Emerging brands among standouts at annual restaurant confab
From a ‘blow-your-brains-out’ strategy to a plea for positive thinking—a record crowd heard it all at the Restaurant Finance & Development Conference. We present a few highlights
Alexis Schulze started juicing on her own years ago, blending up vegetables and fruits in bright green or purple or orange concoctions and gulping them down. “We fell in love with how we feel after we juice,” she told a Restaurant Finance & Development Conference audience on a panel about emerging brands.
Henry Winkler, in red tie, and his fans, left to right: Pravesh Chopra, RJC; Jeff Moosa, J&D Restaurant Group; and Sunny Ghai, RJC.
Now her company, Nekter Juice Bar, has 25 stores, built from cash flow at first and more recently with Small Business Administration-backed loans. They have plans to open 30 more in the next year.
Nekter was a standout among the dozen entrepreneurs who spoke about the topic, at the annual conference held in November and presented by Franchise Times’ sister publication, the Restaurant Finance Monitor, which this year attracted more than 2,100 attendees.
She, like the others, demonstrated the wide range of paths concepts can take as they strive to hit the big time—100 units and beyond. Because so very few arrive there, these emerging brands and their founders draw intense interest.
Nekter’s is a growth plan not everyone can love. “I call that a blow-your-brains-out strategy,” deadpanned Chris Doody, a fellow panelist and the founder of Piada Italian Street Food, a fast-casual Italian concept with 14 stores headquartered in Columbus, Ohio, and with plans to open six more by the end of 2013. Catterton Partners invested in September.
Doody built his reputation with Bravo Brio Restaurant Group, the sale of which financed the formation of Piada. Doody saw an opening in the fast-casual sector for Italian food, so he started doing research, visiting Italy, of course, but also Chipotle and Panera to get tips on their assembly line style. “We focus-grouped it in my office for nine months,” he said, bringing in hundreds of people 35 at a time over nine months to try the food.
To the private equity investors who back emerging brands, such variety in entrepreneurs, concepts and approaches is familiar. No one formula is a sure bet, and in fact most young concepts fizzle.
“It’s really hard to grow an emerging concept. Just a fraction become successful, and why is that?” asked Scott Pressly, founder of BIP Opportunities Funds in Atlanta and a panelist. “It’s all the crap that has to be put in place.” BIP purchased a minority stake in Tin Drum Asia Café and a majority stake in Tropical Smoothie last year.
One final standout was Peter Yen, founder and CER (that stands for Chief Executive Roller) of Sushirrito, one of seven entrepreneurs who pitched their emerging concepts to investors at the conference. With a background at a private equity firm, he’s raised a Series A round of financing from friends and family and used SBA loans to build three stores. Now he wants to raise up to $2 million in a Series B offering.
He and his brother invented an extra-large sushi roll that’s a cross between sushi and a burrito, and they’re selling like crazy in San Francisco with names such as Geisha’s Kiss and Mayan Dragon. Yen’s sign-off implies the promise he believes, like all the others, lies in his emerging brand. “Roll with us and help change the way people perceive and eat sushi,” he said.
Negate the negative, actor urges
Henry Winkler wants people to think positive. So the actor (of “Happy Days” and “Arrested Development” fame) and author told the audience at the Restaurant Finance & Development Conference.
Larry Weinberg of Cassels Brock, right, mixed it up with KISS frontman Gene Simmons.
“I was the king of negative thinking. I can’t. I won’t,” were his most prolific thoughts when he was young, he said. Then he came to believe the opposite: “Do not finish a negative thought. It does nothing to enhance your life. Stop it. Move it out. Move a positive in,” he advised.
Winkler said he was in the bottom 3 percent academically in school, but he went on to a successful acting career. He’s made it his mission to encourage children who don’t learn as quickly as others, and he said he didn’t enjoy the same support from his own parents. “If you say to a child early and often enough, ‘You’re stupid,’ they’ll believe it,” he said.
And his closing shot: “Thanks for listening. My parents never did.”
Buy-sell market is ‘balanced’
This year will be good in the restaurant industry, at least if you’re buying, selling or financing a restaurant. That’s the conclusion we took away from the conference.
Interest rates are historically low. But multiples are going up. Sellers are getting what they want, and so are buyers. Not surprisingly, deals are expected to increase in 2014, along with restaurant sales, following the one-year breather everybody took in 2013.
“It’s balanced, for the first time in a long time,” said Bill Pabst, principal at The Cypress Group.
Buyers are making decent investments and can get a decent return. If you want to get out, sellers are getting a decent price. And lenders are making solid loans that are decently underwritten.
Three years ago, finding a lender at RFDC was only slightly easier than a game of Where’s Waldo? This time around, at least a dozen lenders were there, eager to get deals done. They did so in big numbers in private meeting spaces and public hallways at the conference.
KISS front man shows his colors
Gene Simmons, the front man for legendary rock band KISS, displayed the full force of his personality as a key speaker.
He bounded on stage in trademark sunglasses, at 9:30 a.m., after the glorious video of his life finished showing. His ending line in the video? “And that’s why it’s good to be me.”
He continued the theme for his talk, where he touted his 5,000 licensed products, from condoms to caskets, and his franchised restaurant chain Rock & Brews, which delivers rock-n-roll music in a “German beer hall atmosphere.”
“The phrase God bless America is apt. The American dream is alive and well. When I see the American flag, I stop and shut the eff up to give it respect,” he said.
“We’re having the time of our life to talk about really cool stuff, about how to make more money,” he told the record crowd at the annual gathering of restaurant operators and the people who finance them.
“I have money. I’m proud of it. I earned it. I deserve it,” he added, drawing a nice round of applause.
Simmons then plunged into the audience, stopping to talk with anyone who had the chutzpah to put up a hand and draw his attention. Toppers Pizza’s chief development officer was one, and when Simmons finished their conversation, Simmons said, “You, sir, are a powerful and attractive man.”
A quick-thinking Chris Jenks replied: “That’s the first time anyone has stated that to me at this conference,” to loud laughter.
Simmons dispensed marketing advice that was simplistic, reminding people to register their trademarks, and scolding people if they left the flip side of their business cards blank—he bemoaned all that wasted space.
He ended with a parting shot as vainglorious as the opening: “It’s been a pleasure to see me,” he said, and he was out the door.
Finance chiefs share tips
The CFOs of two franchised restaurant chains were among those at the conference sharing tactics to drive and forecast sales.
At Bojangles, said CFO John Jordan, they avoid “extreme value discounting.” Rather, “we’ve contracted our menu to focus on core items,” and they’ve seen same-store sales rise by 7 percent, he said.
They do limited-time offers of high-quality items, and they’ve added an entire meal in an “iconic box” that acts as a billboard for the brand, along with a campaign that encourages patrons to “tailgate anywhere.”
At Dunkin’, said CFO Paul Carbone, “we’ve come lights years, using heavy analytics,” which tie discounts to holiday shifts, weather patterns and many, many more data points to allow precise marketing. “It is amazing the rigor behind the process and how close they get,” Carbone said about the analysts who make the predictions.
Technology is used to control labor costs at Bojangles, according to Jordan. “In ‘07 and ‘08 our CEO said, ‘There may be a recession but Bojangles chooses not to participate.’ We decided to reinvest in our people. We invested in technology,” and switched to 100 percent online applications.
Fifty percent who start the online application never finish it, and “we would have hired those 50 percent” in the past, Jordan said. One-third of the people score as weak, and cannot be interviewed. Twenty percent fail the background check, and all those people that in the past would have been hired, now don’t make it.
Turnover was almost 300 percent in the past, he said, and now it’s 100 percent or less. “It’s been a game changer for us because we have better people and we keep them longer.”
Delusions of grandeur
Keynote speaker Charles Krauthammer served up plenty of red meat to the conservative-dominated crowd at the conference. He was a psychiatrist in his earlier days, he said, and now is a commentator and pundit for Fox News, Time magazine and The Washington Post. “In both lines of work I deal with people who suffer from paranoia and delusions of grandeur,” he said. “But the difference is, in Washington people with delusions of grandeur have access to nuclear weapons.”
Krauthammer said President Obama is determined to change the country into the European model of Social Democrats, something he deplores. Obama wants to reverse the trajectory set by President Reagan, he said, which “prevailed for 30 years.”