Spicy Pickle Franchising Updates Outlook

The company's new CEO (since April) Mark Laramie noted, "We have made significant progress in setting the company on the road toward profitability and ultimate success despite the poor overall operating environment in the U. S. in the past six months.

"These are still difficult times for restaurants, including for fast casuals and bakery cafes, as weak consumer spending continues and we are not expecting any significant near term help from the economy. Our comments should be understood in that context.

"Nevertheless, so far this year we have been able to:

• Consolidate our supply chain and purchasing power in North America into a single new supplier, Sysco Corporation, with a significant reduction in our cost of goods sold;
• Increase store level profitability, a benefit to franchisees and the company's restaurants;
• Reach an agreement with Premium Brands Operating Limited Partnership, owner of the Bread Garden® trademarks, to permit us to re-image our current BREAD GARDEN locations to utilize our new, wholly owned BG URBAN CAFÉ marks. Since we have full ownership of our independent BG URBAN CAFÉ brand, upon completion of the re-imaging, we will have full and independent brand rights and revenue streams for all of our existing and future locations and channel development.
• Begin a brand re-imaging program for our Canadian locations into BG URBAN CAFÉ locations with a fresh new look and menu;
• Launch a location focused advertising campaign for SPICY PICKLE stores that has already resulted in positive same store comp sales and increases in average unit volumes;
• Continue company reorganization with a program to bring in executives known to have had significant successes in this business, while controlling our cost structure;
• Secure funding that should carry us well into 2012;
• Visit all franchisees in their individual stores and developed a program of increased franchisee support
• Embark on new menu development at both chains and began improvements in products, per consumer surveys taken; and
• Shore up our new franchisee recruitment efforts and prepared for accelerated expansion.

"The results from our efforts so far have gained traction faster and better than anticipated," said Laramie. "Virtually every aspect of the company has improved and is showing meaningful progress. We have reduced our cash burn other than for new investment spending on advertising and store remodeling. For example, we are investing about $320,000 right now into the Canadian operations to transform them into BG URBAN CAFE locations, with a new image and menu redesign. We have also invested approximately $150,000 in newly created advertising campaigns, which are driving SPICY PICKLE sales.

"We are filling key executive positions with industry veterans who have proven extremely successful in closely related restaurant businesses. Some are initially consultants who will become full time as soon as possible and others are on staff now. Positions recently filled are: Branding and Chief Marketing Consultant Rob Elliott, Chief Financial Officer Clint Woodruff, Vice President/General Manager for Canada Jeff Branton, and Supply Chain and Business Development Consultant Peter Fowler. Together with our very strong board of directors, these executives provide the skills we need to meet our objectives.

"Regarding the Spicy Pickle franchise restaurants, we reviewed the entire program from top to bottom in view of the current economic climate. We looked at everything, from menu, quality, freshness, competitive offerings, sandwich size, suppliers, bread, image, economics, management assistance, staffing, sites and facilities. We improved store economics and we talked to all franchisees about what else we could do to help them. Part of our improved store economics directly results from our new vendor and supplier alliances noted above. While our prior U.S. and Canadian suppliers are fine companies who provided admirable services, the consolidation into a single North American supplier has led to a marked improvement in our overall economy of scale.

"Many of these changes are just beginning to take effect, and we expect to see the results over the next several quarters and more so as we move through 2011. Moreover, while we have cut ongoing general and administrative expenses, we are investing in the company's operations infrastructure in order to help franchisees become more successful and to create a more attractive opportunity for prospective franchisees. That means having successful, top notch restaurants that are very attractive to prospective business partners.

"For the remainder of 2010, we should add a few franchise restaurants and we should see several more next year. However, we believe as we go through 2011 our franchise program will pick up speed and that by 2012 franchise expansion in terms of restaurant openings should accelerate. We believe the funds we now have available, plus the cash generated from our various revenue streams should be sufficient well into 2012," the chief executive concluded.

About Spicy Pickle^® and BG Urban Café™ Brands:
Founded in 1999, Spicy Pickle Franchising, Inc. (OTCBB: SPKL) serves high quality meats and fine artisan breads baked fresh daily, along with a wide choice of eight cheeses, 22 toppings, and 14 proprietary spreads to create healthy, delicious panini and sub sandwiches with flavors from around the world. As a leading "fast-casual" concept, SPICY PICKLE restaurants offer menu items that are far beyond traditional fast food without the price points of casual dining. The hallmark of a SPICY PICKLE restaurant is quality service in an enjoyable atmosphere. The company is headquartered in Denver, Colorado, with restaurants in 10 states. A Spicy Pickle Franchising subsidiary operates as franchisor for BG Urban Cafes in the metropolitan Vancouver, Canada area. BG Urban Cafes serve coffee, pastries, breakfast items, lunch, dinner and a wide variety of desserts.                         

Logos, product and company names mentioned are the property of their respective owners.

Reader Comments:

Be the first to leave a comment for this article

Tweet