Knobias Clip Report (08-19-2008) SPKL
Submitted By Knobias ClipReport
SPKL: CEO Discusses Growth and Expansion in “Fast-Casual” Restaurant Segment
By Fain Hughes, fhughes@knobias.com
A rising player in the “fast-casual” restaurant segment is Spicy Pickle Franchising, Inc. (SPKL). As a fast-casual concept, Spicy Pickle(TM) offers menu items that are far beyond traditional fast food, but without the price point of casual dining. Spicy Pickle(TM) restaurants serve high quality meats and fine artisan breads, baked fresh daily, along with a wide choice of eight different cheeses, twenty-two different toppings, and fourteen proprietary spreads to create healthy and delicious panini and sub sandwiches with flavors from around the world. The Company is headquartered in Denver, Colorado, with restaurants open or under construction across 16 states and many more in development nationwide.
Marc N. Geman, CEO of Spicy Pickle Franchising, explained to Knobias,”We are unique in that we have an enormous amount of toppings and spreads. The spreads are made by the two chefs and founders of the Company, Anthony Walker and Kevin Morrison. The topping are highly unusual and not things that you would normally find such as portabella mushrooms, kalamata olives, horseradish coleslaw, or even apples. People can build their own sandwiches or salads, so there is a lot of customization capability that people like. Some may have dietary concerns, or they may feel adventurous and want to try something different. The ingredients and flavor profiles for our food is what we are all about.”
Spicy Pickle currently has 42 open stores, with 8 of those being corporate-owned in the Denver market. It is also currently looking for a second corporate market. With the franchise agreement, it sells to multi-unit developers that can build out a city or territory with several restaurants. The multi-unit developers that Spicy Pickle seeks have usually operated several restaurants and maybe even different concepts before.
Mr. Geman added, “We have built a robust infrastructure that can support a very large operation of franchised and corporate stores. Not only do you have to have a good idea and a good product, which we have, but you need the infrastructure for rapid expansion. We have put together an infrastructure that can support two to three times what we currently have open. However, the worst thing that you can do is open a lot of franchise stores without appropriate infrastructure to train and support them because you will ruin your brand. So, we are very careful about that in trying to roll out at a fast pace. We want so insure that everyone recognizes the brand and gets the same quality of food.
The Company is aggressively looking at potential acquisitions of smaller chains that don’t have the infrastructure or capital. The Company may convert those locations to Spicy Pickles or operate them independently, as long as their focus is the daytime population meal service.
When asked about the viability of the catering service at Spicy Pickle stores, Mr. Geman said, “All of our stores provide delivery and catering services.The market response to catering has been tremendous. In the stores that are really rolling out catering in their communities, it is showing up as 10%-20% of their sales. The most logical extension to increase unit volumes for us is catering because it hits the same day part at the same time. As long as a store is capable operationally of handling it, it is the easiest one to go after because you are going to them, and they are coming to you at the same day time.”
The Company’s marketing strategy is local restaurant marketing. Each restaurant supports local events such as local sports teams and charitable events. The Company recently implemented a successful outdoor advertising campaign in the Denver area.
The current economic climate does not seem to have significantly impacted Spicy Pickle. According to Mr. Geman, “Interestingly, the fast casual segment and lunch segment have probably been the least affected. People like to get out of the office at lunchtime, and people still have office meetings and require catering. The casual and fine dining segments are being impacted much more significantly that fast-casual.”
Mr. Geman discussed the near term outlook for the business. He said, “We have projected revenues for 2008 of $4 million from corporate stores and franchise fees. In order to become profitable, we need somewhere between 75-100 operating stores. The exact number will depend upon the mix of corporate to franchise stores.”
Commenting on the decline of the stock price over the last several months, Mr. Geman said, “There is no fundamental reason for the decline in our stock price. We have over 5,000 shareholders. For a small bulletin board company that is a lot of shareholders, so we have a very widespread interest in the stock. The stock also supports itself very well at those levels. I think the stock should be a little higher than it is right now.”
Spicy Pickle(TM) was ranked number 25 in Fast Casual Magazine’s 2007 Top 100 Movers and Shakers. Management of the Company has extensive experience in franchising, finance and culinary expertise to lead this Company in the $70 billion fast-casual dining industry. With increased consumer demand for healthier foods and premium ingredients, the fast-casual dining industry provides an attractive growth option for investors to consider.
Additional information can be obtained from the Company’s website at www.spicypickle.com.
This company is a participant in the IRIS program. The investor relations agent may have compensated Knobias for inclusion of the above company into IRIS. Please refer to the “IRIS Program Disclaimer.”
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