Four Foods rolls out Little Caesars
Shauna and Andrew Smith co-founded Four Foods Group, which bought 48 Little Caesars and is adding more in Alabama and Florida. The duo also bought R&R BBQ and The Soda Shop, and developed multiple Kneader’s units.
The duo behind Utah-based Four Foods Group, Shauna and Andrew Smith, are heading south with a new project after purchasing 48 restaurants from Bravo Food Service. Now they’re aiming for 100 Little Caesars in Alabama with their novel profit- and equity-sharing model they used in the Kneader’s Bakery & Café system.
Smith said they would be slowing down expansion of the Kneader’s concept to focus on absorbing the new market and building up a satellite office in Birmingham, Alabama.
“We’ll grow at a prudent pace and see how they perform before we really hit the gas,” said co-founder and CEO Andrew Smith.
Prudent, of course, means different things to different groups. To the Smiths, it means updating the remaining Bravo Food Service units to a new design, then adding 25 to 31 restaurants a year across their brand portfolio and possibly setting up another recent acquisition—the Soda Shop—for franchising.
“So we have five R&R BBQ going up and will do five to seven of those a year; Kneader’s will be five to seven a year; Little Caesars 10 to 12 a year. Soda Shop—that’s one we’re considering franchising right now,” he said.
“We’ve gotten a lot of interest on that in the cookie and soda segment. It’s popular with both the hipster and soccer mom coming through to get a drink and does incredibly well on the unit-level economics,” said Smith. “We see ourselves growing about five of those as well.”
If the company hadn’t grown to 96 restaurants since being founded in 2008 it might sound more aggressive than prudent. Part of the fuel for that growth has been the profit-sharing model that brings in partners who invest in and then run the various locations. In return for their investment, they get a sizable chunk of equity. It brings in a little capital, but more importantly it brings in passionate entrepreneurs who wouldn’t have enough cash to do it alone.
Internal teams that run Four Foods Group’s development arm are another part of that growth. Smith says the model will allow the company to expand with drive-thru locations, which deliver a 15 to 20 percent sales lift over other Little Caesars formats.
“We look forward to … building buildings or acquiring land, which is one of the strengths we have. We’re doing that all internally,” he said.
That, Smith said, puts them above the bidding fray of everyone else looking for a 2,500-square-foot box.
“We’ll buy land, build a three-tenant building and build a Little Caesar’s and put a Soda Shop in there, Or I might put in one of our other concepts or fill it in with one of our other partners in those areas as a preferred developer, then own that real estate or do a sale leaseback,” said Smith. “We look a little larger at what we can do because it’s part of our skill set. A lot of franchisees are looking for spots. We’re looking to buy land and own it all.”
So with the deep bench of skills and experience with complex, large restaurants like Kneader’s, why Little Caesars? His pizza-pounding teenage boys helped make the decision.
“When they have friends over what am I doing? We’re doing the same thing most of America does, you go immediately to Little Caesar’s and pick up four or five pizzas,” said Smith, noting value pizza is mostly recession proof. “That’s one thing we like because the market takes a little bit of a correction—which I think we all expect something to happen over the next couple years. We wanted to make sure we had that catcher’s mitt at the bottom of our portfolio as well to catch that revenue.”
With 35 of the 48 locations in Alabama, the new units will serve as a platform for the rollup of the market. Smith said about $2.5 million of a recent funding round of $32 million—led by $22.7 million in debt from CIT’s Franchise Finance business segment—will go toward acquisitions of smaller operations in the region in a push for 100 locations in Alabama and Florida.
Added Shauna Smith, an Alabama native: “It’s nice to have the simplicity of the menu, but the great thing is that we have a good system and a good understanding of how to get percentages in line, anything from fixed costs to labor and food costs. That’s where we just apply that algorithm in any kind of concept.”