Home | I’d buy it

I’d buy it

25 Units of Mod Pizza Planned for Colorado

source: http://www.coloradoan.com/story/money/business/2016/09/26/farm–table-restaurant-pizza-brewery-tap-fort-collins/90935204/ A franchisee is planning to open 25 Mod Pizza locations in Colorado over the next few years. This segment has been growing rapidly, with contenders Blaze Pizza from Wetzel Pretzel founders and Pie 5 from Pizza Inn corporate. I’ve tried them all and Blaze Pizza does have the best tasting and textured dough. Blaze bakes pizza in a Woodstone oven which gives it a different taste profile from the conveyor belt bakes from Pie 5. It is less efficient in the Woodstone oven, and consistency does suffer when 15 seconds can make the pizza go from perfect to burnt, but the vast majority turn out well baked. Any of the concepts are a safe bet at this point. Expansion through delivery, especially through services like Uber Eats, will help this business model. I’d buy it!

Read More »

Wendy’s Sees Best Growth Since 2005

Some of Wendy’s initiatives seem to actually be working. They have modernized their design and led a good marketing campaign around the pretzel bacon burger. I’d be feeling better if I was a franchisee. Wendy’s (WEN) says company-owned same-store sales increased 3.2% in North America during Q3 and franchise-owned stores improved 3.1%. The two-year stack for same-store sales was 5.9% to mark the best growth since 2005. The restaurant operator improved its margins with a favorable sales mix and lower paper and beverage costs factoring in. (PR) Company-operated North America restaurant margin was 15.6 percent, compared to 13.9 percent last year. The margin improvement was due to a favorable sales mix, with lower paper and beverage costs, partly offset by a 100 basis-point increase in commodity costs. From a press release: CEO says “Our Image Activation program, which started in 2011, has accelerated over the past two years, producing increased traffic and higher sales,” Brolick said. “We have developed a standard ultra-modern design with optional upgrades that provide investment flexibility to meet the needs of our diverse system. We are confident our solutions will work for 85 to 90 percent of our franchisees.” The Company is offering an incentive program to qualified franchisees commencing Image Activation restaurant reimages during 2013. About 100 of these restaurants are currently in various stages of active process, and the Company believes most of them will be open or under construction by the end of 2013. In addition to the expected 2013 increase in Image Activation new builds and reimages, the Company continues to expect further acceleration in Image Activation reimages for both Company-operated and franchise restaurants during 2014.

Read More »

Drive Thru for Coffee

Seattle’s Best is opening 10 small (roughly 500 square feet) combination drive thru and walk up with no indoor seating. The drive thru makes all the sense in the world, and I’ve seen the success Starbucks has had with it. But, the walk up window is a little iffy because you will lose all retail opportunity (beans, coffee related equipment, music, etc.). http://finance.yahoo.com/blogs/the-exchange/seattle-best-bets-dfw-car-culture-204318262.html

Read More »

Franchisor’s Business Coaches

Most franchisors with 20+ units assign dedicated business coaches to franchisees to ensure operating compliance, help solve problems and bolster sales. For example, here is what Jimmy Johns claims to do: 1 coach per 26 stores and they visit for a full day at least once every 30 days. If there are any issues or suggestions they are discussed with corporate if necessary and a written response is provided thr following day. The reasoning goes that nothing should linger and everything is fixed immediately. As comparison, Culvers has one coach for about 20 stores, but obviously they are much bigger stores. I believe Culvers has had only one store closure. A ratio under 40 units per coach is better than average.

Read More »

Applebee’s Franchisee Who Pushed for Change

I enjoyed this short discussion with Zane Tankel, a 34-unit Applebee’s franchisee in New York. He pushed corporate for changes such as removing the baggy shirt and tie requirement (he says “who wants to look at girls behind the bar all buttoned up?”). His times square location is the chain’s highest revenue unit at $13.5 million last year. Here’s an example insightful answer: Q. What have you learned about doing business in those neighborhoods? A. When we open a restaurant and are interviewing, we will have guys show up with their pants hanging below their crotch, their hat on sideways, answering our questions antagonistically. Our recruiters will say to them, ‘If you’re here for a job, go home and get dressed like you’re applying for a job and then come back.’ Many will go home, change and come back. I give Applebee’s credit for not axing him from the system, and instead learning to work with him.

Read More »

Donatos Shedding Corporate Stores

This relates to the previous blog post as it illustrates another great company selling its corporate owned stores. Donatos, who happens to make my favorite pizza, announced it sold 39 locations to a franchisee, Titan.  Titan now owns all 23 Donatos stores in Indianapolis and 16 of the 22 in Cincinnati. The other Cincinnati locations are owned by other franchisees. The focus on franchising was originally announced in 2007 by the Columbus-based pizza chain. At that time, about three-quarters of Donatos’ locations were owned by the company. That has changed. Including the Titan deal, Donatos has 179 restaurants in six states, and 63percent are owned by franchisees.

Read More »

My Take on Papa Murphy’s Acquisition (updated April 7, 2010 @ 8pm EST)

As you’ve probably heard, Papa Murphy’s was acquired by a private investment firm for $180 million, about $150,000 per store.  I think it will turn out to be a good acquisition even with the steep price.  Papa Murphy’s has a combination of economic advantages that no other pizza chain has – 1)  it doesn’t have the overhead and capital costs of in-store baking, AND 2)  it is gaining strong penetration in grocery stores. I admit, from the consumer’s stand point, a take and bake concept is a little confusing at first. “You mean I have to bake my own pizza?”   But that impression soon fades.   The pizza in its raw form looks fresh and the final product cooked in the home oven is as good as pizza delivery.   One hurdle overcome by the industry was the difficulty of using a home oven to cook a pizza because it doesn’t brown up well with the ordinary pizza dough recipe.   To solve this, chains like Papa Murphy’s increase browning by increasing the sugar percentage and providing a disposable reflective baking tray. Another potential acquisition target is Homemade Pizza, a regional 25 unit chain in IL, MN and DC of classy take-and-bake stores where the average price of an “unbaked” large pizza is almost $20.   It seems to be doing well and has great branding.  Homemade Pizza pizzas are still priced on the high end because it is made with fresh and local ingredients.  The dough is prepared in a commissary to simplify store operations and reduce size requirements. _______________________________________________________ Update:  Below is more interesting history on Papa Murphy’s from a November 2009 article in Portland Business Journal.  Average store sales are about $535k. Papa Murphy’s is a holding of Charlesbank’s Equity Fund V, a $590 million private equity fund that …

Read More »

Former Franchisor Execs Becoming Franchisees

Staying on the pizza topic for a moment…..Little Caesar’s and Donatos (both pizza) have a large number of former company executives that have transitioned to franchisees. That is a good sign and both are adding units faster than their counterparts in the industry, each for different reasons (LC for price, D for uniqueness). Little’s Caesars hot-and-ready pizza deals have been a hit with a simultaneous improvement in quality from high speed impingement ovens. Donatos’ pizza is a very unique thin pizza similar to a St. Louis style or Chicago thin style, and it has operations and pizza assembly down quicker than anyone I’ve seen. Surprisingly, Little Caesars makes their own dough while Donatos uses preformed frozen dough that arrives ready to bake on a disc. Asking a franchisor salesman how many executives or former executives are franchisees is a great question.

Read More »

Smart Money Buys Dominos Franchisee In Japan

Bain Capital employs some of the smartest financial and strategic professionals in the USA.  Bain Capital originally funded Dominos Pizza back in the late 1990’s and reaped a hefty profit when it went public in 2004.  Now, Bain Capital is jumping back in with Dominos by acquiring the Japanese master franchisee, who delivers pizzas that often cost over $40 in Japan.  With Bain’s history in Dominos, I would bet that this is a smart investment.

Read More »

Burger King’s New Design

I like Burger King’s new 20/20 design. It’s this kind of change in customer experience that can reinvent the brand. Concept stores that have been rebuilt with the new design have seen 30% increase in sales compared to the old style. Burger King’s new broiler, Duke’s Flexible Batch Broiler, is a great piece of equipment too. It will allow more innovation and adaptability by franchisees. The price tag at $6,000 is reasonable. Whether it be Angus beef or chicken, the Flexible Batch Broiler turns frozen products into char flavored, tender and juicy pieces of meat. A single cook in the kitchen can deliver eight Whoppers or 12 regular burgers in two minutes or less. This would give a production rate of 240 Whoppers and 360 regular burgers per hour. Also, the Flexible Batch Broiler can flame broil products that haven’t been thawed out. Ranging from $5,400-6,900, the Flexible Batch Broiler will save energy, time and money. For more insight on Burger King’s strategy, see this presentation from an investor conference:

Read More »

High-End Fast Casual

I’ve been noticing a new crop of high-end fast casual franchise concepts that are the size and atmosphere of a traditional sit down restaurant, but orders are taken at the walk-up counter.  Ingredient in Kansas City comes to mind.  They follow the recent trend of hearth oven baked pizza, homemade pastas, salads and sandwiches. Vapiano is also an interesting urban-only concept started in Germany and now here in the USA. It is a very modern, high-end Italian fast casual concept.  The chefs are stationed around the dining room, and customers walk up to the chefs who prepare their order right there.  A customer’s food and drink totals are tracked using a chip card similar to one you’d see on cruise boats.  As the customer leaves the card is scanned and the customer pays. It sounds a bit like a modern cafeteria but the architecture is sleek and hip.  The average check ranges from $14.50 to $22, depending on whether it’s lunch or dinner, claims the owner.

Read More »

Some Sales are Up – Panera, Buffalo Wild Wings

Panera Bread (I appreciate their free Wifi) reported company-owned same-store sales increase of 3.3% for its third quarter ended Sept. 29, 2009.  Franchise-operated same-store sales increased 2.5%, marking a systemwide increase of 2.8% compared to the same period last year. The company-owned comps increase showcased transaction growth of 1.8% for the quarter, and average check growth of 1.5%. Average check growth was comprised of retail price increases of approximately 2.25% and negative mix impact of approximately -0.75%. Buffalo Wild Wings company-owned restaurant sales increased 26% for the quarter versus the same period in 2008. The growth was driven by a company-owned same-store sales increase of 0.8% and 33 additional company-owned restaurants in operation at the end of the 2009 third quarter. Franchise-owned same-store sales increased 1.9% for the quarter and 52 additional franchised restaurants were in operation during that time.

Read More »

Potbelly’s Growth Slows…For Now

Potbelly’s Sandwich Works with its core markets being Chicago, Washington D.C., and Texas, is walking away from some potential new locations, and renegotiating leases on existing locations to “reflect the new market conditions.” In recent months the sandwich chain has walked away from at least two prospective deals in the suburbs, in Hillside and Romeoville, and local real estate sources say company executives have told them Potbelly is pulling back its growth plans here. Potbelly founder Bryant Keil said last year that the chain could double its Chicago-area stores to more than 150, and hired former Sears CEO Aylwin Lewis to spearhead growth nationwide. Mr. Lewis said he wanted to accelerate expansion and at the very least maintain Potbelly’s growth rate of about 40 new restaurants a year. But the dramatic drop in the economy over the last six months has hit even the private Chicago-based company known for its kitschy décor, toasted subs and fresh-baked cookies. Potbelly’s costs to build its stores are higher than its rivals’, sources say, so the company can’t afford too many mistakes in a climate where sales are likely to be slow.

Read More »

Potbelly’s Sandwich Works in Chicago to Franchise?

The very popular Potbelly’s in Chicago appears to be getting ready to franchise after opening 200+ company owned units.  Even though their web site still denies franchising is in the works, this job description has the following requirement:   Must have franchisee expereince and knowledge of how to manage a mix company franchise system          Photos and some random YouTube video of Potbelly’s are below the fold for you Chicago virgins.

Read More »

News: Buffalo Wild Wings, Denny’s, Baskin-Robbins, Bennigan’s, Donatos

Buffalo Wild Wing’s own restaurants in the second quarter rose 8.3%, and franchises rose 4.5%.  Again, the corporate owned restaurant see double the same-store gains as the franchise.Same-store sales alone can be deceiving because it doesn’t tell the whole picture. Were higher same-store sales a result of additional customers, expensive marketing blitz or promotions, new menu items or new pricing? Denny’s performance has been mediocre for the 2nd Quarter of 2008. Same-store sales decreased 0.7% at company units and decreased 3.7% at franchised units. Company restaurant operating margin increased by 0.9 percentage points to 12.5% of sales  Do you live in Cincinnati? If so, Baskin-Robbins wants to open 30 stores in the surrounding counties.  The Bennigan’s bankruptcy came as no surprise. There are about 150 company-owned Bennigan’s restaurants, compared with 138 franchise locations.Bennigan’s franchisees are unaffected, only the corporate-owned locations are shutting down today. The bankrupcty filings also do not include the Metromedia-owned Ponderosa Steakhouse and Bonanza Steakhouse restaurants.  One of the best deals in franchising was made when Jim Grote sold Donato’s to McDonald’s and then bought it back for a rumored $50 million, a 1/3 of what he sold it to McDonald’s for just four years prior. Now, Donato’s has remade itself with a new look and expanded menu. [I love their pizza, bias alert] However, I am skeptical of management now that his daughter has taken over running the company. Is the best person to manage this company just happen to the be the daughter of the owner?   

Read More »