The current meltdown in the financial markets does not seem to be infecting individual investors as harshly as the Wall Street Money Manager Professionals.
Yesterday might very well have been the big “woosh” of panic selling bargain hunters have been waiting for. SPKL was not immune, but it held up nicely in the face of panic selling.
I believe the stock is pretty much in the hands of loyal, individual shareholders who have tried the food, followed the company’s progress, and believe in its future.
Let’s recap where we are today. When I first featured SPKL in September, the stock was $.70, and the company had about 20 stores open with about another 20 franchises sold. There were no company owned stores. The one they owned in Denver had been shut down in favor of moving to a new location.
Today, the stock is about $1.20 after having made a trip to $2, and the company now has 36 stores open, 4 under construction, and 73 more to find locations for over the next 2 to 3 years.
The current crop of franchise stores that are open (35), should generate over $20 million in annual sales, which translates to about $1.7 million in royalties to SPKL: pretty much forever. The number goes up as the number of stores goes up. The one company owned store, which includes a franchise training center, a bakery to serve a number of the stores in the Denver area, and commissary, should generate about another $1 million in top line dollars.- The current top line- about $2.7 million annually as we turn the corner into ’08.
SPKL’s real estate department is looking for properties in many markets right now- by far the most in its history. In a way, a US recession is favorable for SPKL’s expansion plans, as commercial real estate at a reasonable price might be easier to find.
Furthermore, SPKL completed a $6 million financing at $.85 per share in December, which now needs to be invested. It is earmarked primarily for building out company owned stores, which will have a disproportionately large impact on the company’s top and bottom lines. And, did I mention- two of the independent board members invested $1.4 million on their family money in the $.85 financing- is there a better endorsement?
2008 should bring far more rapid expansion than we saw in 2007. The company completed the process of going public, raised a significant amount of capital, and growth is accelerating. There were a rash of new store openings in the second half of 2007- there will be a repeat on a larger scale in 2008.
You won’t see much in the way of big top line growth in the year end numbers, but Q1 numbers should demonstrate a huge gain over Q1 ’07 and Q4 ’07.
Here’s yesterday’s action in the stock:
Here’s what I like. On the day the market absolutely fell apart, the stock traded its highest volume since mid December. Despite an effort to make a new multi month low, it rebounded and delivered a green bar for the day. It held up quite nicely. In fact, over the last two months, the lows have been getting higher, albeit in very small increments. A very good sign in a Bear Market.
Individual investors seem to be able to ignore the noise about recession and the market meltdown. They aren’t under margin pressure, and can step back and look at the big picture. While I certainly can’t predict what the next several months might bring in the overall markets, I can surely predict SPKL will be a much bigger company in 1 to 2 years. Franchise sales are accelerating now, and store openings will be next. The model simply works in the fast casual space.
When we get to 100 stores open, if there are 400 more to open, look for this company to be an acquisition target.
As always, I remind you to go try the food. Decide for yourself if this chain will continue to take off. As far as the stock is concerned, I wouldn’t even consider an SSL unless we get somewhere near the $1 level.
Comments and questions are welcome.
the market made a big turn around today but all of your picks are still going down. its been one year since i have been follow you and not one idea has taken off so what do we blame it on now
Editor: Geez- what a jerk comment- AAPL at $85 in March? SPKL at $.75 in September? CREE at $24 in November? Just published a technical buy on EFSF at $.18? PNWIF at $1.80? Even TTGL started off at $.85 and went to $2.20 before getting clobbered. Those are the facts. If you chose not to act at the right times, look elsewhere to blame someone. I’ve have been providing money making ideas, but just like all other stocks, we are in a nasty correction right now.
The first comment is from someone who literally doesn’t know what they are doing..at all…anytime. What a great picks: spkl, ttgl, efsf, cpne, aapl, cree. I have money on all of them. The difference? Well for one, I listen to you, your suggested stop losses, technicals and I combine your guidance with my own experience. So, that guy is a jerk. Thanks for providing many of us with picks we would otherwise not have known about and not have been able to trade. WE decide on what to do with what YOU provide. Thank you so much. The responsibility lies soley and squarely with us, the investors. Please continue to put out awesome ideas to us, the ones who know what to do with a great idea when we read about one.
Editor: Thanks for the comment. Greatly appreciated.
I have been following your blogs and articles on SPKL and I have to say that I enjoy reading your opinions. The only thing I regret is not finding this site sooner before buying in a lot on the stock when the stock was going on the decline. I bought in at $1.75 and sold most of my position on this stock at $1.36. It was my first stock I ever bought and it was a dumb mistake on my part.
I do have high hopes for this company this year and I do agree that this recession can be beneficial to SPKL since they can find real estate for cheap to establish more franchisees. I just can’t wait until the Los Angeles stores open up so I can finally try the food. I only wish that they start opening more company owned stores so the can get full revenue as opposed to just royalty fees from franchisees.
Keep up the good work and dont listen to the idiot below. Obviously he expects you to predict the market and is mad because he lost money and blaming you for the picks.
Editor: Thanks for the support. At $1.75 I was suggesting the stock was more of a sell than a buy.I also wish you had read about the company when I first introduced it at $.80. Your wish regarding more company owned stores should be granted as more information comes out over the next month or so. I wouldn’t be surprised to see the company end the year with six or seven of them, which would translate into about $3.5 million in annual revs with 15% profit margins.
Thanks for the information on SPKL. I’ve been slowly accumulating as I agree this could be one of the best performers we’ve seen. I agree with the others below that the first guy is a complete jerk. Ultimately, it is our decision when to buy and when to sell. This world needs people to take responsibility for their own actions and quit blaming everybody else. Thanks again.
Editor: I believe the stock is doing great when one considers the condition of the market in 2008- we started the year at $1.30- we’re there now- that’s about a 20% rise against the markets.
re comment by kevin you have to know when someone is jerking your chain ttgl cpne tcgd nihk some sort of anti virus stock should i go on
Editor: we could put up a list of large caps as well if you would like that are in much worse shape than any of these.
Any thoughts about Panera Bread (perceived problem and Class action) with regards to its impact (if at all) on the Fast Casual “image”. I can’t say for sure it impacted spkl and others, but I did see some red running, if you will. Thanks in advance for your time.
Editor: All I know is SPKL has no class action suit, and the time to invest in these restaurant themes is at the steepest part of their growth curve. SPKL will grow faster in 2008 than in ’07, and it will grow faster in ’09 than in ’08- hard to see past that timetable, but from here to about 300 stores will be the steepest part of their growth curve.
In today’s update, you asked if anyone was familiar with Jason’s Deli.
We have 2 stores locally in the north Atlanta suburbs. They serve sandwiches, soup and salad bar items. They are always packed with customers. My kids love the food. I think it is pretty good, but it could be better.
The stores are well managed, organized and clean.
Editor: Nice to hear. It is my understanding the new guy at SPKL was responsible for an major increase in same store sales. Bodes well for the future of SPKL as they get rolling.
The Jason’s delis here in Charlotte NC are excellent and generally jam packed. That was probably a good hire. Hopefully thats the way SPKLs will be.
Editor: A number of them are that way already. Not all of them- but a bunch.
in some of your blogs you talk about spkl being bougth out at 100 to 200 stores what does that meam to share sorry if that a stuipd question
Editor: Rob- today there are 36 stores open. They have pre paid commitments in hand to open another 90 restaurants over the course of the next several years. That number keeps going up. Once they actually have 100 stores opened and operating, which should be sometime in 2010, I believe they will probably have commitments to open another 300 to 400. At that point, and I am just guessing- I believe a much larger restaurant conglomerate- say an OSI Restaurant partners or Yum Brands would tender an offer to buy the whole company- either in a cash or stock offer.
I had my first opportunity to try SPKL’s food today. I was at the Ashburn, Va. store, which to my dissapointment does not carry the pizza items. I had the Sausalito Bandito. It was quite good, albeit a bit spicer than I had expected. However, it was not all that much food for the money. And, while the food was good, there was nothing but a small pickle slice included with it, which also made it rather pricy. I think the one thing they could do to mitigate that would be to include a small serving of something — chips, pretzels, cole slaw, etc. — with the sandwich. If I were an ordinary person choosing a place to eat, I would probably opt for Arby’s over SPKL.
Editor: I’m surprised they don’t have the Pizzettis- there must be another tenant that precludes them in their lease agreement from carrying the product. Sorry you didn’t find it as good as I do. However, now that you have tried the food and are not impressed, perhaps this idea is not for you. Glad you went, and glad you used the opportunity to make up your own mind. If you don’t see it being huge, don’t own the stock. I would agree, it is a bit pricier and more upscale than say an Arby’s. Not for everyone’s taste, but a lot of the stores are really doing very well.
In your comments, you said: “Sorry you didn’t find it as good as I do.” I didn’t say it wasn’t good, just that it was pricey for what you get. Will the concept work? Probably. Will I continue to be a shareholder? Yes. I’m not buying this based on my personal likes or dislikes, but on what I think will succeed the marketplace.
The Ashburn store is in a small food strip mall, with a burger place and other specialty foods restaurants — for instance, one serves Mediterranean cuisine. I don’t remember the names of all the places there, but I am certain that one of them carries pizza. So, the reason the SPKL there doesn’t offer it could be as you conjecture.
Editor: I applaud your effort to go to the store and try the food so you can form your own opinion. I was just observing that if it were Arby’s or Spicy Pickle, there would be no doubt for me. However, I, of course, have an emotional and deep financial attachment to SPKL. I am also grateful for your contribution to the BLOG. It’s purpose is to share information for everyone’s benefit, and the more information we all have the better decisions we can make. Can you see 500 Spicy Pickles someday?
Posted by: amazingkarma
In reply to: chuckycheese who wrote msg# 2004 Date:2/5/2008 8:45:11 AM
Post #of 2006
I see your handler keeps using that erroneous $700K revenue per store number, lol. Too bad he doesn’t read what is actually happening in their filings and see that they’re not even hitting $600K per store, and yes, even for stores open for well over a year.
But none of that fits into his desire to dump his 2 million shares, huh? Tell you what, tell your handler over at OTC that I’ll be buying his shares for maybe $1.30 next January or February if I’m nice.
MAN, it’s got to be pissing him off that he’s having to hold his shares and that the intelligent investors at SPKL haven’t fallen for his hype filled pie in the sky BS.
Carnival barkers really get pissed when their fantasy stories don’t attract suckers…
Oh, and what happened to that “Profitable at 40 stores” that you and your owner kept pumping day after day after day while calling me ignorant, deceptive, and stupid day in and day out? Hmmmm, 36 stores and not even close to dreaming of being profitable. Maybe the next 4 stores will make $15M in revenue per year, lol…
How transparent…
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Any comment for this jerk or are we better off not even addressing him? Thanks.
Editor: In case anyone wants to read comments to the negative side, here you go. Apparently, this is a posting from a message board. Kind of crude, but I want investors to be able to read the commentary from the bashers. There’s always two sides to every story, no matter how poorly you present it.
You asked: Can you see 500 Spicy Pickles someday?
Yes.
Editor: If you are right, then the stock will be considerably higher someday- I just can’t predict where it will be in the very short term against the backdrop of this bear market.
I am just thinking out loud 6 in la 10 in chicago 10 in houston 3 company store the markets getting better is there some merit to amazingkarma
Editor: Looking very promising for growth. They are building up to really getting them up and running. By the end of the year, they will probably be opening three or four a month.
I notice that noboday gripes about this pick. They must all really feel this company is moving right along. This entire sector is on fire right now. I just wish they would put a Spicy Pickle near me.
Do individual owners market their own stores? Do they have, say, local TV commercials? What other marketing is out there for this brand?
Thanks in advance.
Editor: Yes, the individual store owners handle their own marketing within the guidelines of what works as directed by the franchisor.
so, if looking to establish a position, would you do it here? do you think the news flow is going to be such that the price could move up any time soon?
thx
Editor: In short- no- the news flow will continue to be robust, but the stock has not corrected in any meaningful way. As I have been saying for the past month, we are in a bear market, and as such you want to look for irrational sell offs for bargain basement steals. That having been said, I don’t believe it is a sell either. If you own the stock, you want to hold it and see what happens. One thing is certain- the company is growing like crazy. If it craters to between $1 and $1.10, it will be a trading buy without a doubt.
I have not found in any press releases on any kind of earnings projections based on stores in operation and future store openings . Has their been any releases as such or is there going to be ? It is not clear on this stock, to me, how we can figure gross and net earnings based on all the press releases . As we all know that kind of information is critical for investing purposes . Maybe you can have a chat with management and suggest a press release giving us some sort of guidelines .
Andy
Editor: I provided a complete analysis of the business model in past editions. I would suggest going into the archives on the site and reading some of the past editions. I can give you a quick view of the cash flow model. It runs about $250k a month to run the company. So, about $3 million in annual overhead. Each open franchise generates on average $600k to $700k in annual revs. Between royalties and rebates from vendors, SPKL generates about $50k in revs from each unit. With 50 open (36 today), the company generates $2.5 million in annual, recurring revs. As more open, the number obviously goes up. Then there are the company owned stores, which generate about the same- say $700k in annual revs, and about 15% (about $100k) in profits. There is one company owned store today, two more under construction, and a bunch more on the horizon. In short, the company will become cash flow positive about mid year, and then never look back as this is all recurring revenues. You will not see huge numbers in the year end report, but Q1 and Q2 will show huge percentage gains over the same quarters in ’07. From here, the growth is built in for the next two years as a minimum, and that number keeps going up all the time as well. I can provide more details on how the company looks with 100 stores open- you just have to make assumptions about how many will be company owned.
Looks like the market doesnt like the news 20 somthing stores in the last month and the stock still going down but like these penny stocks there always some hidden sercet that only the big boys know about look a the volume nobody even interested and at this price you would think people would be buying it up
Editor: There’s no hidden negative here. Just listless drifting around in a squirrelly market without much investor interest. There’s also the 7 million shares at $.85, but I have covered that information in the published editions. I believe it could give the stock downside risk to about $1. Other than that, there is just going to be growth and more growth. A great long term hold, but in this market you either need to be long term or you need to get out.