To OTC Journal Members:
 

Pickle Powers Past The 125 Store Mark: Houston Will Have 10

If you live in Texas, it is becoming more likely you will be seeing a number of these in your neighborhood at some point in the not too distant future.

I'll make today's edition a quick read. SPKL continues to be the one company that doesn't disappoint. Today, just after the market closed, Spicy Pickle announced the signing of a new franchisee to develop the Houston market. This new franchisee has committed to a build out of 10 stores.

Here's one interesting twist- this new franchisee is the former owner of a very successful chain of funeral parlors. The family sold out for good money (I have no information on the details), and is now turning its attention towards the fast casual restaurant space. As CEO Marc Geman points out in the press release, there are actually a lot of similarities in owning a funeral parlor chain and the fast casual restaurant business. All the components of marketing your services in a local area are pretty much the same. Involvement in the community is another key component in success. Successful Funeral Parlor operators know and understand this.

Today's news breaks the number through 125 stores to 126. If you wondering how the company looks with 126 stores open, it really depends on how many are company owned. If you make the assumption SPKL would only have 10 company owned stores opened by the time all 126 open, here's how it would look. There would be about $7 million in annual sales from the 10 company owned stores. The remaining 116 franchises would generate about $81 million in annual revenues, which would result in about $6.5 million in revenues to parent company SPKL. The total would be about $13.5 million in annual revenues, and probably $5 million would be profits. The $6.5 million from franchises has no cost of goods- it's just collected royalties. These are very high margin revenues- hence, high margins and good profits.

I really can't say exactly where this would put the stock. Today, it trades at a premium to the intrinsic value of the existing stores. Do you know how many will be in development when there are 126 open? I don't. If there are another 400 to open, and they are opening at a very fast clip, who knows what the value might be? Certainly much higher than today.

There's a little bit of a development in the chart I've been showing. Check it out:

The chart I have been watching has changed a little in character. There is a rather anemic and unconvincing breakout above the downtrend line in the descending wedge, but nevertheless it is a positive sign.

What we need for this breakout to become more convincing is simply more volume. If SPKL continues delivering this magnitude of news, and the market starts behaving a bit better, the volume will come. I know that's a couple of "ifs", but it becomes less iffy all the time. The breakout will become more convincing with more buy side volume.

SPKL continues to be the one idea that doesn't disappoint against a backdrop of a slowing economy and the worst January in the history of the stock market. Go SPKL. 

Here is the complete text of today's news for your review:
 

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