This morning I was thinking about a food or beverage stock to write about and for some reason Mexican restaurants is the first thing that popped into my head. So as I always do when looking for hot topics, I went to a list of restaurant stocks hoping to find something other than the large cookie cutter chains that dot the country. It took awhile but I finally found one with promise: Ark Restaurants Corp.(ARKR), New York-based with restaurants in Las Vegas, Atlantic City, Washington D.C., Florida and Connecticut.

The company is slightly schizophrenic in nature with neighborhood joints, larger touristy establishments, and everything in between. In total I think they own or manage 50 locations of one form or another. I definitely get the feeling this is an organization that is unsure what they want to be and I think this hurts them. If they would boldly step forward and make a commitment to developing and executing unique concepts, they’re sufficiently competent operators to move sales and profits forward in a meaningful way. Brandon Mathews of the Fool.com wrote an article in February that questions Ark’s long-term growth potential given they rarely reuse restaurant concepts. I disagree completely with that notion. Two restaurant groups that have done the exact same thing and been wildly successful are Richard Melman’s Chicago-based Lettuce Entertain You Enterprises and Columbus-based Cameron Mitchell Restaurants, the latter ironically enough received the 2005 Richard Melman Concepts of Tomorrow award, presented annually by Restaurant Hospitality magazine. If either of these companies were public, we wouldn’t be having this conversation. Sadly, they’re not.

There’s no reason a public company can’t do the same thing and be successful. True, Ark has been very inconsistent in its growth, up one year and down the next, but I believe this has more to do with them moving between a Melmanesque style and the Olive Garden model, and not with their ability to manage restaurants. In 2006, the numbers were flat. However, look more closely and you see a year over year same-store sales increase of 5.8 percent in New York City. That’s very respectable. In the first quarter, company-wide same store sales grew 7 percent (+17.2% in NYC, +3.8% in Vegas, and -1.0% in DC) with sales from the Las Vegas restaurants accounting for 55 percent of total revenue, New York approximately 28 percent, and Washington and the others the remaining 17 percent. Clearly, the New York and Vegas restaurants are pulling their weight; the rest need to go.

Here’s the rub. The company, despite not firing on all cylinders, produces bottom line margins of 5 percent. It pays a dividend of $1.40 annually (4% yield) and grows sales in Las Vegas and New York, two of the countries best and most competitive restaurant markets. Further, it has low price to sales and price to book ratios as well as an excellent return on assets. Most importantly, Ark has an opportunity to be different from all the other publicly traded cookie-cutter restaurant chains.

Can they do it? It's a 50/50 proposition but you won’t go broke if they don’t.