New GE Capital tool gives smaller firms access to ‘big data’
GE Capital Franchise Finance debuted its “SmartChart” web tool that allows GE customers to compare their performance within a location or a segment, including: analytics, geotargeting to provide information on a specific address and proprietary financial data and demographics by sector, segment and brand.
Agustin Corcoba, president & CEO, recently told the Restaurant Finance Monitor, our sister publication, that GE has 18,000 units in their database, allowing them to “merge demographic and trends and compare their store with others” in the area. “Sometimes they don’t even know what a good number is (in their area). It allows the customer to answer, where can I do better?” he said. They’ve used this kind of information to underwrite loans for years, but it wasn’t in “SmartChart” form to share with customers.
Part of their mandate, he says, is to level the playing field for middle-market businesses. “If you have the data it allows you to grow,” he said. “Anyone will work with the 100-unit operator, but for smaller brands, this is relevant, too. It gives them the power of big data.”
Why does GE do it? In part, because it’s good for them, too. “Having a healthy portfolio is helpful to us,” said Corcoba.
Tough year in store for restaurants?
This could be a bad year for restaurants, according to several analysts contacted as the year turned. “This is going to be one of the most challenging years for the industry in many, many moons,” said Bob Derrington, a Franklin, Tennessee-based analyst with Northcoast Research.
Cost is a major problem. Chicken, pork and beef prices are expected to increase this year. The University of Missouri expects record beef prices amid low supply. And healthcare costs are going up, anywhere from $8,000 to $30,000 per restaurant, based on restaurants’ own estimates.
Sales could take a hit, too. As it is, sales were expected to be sluggish this year amid weak employment. But now the payroll tax holiday is over and workers suddenly lost 2 percent of their paychecks. “Restaurant companies are going to feel that,” Derrington said.
For its part, the National Restaurant Association expects sales to grow 3.8 percent in 2013, but 0.9 percent when inflation is taken into account.
Investor urges DineEquity dividend
Pay close attention to the decision-making at DineEquity. Marcato Capital Management, a San Francisco investment fund, in December revealed a 5.5 percent stake in DineEquity and subsequently started urging the fund to pay a dividend.
Marcato wants DineEquity to pass all of its free cash flow to shareholders in the form of a dividend, beginning in the second half of this year. The argument: Investors are starved for income-generating investments, given the low interest rate environment. DineEquity has low capital requirements because it is an all-franchised business. The dividends would lure income-seeking investors and could double the company’s stock price, Marcato estimated.
DineEquity responded it would review the suggestions. Should the company opt to pay a substantial dividend—which is something Domino’s Pizza does, for instance—and if it drives up the stock price, other all-franchised companies could follow suit.
Could more ads boost Sonic?
Sonic hopes running more ads will get it back in franchisees’ good graces. The Oklahoma City-based, drive-in chain plans to increase its level of national cable ads to improve sales and, management hopes, encourage franchisees to start building again.
Sonic had an unbroken string of same-store sales increases for two decades until the recession ended that—a string based largely on its name recognition from a national cable campaign. Many operators have slowed or stopped developing in recent years since the company’s sales slump began in 2008. Yet same-store sales have been improving of late and its stock price rose 55 percent last year, among the best performances among restaurants on Wall Street.
Sustained sales improvement could get operators to build again. To sustain that improvement amid a tough environment, the company plans to increase the amount of national ads it runs. Last year, half of the company’s ad spending was on national cable TV. This year, it plans on devoting two-thirds of its ad budget on national cable. “Historically, the allocation of media spending has been an important component in driving same-store sales and new-store development,” CEO Cliff Hudson said.
Brentwood sells Pizza Hut franchisee
Brentwood Associates, the Los Angeles-based private equity group, has sold the 80-unit Pizza Hut franchisee Pacific Island Restaurants to another L.A. private equity group, Nimes Capital.
Terms of the deal weren’t disclosed, but sales of franchisees in good markets have been brisk and have generated good prices recently. Pacific Island was founded in 1971 when Pizza Hut first moved to Hawaii. The company now owns Pizza Huts there and in Guam and Saipan, along with Taco Bell locations. Brentwood bought the company eight years ago, calling it “a very successful investment.”
Nimes is the Los Angeles-based private investment arm of Nazarian Enterprises. It specializes in companies in “high-value asset classes with strong management teams in businesses with higher barriers to entry.” Among its restaurant holdings: Unami Burger, a burger chain based in Costa Mesa, California. Nimes has invested in numerous businesses, including technology, manufacturing and real estate. Nazarian Enterprises was a lead, early-stage investor in Qualcomm.
Ruby Tuesday exits side businesses
J.J. Buettgen isn’t wasting time. The CEO of Maryville, Tennessee-based Ruby Tuesday, just two months into the job, is already making some big changes.
In January, he said the company plans to exit some of the chain’s side businesses, notably its seafood concept Marlin & Ray’s. That 13-unit chain will be closed “immediately.” The company is also exiting its one Asian concept, Wok Hay, and is seeking a buyer for its two licensed Truffles Grill restaurants. The company is keeping its Lime Fresh fast-casual concept, but is closing two locations.
Buettgen said in a statement that “driving profitable same-restaurant sales at Ruby Tuesday is our first and most critical priority,” and that Marlin & Ray’s “is not an optimal conversion vehicle for us going forward.” The decisions will cost the company $16.9 million.
Buettgen is making a big break from the company’s previous CEO and founder, Sandy Beall, who spearheaded the creation and licensing of other brands as conversion vehicles for closed Ruby Tuesday locations.
New mini register from ShopKeep POS helps speed line
A new iPad mini register from ShopKeep POS is helping franchisors speed up the lines at their operations, according to the New York-based company and at least one user.
The mini register is designed to let merchants service customers when they walk in the door, says Jason Richelson, CEO and founder of ShopKeep POS. “Plus, it helps to make operations run more smoothly when lines get long.”
Priced at $49 per month, ShopKeep is aiming the product at quick-service restaurants that tend to get long lines during morning rush hour and lunchtime.
David Steingard, CEO of Laughing Man Coffee & Tea in New York, says the mini register improves customer relations. “We like our guests and we like to see them, so the most important thing for me is that we welcome them right away so they never feel like we are too busy for them,” he says. The iPad mini register allows staff to take orders further down the line, outside, or “where we need to.”