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Customer Surveys Reveal That They Return To
Spicy Pickle ‘Fast-Casual’ Restaurants 4 To 6 Times A Month Because Of The
Food, Which Consists Of Cheeses And Meats That Have No Preservatives Or MSG
And Their Freshly Made Bread
Services
Specialty Eateries
(SPKL-OTC: BB)
Spicy Pickle Franchising, Inc.
90 Madison Street, Suite 700
Denver, CO 80206
Phone: 303-297-1902
Marc N. Geman
Chairman, President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published - November 9, 2007
BIO:
Marc N. Geman
President/CEO, Chairman of the
Board of Directors
Mr. Geman is
the President/CEO and a Member of the Board of Directors of SPF. From 1994
to 1998, he was President of Pretzelmaker a national franchisor of soft
pretzels that he built from a handful to over 240 stores and sold to Mrs.
Fields Cookies, Inc. in November 1998. Prior to SPF Mr. Geman was an
officer, and director of both Bayview Technology Group a company that
developed energy efficient products, and in the early 90’s of Portfolio
Management Consultants, Inc., an investment advisory firm managing assets
for high net worth individuals. Mr. Geman has been a licensed attorney since
1973.
Company Profile:
Founded in 1999, Spicy Pickle Franchising, Inc. (OTC Bulletin Board: SPKL)
serves high quality meats and fine artisan breads, baked fresh daily, along
with a wide choice of eight different cheeses, twenty-two different
toppings, and fourteen proprietary spreads to create healthy and delicious
panini and sub sandwiches with flavors from around the world. As a leading
"fast-casual" concept, Spicy Pickle offers menu items that are far beyond
traditional fast food -- but without the price point of casual dining. The
hallmark of a Spicy Pickle restaurant is quality, service and an enjoyable
atmosphere. The company is headquartered in Denver, Colorado, with
franchised locations now open across ten states and many more in development
nationwide.
CEOCFO: Mr. Geman, what was your vision in
the beginning and where are you today?
Mr. Geman:
“When I originally got together with the founders Tony Walker and Kevin
Morrison, they were both chefs. I had looked at the concept and the menu
that they had at that time in their store over on 9th and
Lincoln, near downtown Denver, and felt that it was a franchiseable concept.
I had been involved in a previous franchise that we grew from about 6 to 250
stores called Pretzelmaker, and we sold that to Mrs. Field’s Cookies. I had
a fairly good vision about what could happen. This was a more complicated
business than the soft pretzel business certainly. Right from the very
beginning, I felt that as a franchise company, we could see the number of
franchise stores in the Denver market and we would be able to gain some
recognition on a national level with restaurant people because the food was
excellent and that is where we went. Right now, we are at 28 stores in ten
states, with approximately 10 in construction. We should be at approximately
40 stores in thirteen states by the end of the year. We have a lot more
franchises that have been sold behind that, which we will be looking for
locations for throughout 2008 and 2009, and even throughout 2010 on some
development agreements. Our vision was that we could be a very large player
in the fast casual market of several hundred stores maybe more. That still
is our vision today.”
CEOCFO:
How did you decide what states to go into?
Mr. Geman:
“That changed in a couple of ways; first of all at the time that we set-up
the franchise company in late 2003, our bread was being made by a third
party under our recipes; it was an artisan, Ciabatta, Foccaccia and Filone.
That particular producer of bread had facilities in certain areas, mostly in
the western United States and we felt that our expansion therefore should
logically extend to where we could continue to get that same source of
bread. As chefs Tony and Kevin told me many times that the bread makes the
sandwich, so we were interested in keeping it high quality. The two first
areas we expanded to were San Diego, CA and Portland, Oregon, and the
facilities that would have supplied our bread, closed or were unable deliver
it, as in the case of southern California. We learned very quickly that we
needed to solve our own problems, therefore all of our stores out of state
bake their own bread fresh from scratch on site; so that is the first issue
that drove locations.
As we continue
to expand, we target secondary and tertiary markets in this country, places
such as Sioux Falls, South Dakota, Reno, Nevada, Hattiesburg, Mississippi,
and Ocala, Florida. They are great locations for us; they are good for real
estate, which is usually less expensive and easier to find. There is less
competition in those markets and most importantly, when you go into a market
like that, if you go in with the correct PR on the front end, everybody in
the community knows you are there in a very short time. This isn’t to say
that Chicago or New York, LA, or Washington D.C. aren’t great markets, they
are and they hit our demographic very strongly, but it is a lot more
expensive and difficult to make yourself known in those areas. That is
really, what drives our expansion. We like people to come to us in those
locations assuming they are an appropriate franchisee and since we bake
bread ourselves now and the distribution of our meats and cheeses is
national, we really do not have a limitation other than that.”
CEOCFO:
What is special about Spicy Pickle?
Mr. Geman:
“The food; we make great food, it is really that simple. We conduct exit
interviews with our customers all the time through surveys in the Denver
stores and we have done them nationally. People tell us they come back to
our restaurants four to six times a month; that is very large repeat
business and shows a lot of customer loyalty. If you talk to people they
say, ‘I have to have a Bronx or I want a Sausalito Bandito’. They get
addicted to the sandwiches. The reason the food is so good is that all of
the meats and cheeses are non-preservative, free of MSG, and the flavor
profiles are very unusual. There is just not a lot of places that put apples
and portabella mushrooms and artichoke hearts and things on a sandwich. Not
that all of those go on the same sandwich, but have that many ingredients,
toppings and spreads that can be added to a sandwich and customers can come
in and build their own. I think we have a real following around that niche
concept and around the fact that we deliver very good food.”
CEOCFO:
Is your demographic different than your average fast casual restaurant?
Mr. Geman:
“I don’t know about the average fast-casual, but I would say that it is
different than the average sandwich shop. Our demographic is probably closer
to the demographic, I am guessing, of a Cosi or Panera Bread. We are a
white-collar, administrative, managerial, professional demographic, which is
the bulk of our businesses around the lunch hours. It is skewed slightly to
the female side; it is generally 25-55 year-old people who are in that
white-collar professional endeavor. Tech centers, universities, hospitals,
government centers in and around certain downtown areas; they all meet that
demographic. In general, sub-shops as a category tend to appeal much more in
a blue-collar environment. In a university environment, they can look for
the freshman and sophomores, so they are priced less than us. Our average
ticket is 7 to $10.00. We probably do not attract much of that blue-collar
demographic as maybe a general sub-shop.”
CEOCFO:
These are people who will pay a little more for quality.
Mr. Geman:
“I believe so. That has always been our experience and we think people
perceive good quality and good food when they put it in their mouths.”
CEOCFO:
How do you control what is happening in the shops that reflect on you when
you are not there, such as ensuring the quality, service and presentation?
Mr. Geman:
“That is what my background was. I had been involved with another franchise
company before that, and we learned a lot of lessons about franchising; one
of them was what I would call quality control, particularly when your stores
are spread out across the country. What we have done is hire an
infrastructure here; we have 21 full-time people on staff and the bulk of
those people are in the operations department; so we have store openers,
store trainers, and ongoing operations support people. They are always out
in the field and the stores are visited at least every other month, most of
them monthly at this point, because we are in areas where we are building
stores again. That is one way to do it; there are other methods of course.
We have a website that is very friendly for customers to go up and send us
comments and complaints if they want to, so both positive and negative. We
get feedback that way, and we know people in a lot of areas where the stores
are and we ask them to go in on a mystery shop basis. They tell us about
their experiences and if we have a problem in a particular store or a
particular area, then we put operations people on the ground to bring things
back up to the standard that we think they need to be.”
CEOCFO:
Are all of these stores franchised or do you own any corporately?
Mr. Geman:
“All the stores we have been discussing are franchised. We had a corporate
store, which we used for training and culinary purposes here in Denver; it
was one of the three original stores. It was opened in 2001, but it was too
small kitchen-wise to facilitate training and culinary as well as ongoing
operations of the store. Therefore, we are building a very large store here
in Denver right now that will be open in a month or so. It will accommodate
both the culinary and training aspects of our system. Next to it, we are
building a large bakery that will supply the fresh breads to all of the
Colorado stores because they do not bake them in-house, as all the
out-of-state stores do, since they came before that method was put into
place. We cannot really retrofit a bakery into those locations, so we are
going to bake the bread and deliver it to them fresh daily.”
CEOCFO:
Do you sell the breads as well?
Mr. Geman:
“No; we have had discussions back and forth about the bakery, but we are
taking one step at a time. We will set up the bakery first to make sure that
we have all of the infrastructure in place to supply our stores because that
is really the principle purpose of that bakery. If operation is working well
and the delivery is working well we will see where we will go from there.”
CEOCFO:
You have recently gone public; why now, what is the plan?
Mr. Geman:
“There are a few reasons why now. In the summer of 2006, we raised $2
million in a private offering and one of the pieces of that offering is that
we would create some type of exit strategy for those investors and
certainly, a public face is one way to do that. Secondly as a uniform
franchise offering circular requirement for the franchising, you have
audited financials, so we felt that we could process a registrations
statement fairly efficiently since, we already had audited financials as a
small company and that is a big hold-up often. Thirdly, we knew we wanted to
talk to investors in funds that would give us the next round of financing
that would help us build out company stores, which is really what we would
like to do. We eventually would like 15 or 20% of our total locations to be
company-owned, and in a couple of different markets. The public vehicle
gives us access to that kind of capital.”
CEOCFO:
Why should potential investors be interested?
Mr. Geman:
“There is long history of successful restaurant chains that have started
small. For people that had invested in them early on, assuming there was an
investment vehicle available for them at that time, they became commonplace
household names several years later. This is because they were successful
chains with good food and they had done the appropriate expansion. We
believe we fall into that category. Spicy Pickle is destined to have several
hundred stores if not more in most major cities, secondary and tertiary
markets in this country and we think the company can perform extremely well
for investors.”
CEOCFO:
What do you see as your biggest challenge and how are you ready?
Mr. Geman:
“We have two big challenges; the one that is not in our control is the real
estate, because neither our franchisees nor us own the real estate. Real
estate is very expensive, very competitive and it is difficult to get good
locations and hold them. The overall leasehold cost for the franchisees is
approximately 10% of their gross volume, which is where we believe it needs
to be or under that. That is our biggest single challenge, secondarily is to
make sure that our franchisees understand that we subscribe to a theory that
says that if you build it they will not come. Therefore, you have to go out
into the market place and into the community, be associated with your
community and build a loyalty and a following in that community. That takes
an outreach program, you cannot simply run a good restaurant within the four
walls of the restaurant; you have to do more than that in this very
competitive environment. Those are our two biggest challenges.”
CEOCFO:
What should people remember most about Spicy Pickle?
Mr. Geman: “Great food! Come and
have a good lunch, dinner or breakfast panini, which works for many who live
Sacramento. Enjoy the atmosphere and take a little time out from your day.”
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