Stock falls as Urban Outfitters buys Vetri empire

Creating an intersection of food and retail, restaurateurs Marc Vetri and Jeff Benjamin have agreed to sell their firm Vetri Family to Urban Outfitters Inc. Both are based in Philadelphia.

The companies portrayed the deal as allowing Vetri to expand its pizza concept nationally while adding a dining component to bolster Urban's foot traffic. The merger includes the Osteria, Amis, Alla Spina, and Lo Spiedo brands and the growing Pizzeria Vetri, but not the flagship Vetri Ristorante on Spruce Street.

Investors reacted coolly. On a day when the market surged, Urban stock fell by 7.4 percent to $22.67 a share, as Wall Street for the most part interpreted the deal as Urban's buying a "gourmet pizza chain." Terms were not immediately disclosed.

"Now I guess you'll start hearing questions about cheese prices," cracked RBC Capital's Brian Tunick to CEO Richard Hayne in a conference call Monday with analysts.

Some Vetri contemporaries reacted positively. Dave Magrogan, who owns a West Chester-based group of five restaurant brands including Harvest Seasonal Grill, called it an "exciting opportunity for both organizations" as he cited Urban's "capital and deep demographic knowledge."

The owners of the bar Jose Pistola's tweeted a simple but wistful:

In an interview, Vetri said restaurant patrons will not notice a thing after the deal is consummated this year. "In meetings, everyone from Urban kept saying, 'It's more crucial than ever that you guys are at your restaurants,' " Vetri said.

With Vetri as president and Benjamin as COO, Vetri Family will become an Urban subsidiary, joining clothier Urban Outfitters, female-focused lifestyle store Anthropologie, home and garden center Terrain, and apparel enterprise Free People.

Vetri Family partners Jeff Michaud and Brad Spence each will assume the title of "executive director, culinary."

No branding or logo modifications are planned, and no employee moves are expected.

Benjamin, who said he had been "the de facto back office for our company," handling billing and hiring, said he could turn his attention to operations and quality control. Urban will provide access to growth capital as well as real estate specialists, architects, designers, and builders.

URBN, as it likes to brand itself, will continue to integrate restaurants next to its clothing stores in so-called lifestyle centers, as it has done for several years.

Urban chief development officer Dave Ziel said trends show that disposable income is increasingly shifting from retail into food.

Benjamin added: "Until they invent actual replicators, like on Star Trek, e-commerce is not a threat to the restaurant business."

There's also a philosophical component to the concept.

"We think retailing needs to become more experiential," Ziel said. "There's a craving for real socialization beyond social media." To encourage potential shoppers to visit stores, Urban in 2013 began a program of developing centers and stores with both edible and tangible goods.

Urban Outfitters Herald Square opened in June 2014 in New York City with a coffee and snack shop called UO Cafe. Urban Outfitters Space 24 Twenty is opening in Austin, Texas, with both a Pizzeria Vetri and Symon's Burger Joint by chef Michael Symon.

On the Main Line, the proposed Devon Yard lifestyle village includes branches of Pizzeria Vetri, Amis, Anthropologie, and Terrain.

Urban also operates cafes inside its two current Terrain stores, in Glen Mills and Westport, Conn., as well as Shop 543, the cafeteria at the company's Navy Yard headquarters that is home base for Vetri's annual Great Chefs Event fund-raiser.

All of Urban's food and beverage brands will be folded into and managed by Vetri Family. The restaurant veterans also will be tasked with helping Urban develop food and beverage concepts, which Vetri and Benjamin say they are eager to take on. The business partners also will continue to run their Vetri Foundation for Children.

"It's like after 17 years, Jeff and I are renewing our vows instead of getting a divorce," Vetri said.

After Pizzeria Vetri launched in September 2013, the restaurateurs said, they were hit with a barrage of pitches. But the men, whose initial capital was Vetri's $100,000 Small Business Administration loan to open at 1312 Spruce St., were reluctant to give up creative control to outside investors. So their expansion was entirely self-funded.

"You want to grow because you don't want to lose employees, so you take on more debt," Benjamin said. "But Marc and I are getting older [they're 48 and 46, respectively], and there comes a time when you say, 'Do I really want to put my house on the line again?' Plus, my daughter is going to college soon."

Urban executives, including Hayne, who founded the company in West Philadelphia in 1970, have always been close with the Vetri team. The relationship grew when Urban offered to host the Great Chefs Event eight years ago, and solidified when Vetri Family moved its headquarters to the Navy Yard.

A year ago, the two entities "were just tossing ideas around, and then all of a sudden we were like, 'Wow! This could be real!' " Vetri said.

Benjamin said the companies click because neither believes in acting "corporate."

He pointed to milestones such as offering health insurance in 2000 and starting profit-sharing in 2001, both virtually unheard of in the restaurant industry at the time.

While Urban is now a relative giant, with more than 560 wholly owned retail outlets worldwide, "we're the smallest-feeling big company I know," said Ziel, who has been chief development officer for more than 10 years. That said, growth is always in the picture, especially because Urban, with $3.3 billion in sales in the last fiscal year, is publicly traded and has seen its stock fall by more than half since its recent high in March.

Pizzeria Vetri, which has two locations in Philadelphia and two planned for Washington, in addition to the Austin location, is seen as the brand with the most growth potential.

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