Big Fish
In the eighties Tilman Fertitta’s seafood restaurants earned him millions while his hard-nosed business tactics earned him enemies. But these days the Galveston native is winning new respect in his hometown by standing up to the most powerful family on the Island.
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Three crucial factors converged to deliver him from the tarpit of the eighties and place him in the blissful catbird seat he occupies today. The first was the stay of execution granted to all high rollers when nearly every major bank in Texas failed. Then, when some 25 creditors filed suit against him, Fertitta turned to a cousin’s law firm, Stumpf and Falgout, plucked from the ranks a deceptively soft-faced young attorney named Steven Scheinthal, and assigned him the task of keeping the wolves at bay. Employing the usual host of maneuvers that have endeared the legal profession to so many people, Scheinthal delayed, then denied, then delayed some more before at last negotiating settlements that amounted to a fraction of the original debts. Between the collapse of the Texas banking industry and the heroics of his attorney (who today is a vice president and the general counsel of Landry’s), Fertitta had bought time, and at a discount.
But to emerge free and clear, he needed cash flow. Fertitta had wisely hung on to his video games, but the Pac-Man craze was slowly going the way of the Hula Hoop and the pet rock. That business and a few other piddling revenue streams weren’t going to fill the multimillion-dollar hole Fertitta had dug. Teetering on despair, he considered giving it all up if a certain lender would let him hang on to $1 million. When the bank had the gall to impose fees that would cut into Fertitta’s remaining million, the kid reached for his cojones, said screw you, and went looking for an unsuspecting savior—who turned out to be Bill and Floyd Landry.
The Landry brothers, along with several running buddies from their hometown of Lafayette, Louisiana, had taken Houston by storm in the late seventies with authentic Cajun restaurants like Willie G’s, near the Galleria, and the first Landry’s, on the far west side of town. But by 1986 the partnership had become frayed by ill feelings, and nearly all of the partners wanted to sell out. An acquaintance of Bill Landry’s named Angelo Dispensa conveyed this information to his cousin, one Tilman Fertitta, who had worked briefly at a Landry’s establishment as a college student and knew what kind of business they did. Having just sold his interest in the ill-advised construction of Galveston’s Key Largo Hotel to his partner and cousin, Frank Fertitta, for$589,000, Fertitta had the $400,000 up-front cash he needed to buy out Bill Landry and most of his cohorts on December 31, 1986. Fertitta told the sole remaining partner, Denis Wilson, “I’m not a restaurant guy. You run the operations, and I’ll run the office.”
Their partnership proved to be one from hell. According to Wilson, the new president couldn’t resist intruding on the operations side and on one occasion came into the kitchen and threw a plate because it didn’t have enough butter on it. Fertitta counters that Wilson was a sullen presence who spent much of his time in the office ordering his secretary to bring him cups of coffee. Both concur, however, that near the end of 1987, Fertitta made sure that Wilson knew he intended to buy him out, no matter what it took. Wilson received $250,000 in cash up front, but it would cost him $120,000 in legal fees to collect most of the remaining $600,000. The debt-juggling continued, and Fertitta raced the clock like a man aflame.
In hindsight, he almost made it look easy. Despite pronouncements from food wags that Willie G’s would suffer without the Landry touch, Fertitta maintained an annual $4 million gross while trimming expenses. The cash flow from Willie G’s, combined with heavily discounted package loans from the Federal Deposit Insurance Corporation (FDIC), kept his head just above water. Meanwhile, his behind-the-scenes construction genius, Al Jaksa, demonstrated a proficiency at building new restaurants quickly and cheaply. Fertitta’s first two Landry’s expansions, both in Houston, suffered virtual crib death: One on Westheimer went bankrupt, and one on Shepherd he abandoned in the middle of the night. Hemmed in by a sudden proliferation of restaurants from the local Pappas chain, Fertitta turned away from the Bayou City: He opened locations on the Galveston Seawall, in downtown San Antonio, in Corpus Christi, and on the picturesque waterfront of Kemah, an overnight sensation that, he now acknowledges, “took us to a whole new level.”
Fertitta began to hit his stride as an operations man. Though today he terms himself a creator, the restaurants he fashioned are the product of a consolidator. He hung on to the names—suing Floyd and Bill Landry when they attempted to open restaurants featuring their last name or the name of their father, Willie G—but nothing else was sacred. He squeezed the Cajun spicing from the dishes (“Cajun food was a fad,” he says), scrubbed away the funky interior of Willie G’s, and starched the waitstaff’s appearance. At Kemah he introduced the first of his neon marquee signs, which bore a suspicious resemblance to the marquee of the Bookstop across the street from the ill-fated Landry’s on Shepherd. The Galveston and Kemah locations taught Fertitta that patrons liked to gaze out at the water while they ate their seafood, a gambit he applied to three of his next four expansions.
What a long, strange trip it was. Tilman Fertitta had blazed and swerved like a heat-seeking missile in a decadelong search for his pot of gold. And here it was, in a middlebrow market of consumers who wouldn’t be caught dead in a Red Lobster but would go gaga over studiously unspectacular seafood served in proximity to bodies of water—like Austin’s Town Lake—that hadn’t yielded an edible fish since the Bronze Age. Ah, but the system worked. In 1991 Fertitta paid a final visit to the FDIC office. He handed over a check for $2 million and was officially pronounced debt-free. What a country, he must have thought as he strolled out into the light—all zeroed out and nowhere to go but up. Now he could shed his eighties Teflon and dare to believe in a place called Hope.
IS IT TOO LATE TO MENTION THAT I LIKE THE GUY? Forget, for a moment, the trail of tears somewhere back yonder. Texas was civilized by daredevils like Tilman Fertitta who put everything they had on the line and wouldn’t back down. “While people sit around and talk about doing something,” he likes to say, “I go out and do it.” This January he snatched up the entire Kemah waterfront, an enviable acquisition anyone else could’ve done—but didn’t. “I’ve been hearing Houstonians talk about doing a waterfront deal on Buffalo Bayou for the past thirty years,” Fertitta snickers. “I’m gonna have Kemah finished and looking great while they’re still talking about it.”
But here’s something else. Today Fertitta is a gracious winner, rehiring people he fired years ago, richly rewarding those who hung tough with him, contributing thousands to the University of Houston and the University of Texas Medical Branch’s breast-imaging program, and no longer given to tacky displays of prosperity. His eight-thousand-square-foot Memorial home is pleasant enough. He’s married now, to an attractive and unpretentious woman named Paige, and he says he’s determined not to spoil his two young sons (ages two and four), who have already flown all over America, though never once on a commercial plane.
Since Landry’s first public offering in 1992, the acquisitions of Joe’s Crab Shack in 1994 and the Crab House in 1996 have spread his empire to more than ninety properties in 28 states. Yet despite his feed-the-masses-not-the-classes proclamations, Fertitta has begun to show an interest in memorable dining, recently hiring respected Houston chef Kathy Ruiz to revamp his menus. In late 1995 he acquired from George Mitchell 22 acres of Galveston beachfront—including not only Mitchell’s San Luis Hotel but also the old Key Largo, which his cousin Frank had sold to Mitchell in 1987. Fertitta pumped millions into the sagging San Luis, added the finest landscaping touches the Seawall had seen in decades, and even opened up a first-class steakhouse at the San Luis, about which he declares, “I don’t give a s—t what it costs me. I want to serve the best meat there is.”
This is the Tilman Fertitta he always wanted to be. One of the good guys. Doesn’t smoke, seldom drinks, and is anti-drug to the point of randomly testing his 12,000 employees. Sees something of himself in Bill Clinton, who “was doing deals in the eighties just like the rest of us—I can’t sit and judge,” but who “really does care about poor people, black people, education.” During one of his private moments with Clinton, Fertitta broke from his industry and advised the president that an increase in the minimum wage wouldn’t lay waste small businesses, and anyway, it was the right thing to do.
It astounds him, then, to learn that so many people seem to think he’s so wrong, so nasty, such a jerk. Sure, his management style could be termed thumbs-on, and it’s true that at his Kemah and San Antonio locations he accused waiters of throwing out the silverware with the food scraps and dumped the garbage cans onto the kitchen floor to prove his point. But he made a point of tipping the busboys and dishwashers after they cleaned up the mess. And, yes, there he was at the San Luis, personally showing the bellhops how to hold the door open and greet the customer. “I’m a teacher,” he says, defending himself. “I’ll take you to a different level.” Or he’ll show you the door, as he did when he summarily fired seventy employees the day after he took over Mitchell’s hotel. But their jobs were expendable and that’s business, so why hold that against the boss?
And why hold it against Fertitta that, when he first moved a Landry’s into Kemah, he signed a lease that instructed the tenant not to open another seafood restaurant within a five-mile radius . . . and then, a few years later, opened a Joe’s Crab Shack right next door? Hey, the contract was ambiguously worded! Fertitta wasn’t the “tenant,” Landry’s was! And anyway, the landlord has been placated with a new contract, so why should anyone else complain? The same with Frans Gillebaard, who sold his three Kemah waterfront restaurants to Fertitta in January. He got in excess of $10 million on the deal. Why should he be offended that Fertitta had a squadron of two dozen employees, including general counsel Scheinthal, descend upon the properties at midnight the day of the closing to make sure that Gillebaard didn’t abscond with some of the furniture? That’s just good business. Instead of reviling Fertitta for living large in the eighties even as he was jacking around his creditors, why didn’t they thank him for adhering to the final settlement terms, unlike other fat cats he could name? Why not emulate him instead of trashing his name all over town, telling every loser on a barstool that Citizen Fertitta was nothing more than a nefarious mobster?
That was what the malcontents always fell back on. Fertitta, with his in-your-face, hot-blooded Italian disposition, had to be a wiseguy. Mob money got him in, mob money bailed him out, they would claim. After all, they’d say, wasn’t the arcade business controlled by the Mafia? Didn’t his Key Largo partner, cousin Frank, own three casinos in Vegas? And just what did Fertitta intend to do with all that property in Galveston and Kemah, if not make it a haven for gambling thugs? Because you knew, didn’t you, about his family . . .
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