Snack kingpin builds Auntie Anne’s
Illustration by Jonathan Hankin
Dustin King is building a snack empire 16 outlets at a time. That, anyway, is the number of Auntie Anne’s he and his partners in Pretzel King Enterprises have opened in malls over the last 16 months. “We were a little over-aggressive in growth,” concedes the 31-year-old franchisee.
Yet King, who also oversees four other snack brands throughout the Southeast, is a veteran operator who describes himself as a third-generation Auntie Anne’s franchisee. His entrepreneurial-minded grandparents began selling the soft pretzels in a Knoxville, Tennessee, mall in 1992. King, who recalls the long lines at the outlet, began working the cash register when he was 12. He opened his first mall store in 2009.
King now intends to tap the brakes on growth, adding just four Auntie Anne’s outlets this year. Nonetheless, if there’s an opportunity to add one he’ll quickly take it. “Auntie Anne’s is still the best model of all the brands we have,” he says.
Those brands include five Nestlé Tollhouse Cafes, eight Häagen-Dazs stores, six Planet Smoothies and eight Cinnabons. King and partners have opened their snack outlets using cash flow, then applying to BB&T Capital for a loan after sending the bank invoices. BB&T “reimburses us for 75 percent of all the invoices we paid on the project,” he says.
Not fazed by malls
The portfolio allows King to control the snack outlets in a given mall, thus giving him leverage. “There isn’t a need we can’t fulfill for the landlord,” he claims. He’s dealing with the nation’s largest: Tanger Factory Outlet Centers, Simon Property Group and General Growth Properties.
King, who’s based in Charlotte, North Carolina, isn’t fazed by increasing mall vacancies. The mall vacancy rate nationwide climbed to 9.1 percent in last year’s third-quarter from 8.6 percent in the second quarter. It had earlier peaked at 9.4 percent in the third quarter of 2011, reports commercial real estate data experts Reis.
Class A malls “will get stronger and have top brands,” he predicts. “We’ve been strategic to make sure we’ve placed our brands in those ‘A’ malls.” They include Lenox in Atlanta, Concord Mills in Charlotte, Augusta mall in August, GA and the Mall at Green Hills in Nashville.
Although he may be slowing growth, King is eager to expand his portfolio by adding Jamba Juice. Yet the 28-year-old smoothie concept, acquired by franchisor Focus Brands last year, presents a problem for King: He already has a smoothie brand in tow. In fact, he’s Planet Smoothie’s largest franchisee.
“Right now, I have a Cinnabon under construction that was going to be co-branded with Planet Smoothie. We elected not to build out the Planet, and the store will open only as a Cinnabon until we figure out if we can add a Jamba,” he explains.
In King’s favor, apparently, is the fact his company isn’t a Planet Smoothie area developer. His stores have been opened as one-offs. “We tried early-on to sign a development agreement, but Planet Smoothie dragged their feet. Then when they got wind of the Jamba/Focus Brands deal, they hurried things up. But we are loyal to Focus Brands,” he insists.
Fazoli’s, back in Georgia
Meet Lamont Brooks of Arriba Restaurant Group. Like Dustin King, he lives in the Southeast (Snellville, Georgia) and is an experienced franchisee now operating 29 Pizza Huts and 14 Dunkin’ stores.
Arriba Restaurant Group, his company, signed a development deal last fall with Fazoli’s, agreeing to open five ground-up units over the next several years in Snellville and Peachtree City, among other places. “I have the development rights to Georgia outside of Columbus and Mason,” he says.
To be sure, five is a relatively small number for the battle-tested Brooks whose franchise past includes Subways, Fuddruckers and Quiznos. “Then again,” he explains, “our plan is rather aggressive. We immediately made it known we also want to buy existing stores. So corporate put us in touch with selling franchisees in Kansas, Ohio, Iowa and Florida.”
Also like King, Brooks has a family history of franchising. His father operated Subways and Burger Kings in Venezuela, even expanding into neighboring Guyana. Those units have all closed with the collapse of Venezuela’s economy.
Although Brooks has been aware of Fazoli’s for years (having eaten in one long ago), Georgia development deals haven’t been available, he says. Unit economics, meanwhile, were appealing. “Food cost is in the low- to mid-20s,” he says, adding the food is good and service is quick.
He also praises CEO Carl Howard for his insight into the Italian brand. “He knew what was needed,” Brooks says.
His first unit will open in about six months, in Snellville, on a busy stretch of Scenic Highway. True, nearby Highway 78 has more traffic, some 45,000 cars a day and the dirt he needs is cheaper. Yet, people traveling that road are typically on their way elsewhere and tend not to stop in Snellville.
Scenic Highway, on the other hand, has fewer cars. “But there are so many draws that traffic tends to be destination-oriented,” Brooks says. He estimates the new Fazoli’s will cost $1.5 million. Yet it won’t be ideally situated because the site isn’t on the main drag. “But we still think we’ll get enough traffic to make the numbers,” Brooks says.
Despite his group’s track record, Brooks avoids banks. Arriba’s growth instead is backed by wealthy private investors. “I think we can easily go in and get a bank behind us, but we just don’t try to,” he adds.
David Farkas has covered the restaurant business for 25 years as a reporter and food writer, and writes about development deals in The Pipeline in each issue. Send your franchise’s development agreements to him at firstname.lastname@example.org.