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  • The Argument Against The REIT Is McWrong. Here Is Why It Works For McDonald's. [View article]
    What writer misses in his pro-REIT commentary is the following. Here are five questions for further thought:

    (1) what is the rent step up--higher rent costs that the MCD entity no doubt would have to pay to meet the REIT entity's needs in the outyears. Virtually all sale/leaseback terms that I've seen over time invariably have a step up. Can the restaurant cash flow handle it? What is the negative impact upon the MCD entity?

    (2) What about real estate portfolio breakage? Lets face it, with so many restaurants in the US, the effective economic useful life of a restaurant is highly dependent on visibility and locational factors. Locations need to close and be sold, sometimes quickly. Will the MCD entity be on the hook for paying dead rent on dead sites?

    (3) Can MCD shareholders get more than $5 billion in earnings annually from the REIT ownership, tax savings or stock appreciation as that is the MCD real estate margin currently? Check out the MCD 10K in detail.

    (4) Why are there no restaurant REITs now?

    (5) How did that gaming REIT, Penn National (PENN) work out?

    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant analysis and advisory
    Mar 30, 2015. 03:17 PM | 5 Likes Like |Link to Comment
  • McDonald's: Don't Look Back; Burger King Is Gaining On You [View article]
    MCD v. BKW: they are really in two different classes, almost not comparable.

    If this article was written ten years ago, perhaps. But BKW is at least ten years behind, likely twenty years, with US and world-wide store store level AUVs two times or more higher than that of BKW. BKW suffered through a decade of private equity and poor internal management suboptimization. MCD is remodeling with existing cash flows, BKW is hoping to remodel VERY OLD stores based on franchisees money that hasn't been invested (or found) yet.

    And BKW will have to get past Wedny's first. And CKE Restaurants. And others. And it has to deal with its own in house retail guru, Bill Ackman, he who of Borders, Target and JCP fame.

    BKW has some same store sales momentum in the US right now, but I'd hope so, given the large number of new products and the ad fund investment.

    Let's watch the numbers.

    John A. Gordon
    chain restaurant analysis and advisory
    Aug 14, 2012. 10:13 PM | 5 Likes Like |Link to Comment
  • Habit Restaurants: Suspicious Takeaways From FY 2014 Earnings Week [View article]
    Writer: suspicious? Really?

    There are plenty of equities (some restaurants) that do give truly suspicious guidance and accounts but HABT, on its very first earnings call, was not and could not. As I noted in my SA article piece this year (2015 Restaurant Realities), just out of the gate restaurant IPOs need some time to settle out due to extraordinary market sentiment. But it's explanation and expansion looks logical. There is no typical at such an early stage.

    As a southern CA based restaurant analyst (buy side), with almost 40 years of restaurant experience, I can tell you the HABT stores, staff, food and execution has been wonderful, and exactly what I expect to see. If you leave nuclear engineering, I'd be happy to give you a tour of the real restaurant world.

    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant analysis and advisory
    Mar 17, 2015. 11:58 PM | 4 Likes Like |Link to Comment
  • Is Casual Dining Dying? [View article]
    I agree with Denise. I'd add Texas Roadhouse (TXRH) to the standouts list: no breakfast, no lunch, no brunch; are buying back franchisees; incented and well compensated store partners, the heart of the system. No financial engineering, no gimmicks.

    John A. Gordon
    Pacific Management Consulting Group
    Oct 27, 2014. 12:17 PM | 3 Likes Like |Link to Comment
  • Expect Darden Shareholder Pressure To Intensify [View article]
    I know its popular to pile on DRI currently but a deeper analysis than the above is required. DIN is a very poor peer for DRI. EAT may work, but, BLMN is closer.

    John A. Gordon
    chain restaurant analysis and advisory
    Jan 24, 2014. 11:20 AM | 3 Likes Like |Link to Comment
  • Chipotle Mexican Grill: The High Multiples Are Justified [View article]
    Alex: a few points:

    (1) CMG is NOT getting a 70% return on each restaurant. The data table you included excludes CAPEX and G&A which brings down enterprise returns lower. Not your fault, but retail and restaurant companies make that same per store display error endlessly. Investors have to know that.
    (2) No forward lineal extrapolation model can possibly be accurate. In the restro space, market conditions, incomes, restaurant development and tastes and preferences change greatly. In my long restaurant analytical career, these lineal models never work out.
    (3) The 1.61 elasticity is a bit high, never seen it that high. Maybe 1.15.
    (4) When viewed over history, restaurant lifecycles are finite. Management capability to prolong the lifecycle can't be knowable at this point.

    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant analysis and advisory

    Mar 17, 2013. 11:00 PM | 3 Likes Like |Link to Comment
  • A Long-Term Value Case For Wendy's, Part III [View article]
    Very comprehensive review. While SOTP is interesting narrative, the real fundamental catalysts for WEN are (IMHO):

    (1) getting the WEN quality value promise reinforced in the consumers mind.
    (2) remodeling stores and store experience platforms, both company owned and franchised. The franchise economics will be the most difficult because of the CAPEX required.
    (3) getting breakfast to work.
    (4) more new product new news.
    (5) the then resulting same store sales, restaurant margins, expanded and viable franchising.
    (6) consolidating its position before weaker competitors do so.

    John A. Gordon
    Pacific Management Consulting Group
    restaurant analysis and advisory
    Oct 26, 2012. 03:01 PM | 3 Likes Like |Link to Comment
  • Zoe's Kitchen: Cheap For A Reason [View article]
    I generally agree with writer above that Zoes's is a strong brand and there is a long positive pathway for Zoes's to develop.

    However, Colorado fundamentally misunderstands the economics of franchising. At an early stage, when the brand is growing with great unit level economics, restaurants should develop company owned store models because the profitability is greater than that of franchising. Franchising yields only a small royalty stream per store. It is later, when the brand matures, and is overbuilt, or when it should be expanded internationally, that franchising makes sense. One always takes dollars to the bank, not percentages.

    John A. Gordon
    Pacific Management Consulting Group
    Mar 20, 2015. 01:38 PM | 2 Likes Like |Link to Comment
  • A Fresh Cup Of Coffee? Starbucks Q1 Projections [View article]
    SBUX is a wonderful, powerful, creative consumer thought and business leader that can turn on a dime. However, i think the near term investor perception issue will be whether the mix between sales and transactions will show another narrowing of the transactions as we saw last quarter. Reports of down mall foot traffic should be watched.

    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant analysis and advisory
    Jan 20, 2015. 12:47 PM | 2 Likes Like |Link to Comment
  • Don't Sell McDonald's Stock Because Of 2 Minimum Wage Myths [View article]
    Tim, I'd recommend thinking more about restaurants as integrated whole systems, rather than just separate company owned and franchisee pieces.

    Everything affects everything else.

    MCD is a (1) real estate operator (2) franchisor and (3) company operated unit business. The business model has to be strong enough for franchisees to absorb periodic wage increases....because if they can't, restaurants don't get remodeled and in time lose sales, market share, MCD loses royalty and real estate margin. You get the drift.

    The Q for MCD the franchisor... is the business model being improved so the wage hikes are workable?

    John A. Gordon
    chain restaurant analysis and advisory
    Mar 24, 2014. 11:48 PM | 2 Likes Like |Link to Comment
  • The REIT Answer For Darden Is Its Coveted Real Estate Portfolio [View article]
    Another long read on Darden (DRI) and REITs that does not discuss: (1) whats the change in the restaurant operating model due to spinning off restaurant real estate (2) that there are no restaurant REITS to serve as a proper benchmark.

    John A. Gordon
    Pacific Management Consulting group
    chain restaurant analysis and advisory
    Feb 14, 2014. 02:51 PM | 2 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
  • 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
  • Biglari Holdings, Inc: Sardar Biglari - Bet The Jockey Part VII [View article]
    Dana: CEO workship cults don't have a very long time working in this a service business, it is the staff that delivers the value, not the CEO.

    Moving on...seems like you are saying that because of the CBRL consolidation accounting, the $BH holdings have a "more reasonable valuation", even though they have no control of those earnings except via dividends or stockownership rights.

    I'd recommend you keep the earnings metrics clean and simple, and not muddy the waters.

    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant analysis and advisory
    Mar 18, 2013. 12:47 PM | 2 Likes Like |Link to Comment