[updated so moved back to the top]
Founded in 1999, Spicy Pickle is not have a good run. In 2008 the company’s income was $4.4 million but their expenses were $10 million, for a loss $5.6 million. In 2009 income was $4.1 million, and they slashed expenses and payroll to $6.1 million, for a loss of $2 million. They now have $800,000 left in the bank. They are desperately working on a new round of financing. I’d have to see unit performance and lease rates, but it could be an attractive acquisition for veteran QSR investor.
It also franchises a brand called Bread Garden Urban Cafe…a Canadian sandwich and bakery QSR I never heard of. The franchisor employs 28 people.
Update: March 18, 2010, 10:00PM CST
I updated the above financials stats with more details. I was still curious about Spicy Pickle’s financial predicament so I did more research.
Back in 2007, Spicy Pickle needed to raise more money. So it sold preferred equity that gave the holders superior rights to its assets and priority to dividend payments, and I’m sure other special treatments were in the agreement like rights of refusal for issuing more preferred equity. Fast forward to 2009, and Spicy Pickle needs money again. What’s left to give away? Not much, so it had to buy back the preferred equity. In 2009 with around $2 million in cash left, Spicy Pickle paid $1 million of its common stock and $800,000 cash to buyout the preferred equity holders. Clearly they wanted those preferreds out!
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-715-8115.
This is an interesting article and I can say from personal experience that I feel the Spicy Pickle is not doing a very good job in a very competitive sandwich world. I know I ate at the Spicy Pickle a few times in Colorado and I just didn’t feel the value was there. The bottom line is if the product isn’t there then you are going to have propblems. I am an example of a customer who passes right by a Spicy Pickle right across the street from my office to go to other restaurants I feel provide a better product and experience.