Tuesday, 12 January 2010 18:54
January 11, 2009
Brands To Keep Your Eye On In 2010
The fallout of retail rents and shuttered restaurants will finally give way to sizeable expansion pipelines for
many concepts in 2010, even though most companies fell short of their goals last year. Smashburger,
Checkers Drive-In Restaurants Inc., Jersey Mike’s, Marco’s Pizza, Uno Chicago Grill, Pizza Patrón,
Bruegger’s Bagels, Hurricane Grill & Wings and Rumbi Island Grill all aim to ramp up expansion in
the new year. Smashburger sees a slew of multi-unit franchisees signing on, and Checkers increases
development through existing franchisees and its flexible model. Jersey Mike’s works on an immense deal,
while Marco’s offers financing help and a new distribution facility to its franchisees. Uno expands through
three prototypes. Pizza Patrón envisions a busy year ahead with a new model, new monthly deals and a
shift in brand positioning. Bruegger’s looks into co-branding and acquires another chain. Hurricane will
grow by more than 30%, while Rumbi works on some franchise deals.
Most forecasts show restaurant traffic to be weak until at least the second half of the year, with many
experts not anticipating stabilization until 2011. Personal consumption is actually predicted to be up
this year and even though it’s only expected to rise 0.3%, any jump is a good sign. In 2009, personal
consumption dropped 1.1%. Recent NPD numbers show consumer spending at restaurants fell 2%
and total industry traffic is down 4%. High national unemployment in excess of 10%, elevated
consumer-saving rates, lower disposable incomes, tightened credit, a $3.4B shortfall in lending to
franchise businesses, lower grocery store prices and cost-saving measures by businesses will continue
to have a negative effect on restaurant traffic, revenue and earnings. This causes a lot of restaurant
companies to hide their heads in the sand and wait for it to be over, but some chains are not giving up
and will actually increase expansion efforts in order to have greater saturation in the marketplace in time
for the turnaround.
Most of these companies are showing flat to positive SSS and they are working on some new brand
initiatives, franchising packages, models, menus and promos that should help keep sales up. Lower rents
and higher TIs will help open the door for concepts that are in the financial position to grab some great sites
this year. Financing will remain tight, but multi-unit, well-capitalized franchisees shouldn’t have too much
of a problem if they can plunk down 40% to 50%. These nine companies are our selections for significant
growth in 2010.
Smashburger
Expected openings in 2010: 80 to 100
Actual openings during 2009: 34
There is no stopping the newest fast-casual industry darling that kicked off 2009 with 10 stores and
plans to have almost 150 by this December. Smashburger sold more than 200 franchised units last year
alone, which includes some sports stars and major franchising companies. Count on the company to
add franchise units in Las Vegas, Los Angeles, San Diego, Sacramento, Calif., Orlando, Fla., Lexington,
Ky., Texas, South Dakota, Missouri, Louisiana, Arkansas, Wyoming, New York and Michigan this
year. Corporate growth is expected in Chicago and the Washington, D.C., Baltimore and Virginia areas.
President Scott Crane believes his brand is in the perfect niche and is growing at a great time thanks to
the lowest real estate rates he’s seen since the mid-1990s. Look for Smashburger to test online and
call-ahead ordering, as well as a table delivery system to speed up service. Units are 2,000 s.f. and buildout
is down 10% to 15% over last year at $360K. AUVs range $1.1M to $1.2M and the average check is just
below $8.
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Brands To Keep Your Eye On In 2010…
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Checkers
Expected openings in 2010: 64 to 68
Actual openings during 2009: 40
With a 60% to 70% increase in expansion compared to 2009 and a flexible model, Checkers is one
company to watch out for in 2010. SVP and Chief Development Officer Lynette McKee notes that a good
portion of new sites will come through existing franchisees, which she feels says a lot about the company.
McKee also believes Checkers is in a good position to take advantage of low-priced real estate and is
confident franchisees will be able to find financing. Development will remain east of the Mississippi,
including major markets in New York and Florida. Units run 680 s.f. to 750 s.f. with a double drive thru,
although the 830-unit company will also fill in existing markets with end caps and inline sites. The initial
amount to open a Checkers is $476.7K to $617.2K. There is also a push for nontraditional units, including
college campuses and airports. AUVs are $800K. An average check at the QSR burger chain is $5.93.
Jersey Mike’s
Expected openings in 2010: 60
Actual openings during 2009: 49
Fast-casual sub chain Jersey Mike’s will move forward with a goal of 15% growth for the year and is
happy with flat SSS at the end of 2009. COO Mike Manzo hints at something big in the works on the
nontraditional development front that could increase the number of new stores opening this year and
next. The 412-unit brand will expand in its existing 28 states, especially in the newer Chicago and
SoCal markets that it entered last year. Keep an eye out for a new menu rollout this year and some big
promos and giveaways such as Super Bowl parties and trips. The company also works closely with the
community, charities and local food banks. An average unit is 1,600 s.f. and end caps are preferred
although freestanding or inline work too. Buildout is running $70/s.f. to $100/s.f. and the average
check is $8.50.
Marco’s
Expected openings in 2010: 60
Actual openings during 2009: Approximately 38
With the help of a number of innovative franchise financing packages and tools, Marco’s could actually
surpass its development goals for the year since it already boasts around 880 signed stores. Development
will continue in the 200-unit company’s 17 existing states. Watch for Marco’s to enter Kansas, Nebraska,
New Mexico and Wyoming this year. President and CEO Jack Butorac notes the recession has reduced
cost of buildout by 25% to 30% to between $20.5K and $130K. He is excited about Marco’s Pizza
Distribution that will launch this month in Maumee, Ohio, and deliver to around 160 stores. This should
help protect franchisee profitability, ensure consistency of high quality ingredients and represents a new
phase of growth for the company. DTO units are 1,200 s.f. and the dine in model comes in at 2,400 s.f.
AUVs are $600K. An average check is $16.75. The company had SSS up 1% at corporate stores for 2009.
Uno Chicago Grill
Expected openings in 2010: At least 52
Actual openings during 2009: Approximately 50
Preliminary expansion plans are nearly the same as last year but will most likely pick up as Uno will
add units in core markets through a multi-pronged approach with three prototypes. The profitable Uno Due
Go model has seen SSS up 5%, so expect more of this brand. Traditional Chicago Grills will open in
Pennsylvania and Northern California this year and count on 1 new Express unit per week. A hybrid Uno
Due Go is in the works at Cleveland State University. Express locations will come to Duke Medical Center
in North Carolina, another medical center in Springfield, Mass., and the New England Aquarium in Boston.
Look for lots of LTOs to roll out this year and SVP of New Concept Development Jamie Strobino expects
restaurants to be in a better place by year’s end. Buildout on the traditional 7,000-s.f. casual-dining model
is $2.5M. AUVs are $2M for traditional units and $1,100/s.f. at Uno Due Go. An average check ranges
from $5 to $15, depending on the model. Uno’s portfolio includes 200 full service, 300 Expresses and
2 Due Gos.
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Brands To Keep Your Eye On In 2010…
Continued from Page 2
Pizza Patrón
Expected openings in 2010: 40
Actual openings during 2009: 12
Pizza Patrón looks forward to a busy year with 14 locations in active construction set to open during
Q1, which already surpasses last year’s development. New markets for 95-unit Pizza Patrón include
Atlanta, New Mexico, Utah and hopefully Chicago. Look for more of its new QSP (quick service pizza)
model that has a drive thru, with 1 planned for Dallas by next month. SSS were positive for all four
quarters of 2009 and the company sold more pizzas in 2009 than 2008. After the success of the Amigo
Pizza deal last year, the company launches Paquetazo, which will be a different discounted deal every
month. Director of Brand Development Andy Gamm is enthusiastic about the company’s new tag line of
“Latin Life Enjoy” that will shift the theme of the brand to celebrating the Latin lifestyle and culture to
attract more non-Hispanic customers to the restaurants. The initial investment for 1,200-s.f. carryout unit is
$175K to $237K and the 900-s.f. to 1,100-s.f. QSP runs $225K to $400K. AUVs are $450K and the
average check is $7.
Bruegger’s
Expected openings in 2010: 27
Actual openings during 2009: 18
Bruegger’s launched a financial program early in 2009 with Diamond Financial to help franchisees get
loans that should stimulate 2010 growth. Expansion will focus on Atlanta and existing markets, including
Tampa, Fla. Also, the company’s recent acquisition of wholesale coffee distribution company Timothy’s
World Coffee and its sister brands mmmuffins and Michel’s Baguette should keep it occupied during the
year and added 137 units to the portfolio. Operations and purchasing can be shared between the brands,
leading to lower costs for Bruegger’s. This opens up co-branding opportunities for Bruegger’s with those
concepts, as well as new products such as a better coffee offering. CEO Jim Greco will pick up the pace
of product innovation this year. Units are 2,200-s.f. end caps or downtown urban locations. Look for a
next generation-designed prototype to roll out in April that will be the same size, but with a new look.
Around 50 remodels are planned. Buildout is $425K. AUVs are around $725K for the 296-unit chain.
Hurricane Grill & Wings
Expected openings in 2010: 12
Actual openings during 2009: 6 to 8
The 30-unit company is primed for growth under new owners led by CEO John Metz who acquired
Hurricane by purchasing its secured debt and assets in December 2008. Hurricane is now debt free and will
fund corporate growth internally. Metz spent the majority of 2009 reevaluating the brand’s business model
and honing in on larger units to maximize seating. The previous owners targeted slim 2,000-s.f. inline
spaces and Metz notes that these sites see the same sales per seat ratio but can’t command Hurricane’s $1M
to $1.25M AUVs in that square footage. Sales average $10K/seat and now units will run 3,000 s.f. to
4,000 s.f. with roughly 125 to 150 seats. Look for Hurricane to fill in Florida and to break into New York
this year, with sites envisioned for Long Island, Albany and Westchester. Metz noticed that the rent market
in Florida broke about four months ago. One development in Fort Lauderdale, Fla., that was asking
$30/s.f., got returned to the lender and is now under new management that agreed to $14/s.f. for the same
site. Also, watch for Hurricane to ink a deal for SoCal and to increase its presence in Arizona. Conversion
sites run $200K to $400K and Metz is seeing TIs from $20/s.f. to $40/s.f. An average check is $10.
Rumbi Island Grill
Expected openings in 2010: 7
Actual openings during 2009: 2
Although one of the smaller companies on this list, 2010 should be a big year for Rumbi as it increases
development, enters new markets and signs on more multi-unit franchisees. Look for a unit in Rancho
Santa Margarita, Calif., this month and Logan, Utah, in March. More locations are in the cards for the
Golden State in La Habra and Newport Beach, as well as 2 in Los Angeles. A multi-unit deal will most
likely be finalized in Texas sometime this year. President and CEO Stuart Gee also has some interest in
Idaho, Florida, Kentucky and San Diego. He will continue to evolve the menu and promos this year and
thinks once unemployment stabilizes consumers will start spending money again. Units are 1,500 s.f. to
2,000 s.f. and a recent conversion in Mission Viejo, Calif., was opened for $150K. AUVs at the 25-unit
Rumbi are right around $1M. An average check at the tropical fast-casual chain is under $9.
