Santa Fe Holding Co., Inc. (SFHD.OB) is the parent company of Santa Fe Cattle Co., a chain of 23 casual-dining restaurants in Alabama, Georgia, Indiana, Kentucky, Mississippi, Oklahoma and Tennessee. During a recent interview, the company’s founder and chairman, Danny York, discussed the restaurant’s specific market niche and ultimate growth strategy for 2008 and 2009.
Santa Fe Cattle Co. caters to a specific niche within the steak restaurant business, with dinners priced in the $10 to $12 range, a sector that is not dominated by any one player. In this price range, Logan’s and Texas Roadhouse only operate a total of 600 locations nationwide, leaving a large portion of the market underserved and thereby creating tremendous growth potential.
Santa Fe Cattle Co’s segment of the steakhouse restaurant market falls between Outback Steakhouse and Longhorn Steakhouse, with dinners priced between $14 and $16, and Golden Corral and Ponderosa that charge between $6 to $8 per dinner. Steakhouse customers are price sensitive; a $2 difference in entrees enables Santa Fe Cattle Co. access to steak consumers who are differentiated in the market and are not being served by either the lower- or higher-priced restaurants.
In addition, the company is pursuing an aggressive growth strategy that will add 10 new restaurants this year and 12 additional locations by the end of 2009. Impressive year-end sales for 2007, totaling more than $33.9 million in revenue, are supporting the company’s rapid expansion initiatives. With a year-over-year revenue gain of 57 percent, Santa Fe Cattle Co. is one of the six publicly traded restaurant chains out of 69 that has recorded annual growth of more than 30 percent.
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