teacher “I cannot write English. I can write Spanish.” The director of the department allowed me to take the test orally. From time to time, I still talk to him, and sometimes ask him, “Chef, do you have somebody who can help us?”

Around the time I went to school, Tracy bought Prego, an Italian restaurant in the Rice Village. I did a year of apprenticeship while going to school. After I graduated and spent a year at Prego, Tracy invited me back to Backstreet to be the chef.

Sometime in the summer of 1990, Tracy had a party for employees in Galveston, and my responsibility was to cook chicken and hamburgers. It was that day I declared my intentions. We married on May 19, 1994. In 1997, our daughter Sophia Elizabeth was born.

A few years later, we had the opportunity to open Hugo’s. Tracy’s uncle called to tell her a friend had a piece of property on Westheimer she might be interested in. We were very busy at Backstreet, but eventually we went to have a look.

Standing in the parking lot behind the building that years earlier had been the object of my fantasies, Tracy asked me: “What do you think about opening a restaurant cooking the food of your grandmother, your homeland?

I thought about getting up at 5 every morning, loading jars on the donkey and going to the bottom of the hill to get water for the kitchen; cutting wood to make a fire every day; taking care of 300 goats; everything made a mano ...

My answer may be hard to believe, but I said from the heart, “Tracy, my god, that’s a lot of work!”

Of course, I had learned to say “yes” to everything.

Source: Houston Chronicle

Luby’s fends off board challenge from activist investor

Luby’s shareholders rejected an activist investor's attempt to wrest control of the restaurant company from the Pappas brothers on Friday, ending a 43-day proxy fight over the Houston chain.

Shareholders elected all the company's candidates for its nine-member board at its annual meeting, rejecting four nominees pushed by New York hedge fund Bandera Partners, according to preliminary results issued by the company.

Luby's did not release the voting count but said it was a close contest. Bandera said the election had a voter turnout of more than 85 percent.

Chief Executive Chris Pappas said in a statement that the company will look to improve its operating results.

"With this annual election now completed, our full focus returns to executing our turnaround plan for the business and ensuring that we have our right board composition to oversee our strategy," he said.

Jeff Gramm, a Bandera co-founder, said he accepted the preliminary results, which were reviewed by Luby’s proxy solicitor and will later be certified by an independent inspector of elections and filed with the Securities and Exchange Commission.

"Although it is early and we have not seen official results, we believe we won the vast majority of votes from non-affiliated shareholders," he said. "It is clear to me that Luby's shareholders are very frustrated with the company and desperate for change in the boardroom."

Friday’s election caps a bitter boardroom dispute between two prominent Texas families fighting for control of the iconic but struggling Houston restaurant chain known for its comfort foods, such as the LuAnn Platter. The company operates 82 Luby's Cafeterias and 59 Fuddruckers restaurants. It franchises another 104 Fuddruckers locations nationally.

Gramm, the son of former U.S. Sen. Phil Gramm of Texas, was seeking to oust Chris Pappas and his brother Harris Pappas from Luby’s board, which they have helmed for nearly two decades. The brothers also own and operate popular Houston restaurants Pappasito’s Cantina, Pappadeaux Seafood Kitchen and Pappas Bar-B-Q.

Bandera, which has been a Luby's shareholder for more than a decade, was lobbying fellow investors to replace the Pappas brothers, Chairman Gasper Mir III and board member Frank Markantonis with its own slate of candidates, which included Gramm and his father.

Bandera faced an uphill battle to pry control of Luby's from the Pappas brothers, who own 36.8 percent of the company's stock. Bandera has a 9.8 percent stake.

Gramm, who flew in from New York to attend the annual meeting, said he did not regret the proxy fight, which tested his close friendship with fellow activist investor and business associate James Pappas, Chris Pappas’ son. In a prepared statement to Luby’s board, Gramm encouraged it to listen to shareholders and wished it success in the coming year.

“I don’t regret my decision to take this vote to Luby’s shareholders,” Gramm said in an interview. “I really do believe that if I hadn’t done this, the company wouldn’t have committed to bringing some change to the boardroom in the coming year.”

Luby's last week announced plans to make some changes to its board in a bid to appease Bandera and other shareholders concerned with the company's stock performance.

Among the moves, Mir announced he would relinquish his leadership position to another independent board member later this year. The board said it is also looking to replace two incumbent members, several of whom are approaching retirement age, with independent directors. Luby's did not say who would step down but said the changes will take place later this year.

David Littwitz, the owner of Houston restaurant brokerage Littwitz Investments, said little has changed as a result of the proxy fight, however. Luby’s restaurants are unprofitable, the company’s stock is down and the company is still forced to sell off real estate to pay down its debt, he said.

“It’s still a tough situation for the current management to operate,” he said. “All this has done is give Chris Pappas some breathing room for the moment, but not by much.”

Ed Wulfe, the chairman of Houston retail brokerage Wulfe & Co. and a Luby’s shareholder, said he voted in favor of Luby’s slate of candidates.

“I’m very pleased Luby’s is staying in the hands of the Pappas, who are proven restaurateurs with years and years of experience,” he said. “I think in the long term, this is in the best interest of Luby’s and shareholders.”

After rising briefly midday, shares of Luby's fell 13.8 percent Friday to $1.56. The company is set to report fiscal 2019 first quarter earnings Monday.

paul.takahashi@chron.com

Houston Chronicle

Activist investor calls for “fresh faces” to turn around struggling Luby’s

A New York hedge fund is preparing to launch a proxy fight to take control of Luby's board of directors, which if successful would change the course of the struggling chain led for nearly two decades by a member of Houston's Pappas restaurant family.

Bandera Partners, which owns 8.9 percent of Luby’s outstanding shares, on Tuesday sent a public letter to the locally based chain, outlining concerns about the company’s direction and nominating five candidates to “improve the board with fresh, independent faces.” Members of the nine-member board are elected to a one-year term every year at Luby’s annual shareholders meeting, which is expected to take place in early 2019.

“I’m writing today to tell you that what’s happening at Luby’s is simply not working,” Jeff Gramm, Bandera’s co-founder and portfolio manager, said in the letter. “I believe this is the outside shareholders’ last chance to salvage their investment in the company, and I feel a responsibility to take on this difficult battle on their behalf, rather than subject myself and other Luby’s shareholders to another year of value destruction.”

Bandera’s proposed new board members are Gramm; his father and former Sen. Phil Gramm of Texas; Stacy Hock, chairwoman of Texans for Education Opportunity; Savneet Singh, a partner at New York asset management firm CoVenture; and Brian Wright, the CEO of Massachusetts-based Bertucci’s Italian Restaurants.

Gramm, in his letter, criticized Luby’s “bloated corporate expenses” and disagreed with the company’s strategy of closing restaurants and selling company-owned property to reinvest in the business and pay down $39.3 million of debt. Luby’s closed 21 locations this year and laid off some of its corporate staff to chip away at its debt.

Luby’s is liquidating shareholders’ most valuable asset: Luby’s real estate, Gramm said. The chain operates 146 company-owned restaurants under the Luby’s Cafeteria, Fuddruckers Restaurants and Cheeseburger in Paradise brands. The company this month reported nearly $200 million in assets, much of it in real estate.

“It is brutally painful to watch the company chisel away at its real estate portfolio to fund low-return investments into the business,” Gramm said in the letter. “Since fiscal 2008, Luby’s has sold $88 million of assets. This capital, more than double the current market capitalization, is gone and forever lost to shareholders.”

Luby’s, in a statement, said it will review Bandera’s letter and consider the hedge fund’s candidates. The board will make a formal recommendation later, the company said. Chris Pappas and his brother Harris Pappas, founders of Houston-based Pappas Restaurants, became majority shareholders of Luby's in 2001. Chris Pappas is CEO and president.

“We are always open to good ideas regardless of their source and will carefully review and consider Bandera’s candidates as we would any other potential directors to assess their ability to add value to the board for the benefit of all shareholders,” Peter Tropoli, Luby’s general counsel, said in a statement.

Luby’s, founded in San Antonio in 1947 and known for its comfort foods such as the LuAnn Platter, has struggled to retain diners in recent years amid growing competition from new fast-casual concepts, such as Shake Shack, which offer trendy foods and limited service that appeals to younger diners looking to share their dining experience on social media. Luby’s this year issued a statement of going concern, calling into question whether it can stay in business.

The company, in its latest annual financial report, said it posted $365.2 million in sales over the year, down 3.7 percent from the previous year. Same-store sales fell a half percent.

Luby’s reported a loss of $33.6 million this fiscal year, and its stock has lost two-thirds of its value since January. Shares ended the trading day Wednesday at $1.53, down from its peak of around $25 in 1993. The company has a stock market value of around $45.2 million.

“The market is no longer excited about a cafeteria concept,” said David Littwitz, a restaurant broker with Houston-based Littwitz Investments. “The younger customer hasn’t given a thought to Luby’s for a long time.”

Bandera, which has a stake in Famous Dave’s BBQ and has invested in Popeyes Louisiana Kitchen and Fiesta Restaurant Group, has owned Luby’s stock for more than a decade. The hedge fund has issued a number of public letters to company boards, including one sent this year to Boardwalk Pipeline Partners in Houston. Jeff Gramm is the author of “Dear Chairman,” a book on activist investors, and is on the board of Morgan’s Foods with James Pappas, an activist investor and son of Luby’s CEO Chris Pappas.

Another shareholder, Dallas-based investment firm Hodges Capital Management, has owned Luby’s stock for 35 years and said it would back Bandera’s efforts to change the board and the company’s direction.

Source: Houston Chronicle

Luby's closes 21 restaurants amid lackluster sales

Luby's, an iconic Texas restaurant chain known for its cafeteria-style comfort foods, is struggling to remain relevant in a hyper-competitive market as customers increasingly favor new, fast-casual concepts.

The Houston company, which earlier this year expressed concerns about staying in business, said Monday that it had shuttered 21 restaurants and laid off some corporate staff over the past year amid declining foot traffic and sales. The chain is in the process of closing and selling off additional restaurant to pay down $39.3 million of debt and negotiating with lenders to reach a refinancing agreement.

The company did not disclose the locations of the stores it has closed or plans to close, or the number of employees it laid off.

"Our aim and goal is to return to profitability," president and CEO Chris Pappas said in a conference call with analysts Monday.

Luby's, founded in San Antonio more than 70 years ago, operates 146 company-owned restaurants nationally under the Luby's Cafeteria, Fuddruckers Restaurants and Cheeseburger in Paradise brands.The company moved to Houston in 2004.

Luby's has struggled to retain diners in recent years amid growing competition from new fast-casual concepts such as Shake Shack and Flower Child, which offer trendy foods and limited service that appeals to younger diners armed with cell phones and social media sites to share their experiences.

"The sweet spot of the restaurant industry is the younger millennial who has some money and goes out a lot," said David Littwitz, a restaurant broker with Houston-based Littwitz Investments. "Luby's can work very hard to provide a good, hot, fresh meal at an affordable price, but they're just not what millennials are thinking about. There's nothing really Instagrammable about going down the cafeteria line and getting a meal."

Restaurant chains specializing in full-service, family dining have also struggled amid changing tastes. Applebee's and Outback Steakhouse have shuttered dozens of locations while others such as Ruby's Diner have filed for bankruptcy in recent years.

Luby's, which reported earnings Monday for its fourth quarter and fiscal year that ended Aug. 29, said its foot traffic fell 5.5 percent at Luby's Cafeterias and 8.3 percent at Fuddruckers during the fourth quarter. The company posted $365.2 million in sales over the year, down 3.7 percent from the previous year. Same-store sales fell 0.5 percent overall.

Pappas said Luby's executives are not satisfied with the company's financial performance.

"While operationally, there are several bright spots, the decline in profitability for the whole company is totally unacceptable," Pappas said. "In order to improve profitability, we must significantly improve traffic and sales."

Luby's closed four Luby's Cafeterias, 11 Fuddruckers and six Cheeseburgers in Paradise locations over the past year. The sale of 10 restaurants generated $14.8 million, about a quarter of the way toward the company's goal of raising $45 million. The company, which closed nine locations last year, is looking to shutter more underperforming stores.

Luby's provides food service management to hospitals, schools and corporate offices at 27 locations, and has several international locations in Canada, Central and South America, Poland and Puerto Rico. The food service division represented a bright spot for the embattled company. Revenue from food service contracts grew to $6.4 million this year, up from $5.8 million last year.

Last month, Luby's promoted Todd Coutee to chief operating officer to grow its sales and profit margins, which have lagged amid rising costs and lower guest traffic. Coutee said the company plans to use a combination of discounts, employee training on customer service and more popular menu options to drive foot traffic back to Luby's restaurants.

"I believe these are the keys to generate brand loyalty and repeat business," Coutee said. "We have iconic brands that are relevant in today's restaurant landscape."

Source: The Houston Chronicle

Food halls galore: Can downtown Houston handle the latest food service trend

As if Houstonians don’t have enough restaurant options already, another new concept is coming to the Bayou City. But this time, hungry Houstonians will be able to choose from among many options in one place.

By the end of 2019, Houston’s downtown area will have at minimum five operating food halls, which is a concept that’s similar to a food court in a mall or airport but elevated by offering different food options from independent chefs rather than chains. 

The area’s first food hall — Conservatory at 1010 Prairie St. — opened in 2016. By the end of 2018, it will be followed by Bravery Chef Hall at Aris Market Square at 409 Travis St. and Finn Hall inside The Jones on Main at 708 Main St. Next year, two others will follow: Lyric Market at 411 Smith St. inside the Lyric Centre garage as well as Understory at 800 Capitol St. inside the new Capitol Tower. 

“A food hall is taking that same dynamic that we know works: Creating a destination and making it convenient to people by offering a wide variety of products at the same time so that there’s this heightened sense of community — but with a higher level of quality,” said local restaurant consultant Chris Tripoli, owner of A La Carte Restaurant Consulting Group. 

It was only a matter of time before Houston encountered its own food hall craze because the trend has been in full force across a few years. In 2010, there were less than 50 food halls in the U.S., according to the April 2018 report “Food Halls of America” by commercial real estate services company Cushman & Wakefield PLC. By 2015, there were more than 100 operating halls, and by 2020 there will likely be 300. 

Although Houstonians are proud of their city’s culinary reputation, the question remains whether they will flock to five food halls within a six-block radius in downtown. 

“I like that we are getting food halls, but there’s only been Conservatory, and it has had mixed results,” Tripoli said. “And now we have Finn, Lyric, Bravery and Understory, and all will be larger. Having that many food halls with that many tenant spaces available, we might be overserving today’s market.”

Click the following links to read more about each food hall:

• The first: Conservatory

• The incubator: Bravery Chef Hall

• The Art Deco building: Finn Hall

• The artsy market: Lyric Market

• The everything else hall: Understory

However, the odds are in favor of Houston’s fab five: Of the 200 current operating food halls in the U.S., only four permanent projects have closed in the past two years, said Garrick Brown, a national retail real estate analyst who wrote the Cushman & Wakefield food hall report.

To survive, food halls must do high volume of sales because of their size and high investment costs. They also must attract a regular, affluent consumer willing to spend at least $15 per meal a few times a week. 

Enlarge

Garrick Brown is the vice president of Americas head of retail research at Cushman & Wakefield.

COURTESY CUSHMAN & WAKEFIELD

“I do think that there are enough people downtown who will utilize food halls for meals on a regular basis,” said Jonathan Horowitz, who is the former president of the Greater Houston Restaurant Association and currently serves as CEO of Houston-based Legacy Restaurants, which owns Antone's Famous Po’ Boys and The Original Ninfa’s on Navigation. Ninfa’s will be opening a concept inside Understory.

“The one question I have is: Will there be enough evening business that the developers are hoping for?” he said. “And I think that’s just an unknown.” 

Attracting the downtown food hall consumer

Tripoli, Horowitz and other local industry experts expect the five food halls to be busy on weekdays during breakfast and especially lunchtime thanks to the nearly 158,000 people who work downtown. About three-fourths of these workers earn more than $3,333 a month, according to a June report from public agencies Central Houston and Downtown District. 

“It’s a captive audience, obviously, because most of those folks who work in those office buildings don’t want to walk to the parking garage, get in their car and try to drive somewhere else (to eat),” Horowitz said. “You can never say anything is certain, but I don’t see downtown all of a sudden losing all of its workers.” 

However, Brown wasn’t as optimistic — though a majority of the current 200 food halls do survive primarily on daytime business, he said.

“A workforce of about 160,000 could support two food halls,” he said. "It's going to be competitive."

For these five food halls to survive, they need to build an evening and weekend crowd. Local restaurant experts aren’t sure how successful those efforts will be. 

“The key thing for one of these things to work well in downtown Houston is marketing,” said commercial real estate broker David Littwittz of Littwitz Investments Inc. “And the marketing money has to come from the landlord because you have to get people in the door, and — in this case, in Houston — you have to change their thought patterns and explain to them what it is.” 

Food halls will have to persuade office workers to stay in the area after 5 p.m.; sway theatergoers, sports fans and residents to choose a food hall over a full-service restaurant or favorite bar; and convince Houstonians across 655 square miles that the drive, traffic and parking is worth it. But most importantly, these new food halls will need to create a sense of community. 

“Food halls in other cities are successful because they don’t just serve food,” said Greater Houston Restaurant Association Executive Director Melissa Stewart. “They’re a community center.” 

Can 5 food halls survive in downtown Houston?

HBJ asked several retail experts, chefs, developers and food hall operators whether they think Houston's downtown can support five food halls. Here are their answers.

Luckily, downtown is no stranger to change. In the past 15 years, GreenStreet and Discovery Green opened. The METRO-Rail launched. Minute Maid Park, the George R. Brown Convention Center and theater buildings were renovated and expanded. Market Square Park was updated. And several office and residential high-rises were built.

“Everything’s moving downtown. It’s become a bigger city,” said Phi Nguyen, owner of The Pho Spot, a concept inside Conservatory, and The Waffle Bus food truck. He recently moved downtown. “It was dead for so long, but now on Friday and Saturday nights, there’s people everywhere.” 

Several local restaurant experts expressed that there is a demand for more dinner options before theater performances and drinks afterward. With 13,000 seats in the Theater District, many of those attendees need a place to sit down and eat. In fact, a lack of dinner options before a theater performance was the inspiration behind Lyric Center, which is a block away from the Alley Theatre, developer Jonathan Enav said.

What will drive people into food halls at night, Brown said, is evening programs, such as poetry slams, live music and cooking classes, in combination with more residents living within walking distance or a short Uber or Lyft drive away. 

More Houstonians are calling downtown home. The household population in the 2-mile radius of greater downtown Houston is about 67,000, a 30 percent increase since 2000, per Central Houston and Downtown District. These organizations and others are working on growing the downtown area. And with more businesses, families and places for entertainment, there comes the need for more food options. 

“We absolutely need and can support these food halls,” said Angie Bertinot, director of marketing for District Downtown. “I think they will all complement each other, and the clustering will continue to position downtown as a foodie destination.” 

If downtown food halls survive, it will be because they attract more residents and offices. Brown said that in the current amenities’ arms race, many multifamily, office and mixed-use projects want a food hall component with local vendors. Developers often see a halo effect from a food hall in which they’re able to lease space easier and at a higher price in part because of the food options. As such, some developers won’t close a food hall even if it is losing money. 

In particular, tech companies highly desire office space with a food hall component, Brown said, citing Google’s recent purchase of New York City’s famous Chelsea Market and Facebook’s own campus restaurants in Menlo Park, California. 

But four food halls that will open within 12 months and a total of five food halls within six blocks of each other is worrisome, said Scott Taylor Jr., a professor at Conrad N. Hilton College of Hotel and Restaurant Management at the University of Houston. 

“I don’t know if huddling around Main Street is the right thing,” he said. “Five operations is too many. ... Maybe in five or 10 years when more people live downtown.”

Taylor also doubts that attendees at the George R. Brown Convention Center will make the nearly 1-mile trek to Finn Hall, the nearest food hall, between activities. He felt that Discovery Green, with its established green space and many nearby hotels, would have been a better location for a food hall. 

In the next 18 to 24 months, Brown expects to see a wave of food hall closures across the U.S. The ones that shutter will be those that aren’t authentic to the food hall concept as a food destination with local vendors; are inefficient with operations; and are located outside high-density areas.

“I do have concerns in markets where multiple food halls open up in close proximity to one another,” Brown said naming Denver and Miami, which had five open over 18 months, though none of them have closed. “What’s going to be important (for Houston’s downtown food halls) is that they differentiate themselves in meaningful ways from one another.” 

Of the five food halls, experts say Lyric Market has the best chance of survival because it caters to a specific niche market: Theatergoers and an evening crowd. Its market vendors selling fresh goods will also set it apart from the other food halls. 

Experts predict that Bravery Chef Hall will also do well because it will attract true foodies thanks to its chef-driven tenants who are up-and-comers driven to create. Time will tell for Finn Hall and Understory, both of which are from out-of-town operators, though Understory does have an advantage with its five access points to the underground downtown tunnel system along with street access. 

Houston’s food hall future 

Brown and local restaurant consultant Tripoli stressed that food halls aren’t a fad but rather an example of how the food and beverage industry is changing in response to a growing foodie consumer segment, millennials’ desire for experiences over physical items, e-commerce and higher rent. 

“It is not just a short-term trend,” Tripoli said. “This is a trend in food service, whereby developers can use square footage in highly populated area to create much larger variety than they would be able to if they just split (the property) up and put in three or four tenants. It’s a wiser, better use of space.” 

Brown added that the food hall trend is the industry’s sharing-economy model, and it will continue to evolve. 

Similar projects are popping up all over Houston: The 24,000-square-foot Bellaire Food Street in Chinatown, which will bring nine vendors offering Asian cuisine; the redevelopment of the 17-acre Houston Farmer’s Market in Greater Heights; the 3-acre Railway Heights Market near the Memorial Park Golf Course; and a food hall at The Grid in Stafford. 

Overall, food halls are a win for the many parties involved: The developer adds value to his or her property, the operator generates high revenue from alcohol sales, tenants gain exposure in a new market with a low cost of entry and consumers have more dining options. Some restaurants in downtown even see food halls as a boost for their own sales. 

“If anything, the new food halls will be good for business and increase exposure to our two Hearsay locations downtown,” said Zaidi Syed, director of operations for Landmark Houston Hospitality Group, which owns the Hearsay restaurants downtown. “An influx of people will be in the area to dine at the food hall, which will create an opportunity for us to capture their interest for a cocktail or light bite.” 

Regardless, there’s a good chance that not all five food halls will make it, but that’s how the food and beverage industry is, Stewart said. Restaurants close frequently. Luckily for food hall operators, if one tenant doesn’t work or pull in their share of the revenue, contracts are usually set up in a way to quickly get a new concept in.

Stewart, like many others, wants Houstonians to support food halls.

“When we open the five food halls here in town, and if one of them doesn’t succeed in 18 to 24 months, and we are back down to four, that to me is in no way a failure of the concept,” she said. “It’s just how business works sometimes. I think it speaks very well of our continuing food industry here in Houston, and there’s going to be a lot that we can learn from this no matter what things look like in five to 10 years.”

Source: Houston Business Journal

Houston's Top 100 restaurants for 2018 revealed

Dive into this year's Top 100 Restaurants with a virtual banquet of Houston's best dining. There are 17 newcomers to Alison Cook's list, and five returnees have upped their performance after a hiatus.

Two of those newcomers landed in the top 10 tier; and a total of six of them appear in the top 30 ranked restaurants. (The rest of the list appears in alphabetical order.) That's a solid showing that demonstrates the continued vibrance of the city's dining scene, even in the trying year after Hurricane Harvey.

Source: Houston Chronicle

Celebrity chef Jonathan Waxman brewing up all-day cafe in Houston's new 2-story H-E-B

Four prominent New York chefs are opening a coffee shop in Bellaire’s brand new H-E-B. The Roastery unites Jonathan Waxman, Jimmy Bradley, Joey Campanaro, and Jason Giagrande — bringing over 100 years of collective kitchen experience to a group that refers to themselves as “The Four J’s.”

Job postings for the Roastery describe it as “a new quick-service café with a strong coffee program, local coffee roasting operation and a chef-driven menu.” The cafe will use beans roasted by Four J Foods, a company the chefs created that sells sauces, coffee, and tea at H-E-B. Four J touts that it sources all of its coffees from specific farms, which should help ensure the same level of quality from bean to cup that diners find at coffee shops like Blacksmith, Catalina Coffee, and Southside Espresso that are directly affiliated with a local roaster.

The Roastery is located inside the H-E-B but has a separate entrance that's adjacent to the store's. A TABC poster in the window indicates that the cafe has applied for its own beer and wine license. Judging a restaurant's readiness by peeking in the windows is an inexact science, but the build-out looks to be complete. 

Neither The Roastery nor H-E-B have responded to CultureMap’s request for comment about the timing of the opening, but an employee mentioned they're targeting the middle of October. A CultureMap reader discovered a since-deleted webpage that offered a draft version of the menu (see screen shot above). The all-day cafe will likely serve a variety of pastries, breakfast items (avocado toast, quiche), sandwiches, salads, and maybe even bone broth.

Turning to the owners, Waxman constitutes the group’s most prominent name. In the ’80s, his restaurant Jams bought California cuisine to New York City. The chef also won a James Beard Award for Best Chef: New York in 2016 and has appeared on two seasons of Top Chef Masters. His roast chicken is legendary.

Waxman's partners in Four J are less prominent but still very accomplished. Bradley is known for The Red Cat, an almost 20-year-old Mediterranean-influenced restaurant in New York’s Chelsea neighborhood. Campanaro own three establishments, including The Little Owl, an Italian-inspired restaurant in the West Village. Giagrande serves as the company’s CEO; he’s held a variety of roles throughout his career, including serving as the vice president of food service operations for the Starbucks outlets at Barnes & Nobles bookstores.

In scientific terms, that’s an epic shit-ton of culinary talent for any restaurant, particularly a cafe in a grocery store. Hopefully, H-E-B will provide some more information soon. Some secrets are too good to keep.

Source: CultureMap Houston

Hot dog! There’s a formidable new frank in town

For much of the country, Labor Day spelled the end of the so-called dog days of summer. We're lucky, though: it's always hot here, and dog days are a constant especially if you're talking hot dogs.

And now, thanks to Kenny & Ziggy's New York Delicatessen Restaurants, there's a new hot dog star in town. Owner Ziggy Gruber's restaurants recently introduced a new hot dog (called a frank on the menu) that have the texture and flavor of old school Jewish deli franks.

Gruber didn't simply switch hot dogs, he actually helped create a new wiener made specifically for Kenny & Ziggy's to the deli man's specifications. He did so after he noticed a drop in quality of the franks he had been using for years (we'll not embarrass the well-respected brand).

"Franks have always been a cornerstone of every deli through the decades. There was always a frank grill in front of every store," Gruber said. "I was feeling nostalgic for that, and also not happy with the changes in the franks we had been serving and wanted something better for my customers."

THREE BROTHERS BAKERY: A year after Harvey; lessons learned

So, he fished out an old family recipe for hot dogs and contacted a friend who owns a USDA-certified hot dog factory in New Jersey, which Gruber said is one of the few that has equipment to handle natural casings. The all-beef wiener with natural casing is now available on the menu at both his Kenny & Ziggy's locations.

And it's a beaut. The robust red frank with its bun-defying length sports that unmistakable snap so prized among hot dog aficionados. The flavor is spot-on.

"It's like tasting my childhood," he said.

FRIED CHICKEN REVIVAL: Kenny & Ziggy's kosher, deli-style version

Gruber has lent even more authenticity to his house franks. He has his own proprietary mustards; there's excellent sauerkraut available; and he offers that only-in-New-York pushcart sauce of tomatoes and onions. Fans of Sabrette onion sauce, surely an acquired taste from the streets of the Big Apple, will be delighted by this nostalgic bit of hot dog flair.

The menu at Kenny & Ziggy's offers a number of options with the new, soon-to-be-famous frank: Rubenesque (with corned beef, sauerkraut and Russian dressing); Slaw & Order (with pastrami, mustard and cole slaw); Yoso Dog (avocado, fried onions, chili sauce and chipotle cream); Queso-ra-Sera (wrapped in bacon and topped with pepper jack, avocado, pico, chipotle cream, sour cream and onion rings); and Sweet & Saucy (slathered with the pushcart onion sauce). All dogs come with fries and are priced at $12.95. Believe me, these franks are substantial; it's a meal.

Me? I'll take a simple dog with Gruber's good mustard. And I'm happy because the most delicious dog days have finally arrived.

Kenny & Ziggy's New York Delicatessen Restaurants, 2327 Pos Oak and 5172 Buffalo Speedway; kennyandziggys.com.

Source: Houston Chronicle

Houston’s Most Anticipated New Restaurants, Fall 2018

As has been true for years now, restaurants continue to open in Houston at a dizzying pace. Throughout the end of the year, the city will become home to a bounty of new eateries, including multiple food halls, award-winning barbecue, and a steakhouse from one of Houston’s most celebrated chefs.

There’s a ton to look forward to, but these exciting new establishments should be at the top of any diner’s list this fall. Browse through this guide below, then stay tuned for more intel on when each of these spots will officially open the doors.

Truth BBQ

• Who: Leonard Botello IV, the pitmaster behind the original Truth BBQ in Brenham, Texas.
• What: One of the state’s most-lauded new smokehouses, Truth will expand in a major way when it arrives in Houston. Botello tells Eater that the new restaurant will occupy 6,000 square feet, and he’s building a kitchen big enough to produce a broader menu. Expect top-quality smoked meats, including brisket and beef ribs, sides like corn pudding and tater tot casserole, and the famous cakes in flavors like red velvet and banana caramel, inspired by Botello’s mother Janel’s own recipes.
• Where: 110 South Heights Boulevard
• When: October 2018. No official opening date has been announced yet.

Agricole Hospitality’s EaDo Takeover

Who: Chef Ryan Pera, Morgan Weber, and Vincent Huynh, the minds behind Houston restaurants Coltivare, Night Heron, Eight Row Flint, and Revival Market.
What: A gigantic EaDo project that will involve three distinct restaurants — Indianola, Miss Carousel, and Vinny’s.

Scope out details on each individual restaurant below:

• Indianola — A restaurant named for the Texas town where Weber’s ancestors first arrived in Texas in the 1870s. Indianola will feature classic American dishes, made with painstakingly-sourced, heirloom ingredients. Chef Paul Lewis will helm the kitchen.
• Miss Carousel — A sprawling 5,000 square foot bar named for a Townes Van Zandt song that will be attached to Indianola. Up to 30 different classic cocktails will be on offer, along with new libations crafted by beverage director Marie-Louise Friedland.
• Vinny’s — A by-the-slice pizza joint with fast-casual service. Vinny’s will deliver locally, and keep the doors open well into the late night hours.

Where: 1201 St. Emanuel in East Downtown

When: Mid-September

Bravery Chef Hall

Who: Restaurateur Shepard Ross, partnered with Anh Mai and Lian Nguyen, the minds behind Conservatory, Houston’s first food hall.
What: A chef-focused food hall with a seriously impressive line-up of chefs. Scope out the major restaurant players below:

• The Blind Goat — A Vietnamese restaurant from Masterchef winner Christine Ha, popularly known as “The Blind Chef.” Ha will focus her menu on nhau dishes, or Vietnamese shared plates like banh gio (pyramid-shaped dumplings) made with brisket from Pinkerton’s BBQ.
• Nuna Nikkei Bar — A Peruvian restaurant from Andes Cafe owner David Guerrero. Guerrero will serve a menu of cevches and other Japanese-Peruvian fusion dishes.
• BOH Pasta — A new pasta spot from Ben McPherson, who’s been previewing dishes like taleggio and artichoke ravioli served with chanterelles and aged balsamic.
• Cherry Block Craft Butcher & Kitchen — A steakhouse from sommelier, chef, and rancher Felix Florez.

Where: 409 Travis Street

Georgia James

• Who: Restaurateur and chef Chris Shepherd and the rest of his crack team at Underbelly Hospitality.
• What: A steakhouse born of the first iteration of Shepherd’s shape-shifting restaurant One Fifth. Expect steaks cooked in cast iron, and a representative for Shepherd tells Eater that a martini cart is in the works. A number of popular dishes from that temporary restaurant will return, including the beloved uni panna cotta and 1-and-a-half-pound apple pie.
• Where: 1100 Westheimer Road, in the space formerly occupied by now-shuttered restaurant Underbelly.
• When: Mid-September

Sing

• Who: Food writer and chef Cuc Lam and Jerry Lasco, a restaurateur known for popular eateries like Max’s Wine Dive and Boiler House.
• What: An Asian fusion restaurant that will highlight Malaysian, Cantonese, Vietnamese, Szechuan, Thai, and Indian cuisines. Diners can look forward to dishes like chicken tikka masala, mango-shrimp spring rolls, and char kway teow, a stir-fry made with flat rice noodles.
• Where: 718 West 18th Street, in the Lowell Street Market development
• When: October 2018

Finn Hall

• Who: Operator David Goronkin, plus 10 independently-owned restaurants.
• What: A food hall featuring Houston favorites like Dish Society and Mala Sichuan Bistro, and newcomers like pizza spot Mr. Nice Pie and Vietnamese street food destination Sit Lo. Popular food truck Craft Burger will also make a home at Finn Hall, along with Goode Co. Taqueria, a seafood restaurant called Low Tide from the owner of Harold’s in the Heights, and Yong, a Korean comfort food spot.
• Where: 712 Main Street
• When: Opening date still TBD.

MAD (BCN Taste & Tradition)

• Who: BCN Taste & Tradition owner Ignacio Torres, chef-owner Luis Roger, and general manager Sebastien Laval
• What: A Spanish restaurant named for the airport code for Madrid. Look forward to pinxtos, small snacks served on toothpicks, and shareable plates, all inspired by MAD’s owners’ travels through Spain. MAD will be open for lunch, brunch, dinner, and late-night service.
• Where: 4444 Westheimer Road
• When: Late 2018

Source: Houston Eater

J.J Watt and Kealia Ohai: Couple’s Rehab and Recovery

On the eve of his eighth NFL training camp, J.J. Watt opened a text message and got emotional. Inside was a cell-phone video filmed in a hospital corridor 10 months earlier. Watt was on crutches, still wearing his surgery socks and a giant bandage wrapped around his left knee. A physical therapist was showing the former three-time Defensive Player of the Year how to take a single step forward.

“It’s crazy when you look back at it,” Watt said after a late July practice at the Texans’ training camp site in White Sulphur Springs, W.Va. “That day, you are thinking to yourself, How the hell am I ever going to get back to who I am?”

The scar left behind from the complicated surgery to repair the fracture of his tibial plateau, which snakes up from his shin to the side of his kneecap, is lighter now, and even a source of pride. On the practice field, Watt has been back in his usual spots, leading the defensive linemen through position drills and slicing past blockers in 11-on-11 team reps. And on Sept. 9, when the Texans open their season against the Patriots, Watt fully expects to be starting at right defensive end.

But last October, with a second straight season officially cut short by injury, Watt couldn’t be sure about any of those things. If there was anyone who could understand what it’s like to traverse the long and uncertain road back, though, it was the person who recorded the video.

Kealia Ohai was at NRG Stadium on the night of Oct. 8, for the Texans’ Sunday night game against the Chiefs. She was sitting in the stands with her sister, Megan, when she saw her boyfriend run a third-down pass-rush stunt and then crumple to the turf. Ohai rushed downstairs to the locker room, and when she heard the team doctors say Watt definitely hadn’t torn his ACL, she was relieved. She had good reason to be.

In June 2017, Ohai, captain of the Houston Dash of the National Women’s Soccer League, was racing for the ball during a road game in Orlando. When she stepped to cut, she felt a pop in her leg. The diagnosis was what she’d feared—a torn ACL and meniscus. She had surgery 10 days later. A month after that, she needed a second procedure to clean out an infection that developed when one of the stitches didn’t heal. By early October, she still hadn’t been able to start running again. That night, she thought Watt avoiding ACL rehab was a win.

Then they got the diagnosis. Watt had shattered the top part of his lower leg, breaking bone and tearing cartilage, the sort of injury doctors said they usually saw in car accidents. He needed to be operated on within hours of the injury. Ohai waited at Memorial Hermann-Texas Medical Center, a setting she knew well. The orthopedic surgeon who had repaired Ohai’s knee months earlier was part of the team working to put Watt’s leg back together with a metal plate and screws.“They weren’t even sure if the surgery would work and if he would be able to run anymore. That’s what was so scary for us,” Ohai says. “An ACL is difficult, but it’s pretty straightforward. With J.J.’s, because of the type of injury, I remember the doctors were not exactly sure how his leg and his knee would react to [the surgery]. From the beginning, he wanted to work hard and come back. But for a while, [the question] was, would he be able to come back and play at the same level, and support that much weight? Will his leg ever be the same again?”

It was during those anxious days that Ohai filmed the video of Watt trying to master the delicate art of moving his nearly 300-pound frame on crutches without putting any of his weight on his injured leg. The physical therapist helping him down that hospital corridor knew what awaited the couple in the months ahead—a lot of time on the couch—so he made a recommendation: Peaky Blinders, a British crime drama, available on Netflix.

Unable to walk for nearly two months after the surgery, Watt leaned on Ohai to help with almost everything. She’d bring him his toothbrush and a bowl of water, so he could brush his teeth while sitting down. “So I didn’t have to stand there,” Watt explains, “with my leg throbbing.” She mastered the art of sponge baths and took over the critical household duty of making the chocolate-chip pancakes. At the same time, she was in the most intense portion of her own rehab, strengthening her injured leg and getting her range of motion back. Before she’d leave the house they share for her four-to-five hour physical therapy sessions, she’d make sure Watt had his phone, food, water and anything he might need within arm’s reach. When she’d come back, he’d be sitting in the same spot where she’d left him—it was too painful for him move.

In so many ways, this was old hat. For most of the two-plus years that Watt and Ohai have been dating, he’s been rehabbing one serious injury or another. When Watt needed back surgery for a herniated disc in the summer of 2016, Ohai would carry his urine bottles from the bed to the toilet, where she’d dump them out for him. (And this after they’d been dating for only two months.) But this time was different: Now the heartbeats of two franchises were confronting the feelings of anxiety, frustration and uncertainty together.“Neither of us could feel too sorry for ourselves,” Ohai says, “because the other one was going through the exact same thing.”

For instant pick-me-ups, the couple relied on yellowtail-, tuna- and truffle vinaigrette sushi rolls from Kata Robata or Neapolitan pizza from Pizaro’s. To conquer the boredom, they watched The Office for the fourth or fifth time through, and soon found themselves devouring episodes of Peaky Blinders. (They learned an important lesson: Why had it taken them so long to start watching the BBC?)

Watt resumed walking on Dec. 1, ahead of his doctors’ schedule; in January, he and Ohai vacationed in Italy and visited the Coliseum, rediscovering the feeling of stepping into an arena of competition. Toward the end of the winter, Watt started playing backyard goalie for Ohai—as long as she kicked from at least 20 yards away, to soften the sting.

“Having somebody to go through it with makes the bad days so much better,” Watt says. “Back when you are by yourself, you have nobody at all to talk you through it; nobody at all, if you are having a dark day, to really pick you up. I had my family, but they don’t live here, so you are sitting in an empty house all by yourself as opposed to when you have a girlfriend who can help lift you up.”

Ohai returned to the field first, in April, at the very same arena where she’d felt her knee pop. Playing in Orlando again in June, one year and one day after her injury, she booted a distance goal to tie the game. Last month, the forward got called up to the U.S. women’s national team training camp, an opportunity she was worried might disappear for good after her injury. “That was cool for J.J. to see,” she says. “I think that gives him hope and confidence in himself that he’s going to [come back strong], too. I truly believe he’s going to have the best season of his career.”

Watt isn’t willing to make any such predictions. Such is the toll of the past two seasons, during which he played a total of eight games. But, as he talks about his road back from this most recent injury, he references the end point, when you feel like the player you used to be. When did that happen? “Over the summer,” he says. Before training camp began, he felt the shift, being able to make the cuts he used make and feeling like he had full use of his lungs and legs for his entire workout. “It’s more of a feel than anything,” he says. “You can feel that you got in a proper workout; you are doing the things you know how to do, and you are also not completely gassed at the end.”

In the nearly two years since Watt last sacked an NFL quarterback, his frame of reference has changed. He impacted the city of Houston well beyond anything he could have done on the football field, raising more than $37 million in the aftermath of Hurricane Harvey, and for two years in a row he had to confront not being able to play the game he loves for an indefinite amount of time. “I feel like he has a confidence now,” Ohai says. “I know he’s always been confident, but I think he saw himself lose [the ability to do] everything, and possibly not play, and then work his [butt] off to get back to where he is now. That gives you a sense of confidence; it makes you not really afraid of anything anymore.”

Before Watt left for Texans training camp at The Greenbrier in West Virginia, he handwrote Ohai a letter thanking her for helping him get to the other side. In return, she sent him the video of him taking those literal first few steps of the long road back. The clip wasn’t more than 20 seconds long, but watching it was like rewinding through the past 10 months.

“People say you’re going to come out on the other side of an injury better,” Watt says. “I always questioned that. I always wondered about it. But this one, I really do feel, when I look back at it all, I did come out better. She helped me through the struggle, so I could see the beauty at the end.”

Source: Sports Illustrated

Houston Restaurant Broker On Starting His Own Company: 'It Was Absolutely Terrifying'

Source: Houston Business Journal

Houston Names Fastest Growing Metro in America on New Census Bureau Report→

Per Houston Business Journal; "Houston Names Fastest Growing Metro in America on New Census Bureau Report"