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John Gordon  

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  • Wendy's Turnaround Reaching An Inflection Point [View article]
    Writer and readers, just to clarify: "pre tax cash on cash ROI" as noted above is not a good metric because it does not count or match all of the cash outflows (debt service, taxes, CAPEX, overhead) associated with the initial investment to the inflows. its not even a cash on cash view. Only by a full allocated view will the total cost of capital be evaluated.

    Back to WEN: it has a lot of potential: higher AUVs than others and a strong fresh food heritage. The inflection points comes when it consistently generates same stores sales via traffic gains, finds ways to get the franchisees remodeled economically, gets breakfast working and powers up international development. Not yet, but I hope for the best.

    John A. Gordon
    Dec 17, 2013. 03:58 AM | Likes Like |Link to Comment
  • Wendy's Turnaround Reaching An Inflection Point [View article]
    Thanks for writing. Two factual notes however:

    (1) the 20% AUV reimaged sales gain is not likely or probable over time. 20% was the early test results, but the real test cells aren't being repeated due to expense. Assume less. And assume the sales lift is more of a shorter lift duration, not over many years.

    (2) the franchisee "11% ROI" is not correct. This is more akin to a simple, unlevered cash on cash return and does not include the cost of debt service (principal and interest), taxes, and future years CAPEX.

    Because of the heavy CAPEX nature of restaurants, its vitally important to use fully loaded costs to rough out a true ROI.

    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant analysis and advisory
    Dec 16, 2013. 02:04 PM | Likes Like |Link to Comment
  • Cosi Inc.: A Troubling Earnings Report [View article]
    Shaun: why in the world would any company hope to push a broken brand to its franchisees? Who do you think pays the bills to sustain unprofitable operations? The franchisor (COSI) should perfect or fix the model BEFORE franchising.

    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant analysis and advisory
    Nov 25, 2013. 11:49 PM | Likes Like |Link to Comment
  • Investors Should Follow Darden Restaurants For Break-Up Value [View article]
    Chris: this is an interesting question, but I don't believe BWLD or BJRI are good peers. A good peer has similar market penetration potential, economic returns and capital structure.

    The DRI Speciality Restaurant Group (SRG) is different than those two. The average checks and thus market potential is much different. BWLD and BJRI have around a $15 averege check, the SRG excluding Yard House is way over $80, as but one example.

    To be sure, DRI needs to layout the internal synergies, and fully allocated free cash flow for the brands. But there is little chance we can accurately guess this internal information.

    John A. Gordon
    chain restaurant analysis and advisory
    Oct 10, 2013. 01:19 PM | Likes Like |Link to Comment
  • Is Chipotle Going To Serve Breakfast? [View article]
    The restaurant business is the sum of proper execution of thousands of small details. All of the following details must be considered before breakfast can be seen as an option:

    (1) Is there cannibalization of likely higher gross profit cents/item lunch/dinner items to lower cents/item breakfast items?
    (2) Incremental labor/marketing expense for the most highly priced to perfection company ever. Think: the Wendy's experience (WEN).
    (3) CMG has not one drive thru. At breakfast, price and speed are essential.
    (4) The most important factor: the Steve Ells factor. Is it right for the concept?
    Oct 7, 2013. 06:24 PM | 2 Likes Like |Link to Comment
  • What To Do With Darden After The Earnings Miss [View article]
    A new COO or CEO will not solve these isssues. With a company rich in heritgage and tradition, and 2200 locations, change does not occur rapidly. The question is, how do the brands transform to the new normal?

    Personal tweak: given these circumstances, the current PE is a lot more meaninful than the forward PE
    Sep 22, 2013. 09:35 PM | Likes Like |Link to Comment
  • Jamba Juice: Why Q2 (Company Store) Sales Don't Really Matter [View article]
    Several comments, long investor...

    Company store sales do really matter. It's a proxy for profit flowthrough and a profit center going forward. If a company is publicly traded, that part of the metrics base.

    The JMBA model isnt broken. Management has been quite creative and working brand optimization since where they found it in 2007.

    Since "the story" is all about higher margined revenue streams like CPG and franchising, its somewhat amazing that neither this writeup nor company color in the earnings call discussed franchisee sales and economics whatsoever. That is the foundation for the "asset light model". The refranchsing has ocurred long ago enough to take a read.

    John A. Gordon
    chain restaurant analysis and advisory
    Aug 20, 2013. 04:26 PM | Likes Like |Link to Comment
  • Fast Casual Restaurants Continue To Gobble Up Casual Dining And Fast Food Customers [View article]
    Interesting article. Not sure that Qdoba is the best example, as its viability must be reconciled with its recently announced brand review and store closings. I wonder if fast casual success is more about individual brands (CMG, PNRA) versus a building/average check and service system type.
    Aug 12, 2013. 05:15 PM | Likes Like |Link to Comment
  • McDonald's Real Estate Model Realities [View article]
    153972: good questions. The data above is based on worldwide reported values. The MCD bias is to own propery where ever possible. China would require a special study.
    Aug 8, 2013. 11:00 PM | Likes Like |Link to Comment
  • Is Noodles The New Chipotle? [View article]
    Packer: Too soon for shorts. Just my opinion, but since they have just IPO'd and there are no covering analysts or guidance yet, they will be in a bubble for a year or so. Once NDLS gives annual guidance and if they miss or the growth story erodes, then that is the time for the shorts.
    Jul 4, 2013. 01:38 PM | Likes Like |Link to Comment
  • Is Noodles The New Chipotle? [View article]
    Jargon: the table in the article uses parameters from each companies one full year prior to IPO, from their respective S-1s. It is true NDLS has far fewer units than CMG currently, but thats not the point. The point is to compare NDLS prior to its IPO and then CMG prior to its IPO.
    Jul 4, 2013. 01:25 PM | 2 Likes Like |Link to Comment
  • Is Noodles The New Chipotle? [View article]
    Jay, look for the first analyst coverage to begin about 30 to 45 days out, lead by Cowen and Morgan Stanley, after the initial research is done. That's when the websites will pick up more data. One of the key matters to consider is whom is NDLS's best peer?
    Jul 1, 2013. 05:12 PM | 2 Likes Like |Link to Comment
  • Is Noodles The New Chipotle? [View article]
    thanks...right, $627 million not billion!
    Jul 1, 2013. 02:00 PM | Likes Like |Link to Comment
  • Jack In The Box: No Growth Catalysts And Unjustifiable Valuation [View article]
    Agree that reason for and choice of Qdoba unit closes very telling. See my tweetline @JohnAGordon for last PMs press. 18 units closed in Chicago (5 in center city) , all 7 Manhattan stores. Looks to be small unit AUV base (head to head $CMG competition ?) along with high rents are the prime suspects.

    John A. Gordon
    Jun 28, 2013. 11:17 AM | Likes Like |Link to Comment
  • Einstein Noah Restaurant Group: Unlocking Value Through The Franchise Model [View article]
    Shaun: nice article. Does your fully capitalized ROI example from the prospectus consider all future years CAPEX or just CAPEX to date? While refranchsing is certainly a investment and asset allocation decision, the capacity of franchisees for CAPEX and expansion needs to considered.
    Jun 27, 2013. 03:15 PM | Likes Like |Link to Comment