In a recent Folly Volley for Texas Roadhouse (NASDAQ:TXRH), CEO G.J. Hart said he believed its value-focused concept was much like Southwest Airlines' (NYSE:LUV). In tough economic times, particularly with high fuel costs, management believed that this strategy would give the company an opportunity to attract higher-income customers who might otherwise venture toward high-end steak houses. Smith & Wollensky (NASDAQ:SWRG) is just such a steak house.

Well, two can play that game. After fiscal 2005 fourth-quarter results were released, CEO Alan Stillman said that Smith & Wollensky has renegotiated its licensing structure with the original Smith & Wollensky in New York City, allowing the company to open up smaller units -- what he referred to as Smith & Wollensky Grills -- at a significantly lower cost than under the older agreement.

These Grills will be used to target a wider range of consumers while maintaining the higher-income customer base. Smith & Wollensky management sees these units achieving a check average of roughly $45 to $50, compared with the larger, existing restaurants that are often $80 to $90 per check. Also, these smaller units are expected to have a much higher turnover on tables. And because these units will cost less to open, management believes that it has enough free cash flow to pay for these new concepts.

Perhaps this will be the ticket to get the company on the right growth track. It needs to do something -- its recent performance just isn't going to cut it. Stillman said in the conference call that he was "extremely unhappy with the results." With an 11.3% top-line decline for the quarter, I can see why. While there was a hurricane-related closure and one less operating week than in the comparable period a year ago, the meager 0.9% increase in comps, calculated on a weekly basis and without the effect of the New Orleans restaurant, isn't exactly befitting of a company that prides itself in serving up only the best.

If there is a positive, it's that the company is preparing itself for growth. With a manageable balance sheet and cash flow, Smith & Wollensky should have enough capital to pay for the new Grills. And if the concepts perform as planned, we may be looking at a potential winner. Given the recent underperformance, however, prospective investors may want to consider waiting to see if the company can deliver first.

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Fool contributor Jeremy MacNealy does not have any financial interest in any companies mentioned.