Industry News | October 13, 2010

Spicy Pickle Confident in the Year Ahead

Spicy Pickle Franchising Inc., fast-casual restaurant operator and franchisor of its Spicy Pickle U.S. and BG Urban Café Canadian brands, reported on its outlook for the remainder of this year and through 2011.

"We have made significant progress in setting the company on the road toward profitability and ultimate success despite the poor overall operating environment in the U.S. in the past six months,” says the company's new CEO, Mark Laramie.

"These are still difficult times for restaurants, including for fast casuals and bakery cafes, as weak consumer spending continues and we are not expecting any significant near term help from the economy. Our comments should be understood in that context."

Laramie says this year the company has been able to consolidate its supply chain and purchasing power in North America into a single new supplier, Sysco Corporation; increase store level profitability; reach an agreement with Premium Brands Operating Limited Partnership, owner of the Bread Garden trademarks, to permit it to reimage the current Bread Garden locations to utilize the new, wholly owned BG Urban Cafe marks; begin a brand reimaging program for its Canadian locations into BG Urban Cafe locations with a fresh new look and menu; launch a location-focused advertising campaign for Spicy Pickle stores that has already resulted in positive same-store comp sales and increases in average unit volumes; continue company reorganization with a program to bring in executives known to have had significant successes in this business, while controlling the cost structure; secure funding that should carry the company into 2012; embark on new menu development at both chains and began improvements in products, per consumer surveys taken; and shore up new franchisee recruitment efforts to be prepared for accelerated expansion.

"The results from our efforts so far have gained traction faster and better than anticipated," Laramie says. "Virtually every aspect of the company has improved and is showing meaningful progress. We have reduced our cash burn other than for new investment spending on advertising and store remodeling. For example, we are investing about $320,000 right now into the Canadian operations to transform them into BG Urban Cafe locations, with a new image and menu redesign. We have also invested approximately $150,000 in newly created advertising campaigns, which are driving Spicy Pickle sales.

"We are filling key executive positions with industry veterans who have proven extremely successful in closely related restaurant businesses. Some are initially consultants who will become full time as soon as possible and others are on staff now. Positions recently filled are: branding and chief marketing consultant Rob Elliott, chief financial officer Clint Woodruff, vice president/general manager for Canada Jeff Branton, and supply chain and business development consultant Peter Fowler. Together with our very strong board of directors, these executives provide the skills we need to meet our objectives.

"Regarding the Spicy Pickle franchise restaurants, we reviewed the entire program from top to bottom in view of the current economic climate. We looked at everything, from menu, quality, freshness, competitive offerings, sandwich size, suppliers, bread, image, economics, management assistance, staffing, sites, and facilities. We improved store economics and we talked to all franchisees about what else we could do to help them. Part of our improved store economics directly results from our new vendor and supplier alliances noted above. While our prior U.S. and Canadian suppliers are fine companies who provided admirable services, the consolidation into a single North American supplier has led to a marked improvement in our overall economy of scale.

"Many of these changes are just beginning to take effect, and we expect to see the results over the next several quarters and more so as we move through 2011. Moreover, while we have cut ongoing general and administrative expenses, we are investing in the company's operations infrastructure in order to help franchisees become more successful and to create a more attractive opportunity for prospective franchisees. That means having successful, top-notch restaurants that are very attractive to prospective business partners.

"For the remainder of 2010, we should add a few franchise restaurants and we should see several more next year. However, we believe as we go through 2011 our franchise program will pick up speed and that by 2012 franchise expansion in terms of restaurant openings should accelerate. We believe the funds we now have available, plus the cash generated from our various revenue streams should be sufficient well into 2012.”

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