Five Guys backer turns to Pincho, Batteries Plus boss takes breather
Illustration by Jonathan Hankin
“They were great at creating a concept. They weren’t so great at running a restaurant,” says Pincho franchisee Ned Scherer with a chuckle. He’s referring to the fast-casual concept’s co-founders, Nedal Ahmad and Otto Othman. Scherer, meanwhile, has agreed to open 10 units in and around Washington, D.C.
He expects his first Pincho to open later this year, likely in Tyson’s Corner, Virginia, near his office. If that unit performs well, he says, he’ll begin populating the Washington, D.C.-Baltimore corridor.
Scherer is a successful CPA and investor who lives in Northern Virginia and winters in Jupiter, Florida. He’s also a longtime Five Guys franchisee with 12 outposts, in Little Rock, Fort Smith, Rogers and Jonesboro, Arkansas, and Knoxville, Tennessee. (A partner named Laurie Lowe oversees them, though she may transition to Pincho development, according to Scherer.)
“I was a big believer in Five Guys. They started a genre and were focused on quality. I said, ‘This has legs,’” Scherer recalls, adding he even made a loan to the Five Guys founding family.
Rolling up capital
Today, he’s a big believer in Pincho, which has 10 company units in South Florida. Last spring, Scherer led a group in a Series A round, rolling up the then-seven restaurants and creating Pincho Holdings. Terms of the deal, brokered by Exeter Capital, were not disclosed.
Scherer also helped the founders calculate unit economics to appeal to franchisees by showing how “franchisees could put 15 to 20 percent on the bottom line.” He notes his own AUVs could reach $1.4 million. “We should make $250,000 if we can do that,” he says. (Note: As of late February, Pincho’s franchise disclosure document hadn’t been released.)
Meanwhile, two experienced restaurant execs—Jim Mizes of Blaze Pizza and Andy Howard of Huey Magoo’s Chicken Tenders—have joined Pincho’s board. Jayson Tipp, a development veteran of Starbucks and Papa Murphy’s, was named CEO and president last year.
“I think it’s going to be big. So I’ve asked a few people to go along with me,” he says about Pincho and referring to the 30 “friends and clients” whom he’s invited to invest in his new franchise.
Scherer concedes real estate in Washington, D.C., is costly and decent locations difficult to find. “I’ve got people looking,” he explains, “and as soon as we come up with a first location we like, we start building.”
Pincho may wind up in former Taylor Gourmet spaces. The D.C.-based hoagie chain shuttered all 17 units in a Chapter 7 bankruptcy last fall. “We’re looking at a couple of their locations. They’re good,” he says.
Scherer is confident Pincho’s chances at drawing crowds like in Miami are high: “If the food resonates and Laurie operates them, we’re going to do well.”
Joe Kasper is taking a breather—a pretty long one. It has been three years since he and his cousin opened their last Batteries Plus Bulbs, number 19, in Tampa, Florida.
“We grew really fast in a short amount of time,” he says, adding they opened three stores at once at one point.
Since then, the two have been catching up “on the infrastructure side of things.” They are, however, planning on adding more Batteries Plus Bulbs outlets once they have identified where the next one would perform best. Florida, incidentally, had the second-most Batteries Plus Bulbs stores of any state, with 57 open at the end of 2017, according to the franchise disclosure document. Texas, with 72, has the most.
It could be in any of their five Florida markets: Tampa-St. Petersburg, Orlando, Winter Haven, Jacksonville or Ocala. The cousins also operate four stores in the Minneapolis-St. Paul market of Minnesota, where both got their start in the business.
By the time he was 16, in 1995, Kasper was working as a clerk in his uncle’s Batteries Plus Bulbs outlets in the West St. Paul market. After high school, he earned an associate’s degree while helping his uncle open and manage the five-outlet franchise.
“I really liked the business,” Kasper says. “It has never been boring. I never get up and say, ‘God, I don’t want to go to work today.’” Kasper and his cousin wanted to expand, but his uncle had hit his territory limit. The cousins then partnered and picked Florida, eventually buying out the uncle who loaned them the capital to open their first two Batteries Plus Bulbs.
Confident in corporate
The Hartland, Wisconsin-based franchisor, which operates and franchises about 720 units, charges $37,500 for a multi-unit (three stores) deal. The company also levies a new store marketing campaign fee from $10,000 to $20,000, depending on market size. The money is spent, notes the FDD, “to conduct local store opening promotions in your market.”
Royalty and advertising fees add up to 6 percent of net revenue. All in, the cost to open a 1,200- to 1,800-square-foot outlet costs from $190,144 to $367,358. Kaspar says fees total about 9 percent of sales. At the end of 2017, average store net revenue was $853,669.
Kasper allows that he keeps an eye on other industry franchises, though mainly out of curiosity.
“The food industry, especially fast-casual, is interesting to look at, but there’s a lot of complexity,” he says. “I’ve never gotten to the point of requesting an FDD or doing due diligence.”
He appears content operating Batteries Plus Bulbs stores. “The business has changed a lot in 25 years, and the franchisor has done a good job. Knowing we have a good partner in corporate make me confident they and we will adapt,” he says.
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.