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The Spicy Surprise: Pickle
Pulls Rabbit From Hat |
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Good riddance to September- one of
the worst months of my life professionally. What a mess. I am heartened
in the knowledge that the last 4 bear markets have all died in October.
I also know when a Bear ends, 30% of the losses are made up in the first
90 days.
In the midst of the worst doom and
gloom and fear climate in anyone's memory, Spicy Pickle pulled a
true rabbit out of its proverbial hat today and brought in a motherlode
achievement.
Today, SPKL announced it has
acquired Vancouver based restaurant chain Bread Garden. With the
acquisition, SPKL acquires 11 operating franchises, a new concept,
and a number of additional spaces currently in development.
SPKL invested no cash to acquire
the franchise chain- the transaction was done 100% for equity (in the form
of about 5 million shares- about 11% dilution), and will be immediately
accretive to earnings as Bread Garden franchising is a cash flow
positive operation.
The original Bread Gardens
have been around in the Vancouver area for 35 years. It's a European style
theme with a high majority of the menu items displayed in glass counters.
They are very strong breakfast destinations, which is a weakness of the
SPKL
theme.
SPKL is one of my two "sacred
cow" stocks that I have been willing to hang onto through the Bear Market
and this nasty recession. Today's news demonstrates why I have faith in
this company.
The entire fast casual industry in
the US is frozen. I have covered the challenges SPKL is having with
domestic expansion in the second half of '08. Commercial real estate is
holding up relatively well, so spaces are not coming available at the right
price. On the other side, franchisees cannot obtain reasonable financing
terms, so they are handcuffed.
SPKL continues to be commited
to expansion. Rather than stay domestic and remain at a stand still in
the second half of the year, the company has gone out and pulled off a
coup which gives them strong expansion in one masterful stroke.
They are now in a market where there
is no recession, and they have a platform to expand both concepts independently,
or a hybrid of the two. In fact, Western Canada is currently booming as
its a resource based economy. It's fertile ground for growth.
As of today, SPKL now has 53
stores operating in 15 states and 2 countries. Look for more expansion
news around the corner even in an impossible market.
The Bread Garden acquisition
opens the doors for a myriad of expansion possibilities in other arenas
as we wait for the economy to come back and business to return to some
levels of normalcy.
There's an intangible in owning this
stock. Management is not to be underestimated. At a moment in time when
the US Economy is completely frozen as citizens wait for an inept Congress
to take action, Spicy Pickle is coming up with creative ways to
keep its expansion plans moving along and opening up doors for other opportunities.
That's why I'm hanging in there with this stock.
In case you are wondering, I can't
say this acquisition will put SPKL over the top and into a cash
flow positive posture. It's certainly a strong step. The company could
need to raise a little more capital at some point in the future.
SPKL might start a rebound
on this news. The stock has consolidated at the current levels for a couple
of weeks now, and shouldn't have much upside resistance. I would guess
everyone who was going to be scared into selling has done so.
There will be some of what I call
the "whew" factor- some people will see a rebound in the stock, say "whew"
and get out on a bounce. That's ok, and could provide some supply as it
moves up. It won't happen overnight, but it probably will over time.
It's moves like this against impossible
odds that create shareholder loyalty. Here is the complete text of today's
news for your review:
| Press Release Source:
Spicy Pickle Franchising, Inc.
Spicy Pickle Franchising,
Inc. Acquires Bread Garden Urban Cafes
Wednesday October 1,
6:35 pm ET
DENVER, CO--(MARKET WIRE)--Oct
1, 2008 -- Spicy Pickle Franchising, Inc. (OTC BB:SPKL.OB - News) fast
casual restaurants announced today the acquisition of Bread Garden Franchising,
Inc., the franchisor of the Bread Garden Urban Cafes, a chain of franchised
fast casual restaurants located in the greater Vancouver, Canada area.
Currently there are 11 operating restaurants.
Spicy Pickle purchased
substantially all of the assets of Bread Garden Franchising, Inc. including
all of its rights to operate as the franchisor of the Bread Garden Urban
Cafes. As consideration for the acquisition Spicy Pickle issued 5,177,500
shares of its common stock and warrants to purchase up to 3,038,750 shares
of its common stock. Bread Garden Franchising, Inc. is a profitable company
and the transaction is expected to bring additional working revenue from
day one. Spicy Pickle will take over the existing small Bread Garden franchising
office located in downtown Vancouver.
Immediately after the
acquisition, there will be 53 restaurants in 15 states and 2 countries,
including both Spicy Pickle® restaurants and Bread Garden Urban Cafes.
At the present time there are no plans to convert the Bread Garden Urban
Cafes to Spicy Pickle® restaurants.
Bread Garden Urban Cafes
have been operating for approximately 30 years. Originally started by local
residents in the food industry, the cafes were eventually sold to a large
multi-unit corporation and in 2004 to a family that resides in the Vancouver
area. The cafes serve coffee, pastries and breakfast items as well as lunch
and dinner along with a wide variety of desserts. The cafes offer Wi-Fi
service and are a popular destination throughout the day and evening. As
is typical of European style restaurants, the food is displayed in refrigerated
glass cases giving customers a visual experience before they choose their
menu items.
Marc Geman, CEO of Spicy
Pickle Franchising, Inc., commented: "We are thrilled to add this terrific
chain to our growing portfolio of fast casual restaurants. After extensive
due diligence we saw tremendous opportunities. First, we will expand our
geographical footprint into the booming Western Canada region which is
not suffering from the same credit issues we are witnessing in the States.
Secondly, we now have the opportunity to take a very successful coffee,
breakfast, pastry and dessert program from the Bread Garden Urban Cafes
and import it to the Spicy Pickle® model. Additionally, we can supplement
their strong breakfast menu with our expansive and fresh lunch menu. Bread
Garden Urban Cafes are very popular and have a reputation as an all day
coffee house gathering place which adds incremental business throughout
the day."
Mr. Geman further stated:
"The Bread Garden Urban Cafes are extremely well located, many of them
having leased space at a time when great locations were still available
in Vancouver at reasonable rates. We will continue to use the Bread Garden
name as they have developed a loyal following and enjoy great brand recognition
in the region. Bread Garden's branded products are found on the British
Columbia ferries and in gas stations around the city, and while these outlets
are not part of this transaction, they add tremendously to the brand identification
throughout British Columbia."
Zahir Dhanani, a principal
of Bread Garden Franchising, Inc., said: "Over the course of the past year,
we have been searching for successful restaurant operators with similar
concepts and were fortunate enough to meet the management team at Spicy
Pickle. As a smaller chain, we wanted to partner with someone who can assist
us in growing our business at a greater rate. Given the operational efficiencies
and business synergies they offer, we can quickly expand our menu offerings
and benefit from the exposure of being part of a public company. We are
very excited to join the Spicy Pickle® organization."
About Spicy Pickle:
Founded in 1999, Spicy
Pickle Franchising, Inc. (OTC BB:SPKL.OB - News) 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 restaurants open or under construction
across 15 states and several more in development nationwide. Spicy Pickle
Franchising, Inc., also operates as franchisor for Bread Garden Urban Cafes,
a concept with 11 restaurants in the metropolitan Vancouver, Canada area.
Bread Garden Urban Cafes serve coffee, pastries and breakfast items as
well as lunch and dinner along with a wide variety of desserts. To find
out more about Spicy Pickle (OTC BB:SPKL.OB - News), visit our website
at www.spicypickle.com/.
Forward-Looking Statements:
Certain statements in
this press release, including statements regarding the number of restaurants
we intend to open, are forward-looking statements. We use words such as
"anticipate," "believe," "could," "should," "estimate," "expect," "intend,"
"may," "predict," "project," "target," and similar terms and phrases, including
references to assumptions, to identify forward-looking statements. The
forward-looking statements in this press release are based on information
available to us as of the date any such statements are made and we assume
no obligation to update these forward-looking statements. These statements
are subject to risks and uncertainties that could cause actual results
to differ materially from those described in the statements. These risks
and uncertainties include, but are not limited to, the following: factors
that could affect our ability to achieve and manage our planned expansion,
such as the availability of a sufficient number of suitable new restaurant
sites and the availability of qualified franchisees and employees; risks
relating to our expansion into new markets; the risk of food-borne illnesses
and other health concerns about our food products; changes in the availability
and costs of food; changes in consumer preferences, general economic conditions
or consumer discretionary spending; the impact of federal, state or local
government regulations relating to our franchisees and employees, and the
sale of food or alcoholic beverages; the impact of litigation; our ability
to protect our name and logo and other proprietary information; the potential
effects of inclement weather; the effect of competition in the restaurant
industry; and other risk factors described from time to time in our SEC
reports.
Contact:
Company Contact:
Marc Geman
Spicy Pickle Franchising, Inc.
(303) 297-1902
Email Contact
http://www.spicypickle.com
Investor Relations Contact:
Pamela A. Solly
Cirrus Financial Communications, LLC
(720) 489-4912
Email Contact
http://www.CirrusFC.com
Source: Spicy Pickle
Franchising, Inc. |
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