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So if the revenue from franchise deals is recognized earlier (which it is), then BWLD isn't a good proxy, because much of the revenue from existing franchised locations was recognized long ago? I don't know...i'm just asking
you can't do DCF now with one restaurant. What I'm saying is with a few and plans for further expansion, it starts to look very cheap...it's a company under 50 million dollars. To say it's priced for perfection but could also go to 20 at some point is nonsense. Priced for perfection with the potential for outlandish returns is a contradiction.
I agree with you about only one thing here: the weakness of the balance sheet could hurt them: they could always issue more shares or borrow money, but apparently, according to Rawnoc, don't believe they'll need to. We shall see. The negative working capital aside, the lack of long-term debt will make it possible for uWink to borrow if need be.
first you said your calculation assumed that uWink was 50% more profitable now you're saying 25% more, and yet you seem to be getting the same number both ways? lol...show me how you're doing the math...
Just to clarify, from Diedrich's release:
"As previously announced, the Company will close its Diedrich Coffee and Coffee People company-owned locations as part of its plan to focus on strengthening its wholesale business and related distribution channels including franchise locations. The Company will retain the Diedrich Coffee and Coffee People brands for its wholesale and franchise operations. To this end, the Company announced on September 14, 2006 that it entered into an agreement to sell up to 40 of its 47 company-owned Diedrich Coffee and Coffee People locations to Starbucks Coffee Company for up to approximately $13.5 million."
That price will include a lot of PP&A along with the leasehold agreements. Unless they were long-term leases signed at rates that are below what they could command in the current environment, owning a lease on a building is worth very little, and often nothing. As Bushnell has said, you can have thousands of underperforming restaurants for the price of taking on the lease. Bottom line: having lots of restaurants doesn't necessarily make something worth a lot of money. It's what the returns you can earn with them that matters. uWink will earn better returns than most restaurants, imho. Zac
<<
Come on now, granted, my hastily calculated number was way wrong, but the simple fact remains that assuming a 40 multiple, current dilution, and stores that are 50% more profitable each than a comparable BWLD, we still need 75 stores up and running to justify a 5 dollar share price. If the full dilution you indicated comes to fruition, we need more like 150 stores up, running, and producing about 300K a year in net profit (after corporate overhead) just to get to 5.>>
I only mentioned the error once or twice and certainly didn't hold it against you...HOWEVER: You just made another error.
300K X 75 Stores= 22.5 million dollars...BWLD has a trailing multiple of like 40. so 22.5milion X 40 would give a market cap of 900 million dollars. That's SLIGHTLY over a share-price of $5. It's closer to 40... ;) ;) ;) So that's 2 math errors for you...
The point is, you are trying to make a ridiculous argument. With a market cap of around 50 million, uWink DOESN'T NEED THAT MANY STORES generating income to be a big bargain on a DCF basis. You're trying to portray uWink as some high-flying hyped up stock. It isn't.
And if you wanna see just how little having a lot of stores means, look up Diedrich Coffee, which is essentially signing over their leasehold agreements for almost nothing to Starbuck's. If uWink's concept is economically viable, the fact that it only has one restaurant now matters NOT AT ALL. ANYONE can always build more restaurants. The issue is creating a concept that generates outlandish returns on capital. There is a lot evidence that uWink can do just that.
I meant is NOT overvalued...
I just disagree with that...a market cap under 50 mm with this kind of potential/mgmt. is overvalued.
Well I think there MAY be some validity to the idea that uWink's weak balance sheet will make it vulnerable during discussions for selling franchises to area developers...any thoughts on that rawnoc? Zac
I mean, we can't really argue with that. The issue is that if the concept is unique and extremely viable (which we believe it is), getting the franchises sold is really just a formality. Look at some of the absolute crap franchises that get sold. uWink is far more well-positioned than most to offer franchisees a unique product that is actually worth forking over royalties instead of just doing it on your own.
Yeah, but when you could reasonably arrive at a price target of 40 a share in a few years based on franchise money and the multiple on BWLD, how can you say UWNK is priced for perfection. As Johnny Cochran once said "It makes no sense. If Chewbacca lived on Endor, you must acquit." Zac
I mean, I think he brings up some interesting points...yeah, a lot of what he says is just ludicrous, but the issue of the weakness in UWNK's balance sheet perhaps hurting them in negotiating franchise sales? He MAY be onto something with that. In any case, I like to have him here, because it challenges us. I mean, the points he was making actually demonstrate how, because of the low market cap, this stock going to 30 or 40 eventually is NOT AT ALL IMPOSSIBLE. Zac
AT a multiple of 40 with a earnings of 1.4 billion, that would be a market cap of just under 60 billion dollars, which would be a heck of a lot more than 50 dollars a share.
His math is wrong rawnoc...he's off by a factor of 40.
Exactly...it's NOT EVEN CLOSE to being priced for perfection. Zac
No, do it yourself. ;) jk...divide the number you have by 40 and I think that's the number you mean
Check your math...that's not even close to being right.
No, Al Akorn actually made the version for Nolan. And the guy who created Odyssey made a pong thing several years before them, and sued Atari and Bushnell, and settled for 400k.
Exactly...some information I found helpful for learning about this:
http://www.mysitespace.com/franchise_opportunities/masterfranchising.asp
Area Developer Magazine: http://www.areadeveloper.us/
So yes, it appears that uWink will not be targeting mom and pop type operators. Thanks, Zac
Well it's IMPOSSIBLE that they had people already signed. that would be ILLEGAL..
No, I seriously doubt they have anything locked up yet...I spoke with him yesterday and he said they would be able to start doing that very soon....and he emailed today to say they now can in selected states. This is just the beginning of the process. hopefully exciting news in the weeks and months to come.
We are now able to offer franchises in selected states. Would you please send me;
· State(s) you are interested in,
· Contact Phone #
· Any other pertinent contact information.
Thank you,
Mark
Mark Lubchenco
uWink Franchise Sales
mark.lubchenco@uwink.com
tel: 303 431 4530
fax: (303) 431-4590
mobile: 303 808 8797
AIM: mlubchenco
Mark Lubchenco, who works for uWink, managing the franchise stuff.
Just got an email saying they are now able to offer franchises in select states.
Well I think we can all agree that if our optimism about uwink was all based on one restaurant, it would be overvalued. ;) Calculating the P/E based on the one restaurant is really kind of a meaningless restaurant.
As to your other points: while it was expensive to set up the first uWink restaurant, I wouldn't assume at all that subsequent ones will cost anywhere near that much. This was a prototype: it was the first time they'd built one, and it was designed as a sort of disply of what uWink is. Saying that the franchising won't work because the restaurant was too expensive is a little bit like saying airplanes aren't feasible because it cost the Wright Brothers x amount of dollars to build the first one. That said, yes the initial investment will be higher than a Buffalo Wild Wings or a Subway. But you're also getting something completely unique. CEC was an expensive restaurant to start and franchise to buy (HUGE space requirements), but it has worked out ok. Incidentally, there was tremendous skepticism about it from the get-go, partly because of the size requirements. Nolan has always been a rule-breaker.
I also don't see uWink's position has being as dire as you seem to. I don't think they would have any trouble raising some cash if they need to. As they've said, they plan to have 2 to 3 more company-owned stores within the next six months or so. The stuff in the 10-Q is boilerplate. Any company that hasn't established itself yet puts in a going-concern warning. I wouldn't read too much into it. If the idea is good, they will no problem securing financing. If it isn't, the company is screwed anyway.
Put another way...if you agree that this could be FAR BIGGGER than BWLD, and uWink is at a market cap about 1/10 of BWLD, how can it also be priced for perfection...
I just don't see 50 million dollars for what could be something EXTREMELY big as being priced for perfection. Priced for perfection would imply that there is no, or very limited, upside potential.An example might be HANS a few months ago...point is, I don't see how a microcap that could be the next big restaurant chain can possibly be priced for perfection...just my opinion.
As for your earlier comment that the number of shares outstanding bothers you, I just don't understand that- I mean, if they did a 1 for 4 reverse split, would that dramatically change your opinion about the stock. If so, that doesn't make sense to me.
KKD is exactly what I had in mind when I worried about overly rapid expansion. However, KKD's CEO was also a total loser. Bushnell made CEC work very quickly with similarly rapid expansion by franchising (which worked for awhile...it didn't collapse because of that, is my understanding).
I think time will tell. I just don't see 50 million as being priced for perfection with a unique concept, top-tier management, and potential for extremely rapid growth.
And Incidentally, BWLD's shares outstanding has gone from 4 million shares to 8,446,00 shares in like 3 years. Yeah, BWLD has a higher share price and fewer shares, but that's not important. The point is, it would be wrong to suggest that BWLD hasn't diluted shareholders. Any company that grows its stock price rapidly and compensates its management with options is going to have dilution, obviously. The fact that Bushnell isn't selling is indicative of something.
Bottom line: If uWink is able to generate returns on capital that are above and beyond that of an ordinary restaurant, growth will be no problem and the stock is pure gold. Any company that can sustainably generate higher returns is worth a lot. The fact that uWink is new and has tons of room to grow adds to that value.
Might it be prudent to wait and see if it can indeed generate superior returns? Sure. I mean, I can't argue with that. The stock is riskier at this point because that hasn't been proven to be the case. But the evidence seems to suggest it will be, and gains will aggregate much more rapidly to people who take the plunge before deinitive proof is out there. Zac
I appreciate what you're saying. Obviously uWink is expensive NOW. In the piece that I wrote, I said that traditional valuation metrics are not particularly helpful in evaluating. EVERYONE knows it's expensive in terms of P/E, P/B, etc. The issues is that for a market cap of around 50 million dollars, you are getting something that has the potential to be FAR bigger than Buffalo Wild Wings.
As for the number of restaurants, UWNK has extremely rapid expansion plans (I am actually concerned it might be too rapid), and ANYONE can always open up more restaurants. The issue is that Nolan Bushnell believes, and I am inclined to agree, that uWink can generate far superior returns than BWLD's (approximately...not calculating these numbers myself, just going based on Etrade's stats)ROIC and ROE of 10 and 12 percent respectively.
The point is, I just don't see the fact that BWLD has more restaurants as adding value, in itself. I mean, they don't own the real estate. They're just leasing buildings, installing the equipment, and earnings decent returns. Anyone can do that. Where's the moat? Based on the potential for reduced waitstaff, higher average receipt because of automated ordering (the articles i've seen about automated ordering bear this out), uWink has the potential to earn vastly superior returns. THAT is what is important.
By the way, I am basically a Graham and Dodd investor, and investing in something speculative like this is the exception rather than the rule. But I think expansion will come rapidly with minimal dilution/weakening of the balance sheet because of franchise fees. If Nolan is right and uWink's model yields superior returns, the rest is easy. It matters very little that BWLD etc. have built more restaurants to date.
This is all just my humble opinion. Were I not tired, I'm sure I could phrase this better. PLEASE PLEASE PLEASE continue to post on this board. You are intelligent and your arguments are well thought out, even though I disagree with you. :) Zac
Hi,
I spoke with Mark Lubchenco today, who is involved in the franchising of the uWink stores. He said that UFOC will be available "very soon" (couldn't give a specific date), and would only be available to people who filled out/passed the qualification package. He said that it contained information that is sensitive and is therefore not available to the general public. This is standard practice for franchising.
Zac
Incidentally...maybe it isn't so meaningless, as 16500 shares traded at $2.21 at 4:02 PM...idk what that means, i just notice.
I know very little about technicals/whether the level 2 book is reasonably accurate after hours. my focus is on fundamentals. But glad he helped me out with that question. Zac
ok good. that's what i figured.
Hi,
I've been mulling buying a little more, and just checked the Level 2 Quotes, and it shows all the asked at $2.24 and higher...is that accurate? Does it mean anything, or will the lower asks just pop up in the morning?
I have no beef with traders...but when someone who doesn't own shares comes on after it goes from .30 to 2.50 then it goes back to 2 and he says "You guys coulda done well if you'd sold at 2.50..." I just don't think that's intelligent. I mean, what's his point...yeah thanks, we can see that it pulled back, and we're not worried at all about it.
New email from lebed. Please note the plagiarism of the piece Kevin and I wrote. Several weeks ago, we said:
"Bushnell envisions a restaurant where video games are a catalyst for social interaction, not the obsession of greasy-haired adolescent outcasts."
Now he says:
"UWNK's games are a catalyst for social interaction, not the obsession of greasy-haired adolescent outcasts."
It's almost like he read our piece! ;) Anyway, here's what he said:
I just picked up my Nintendo Wii. It is amazing how far video games have come since UWNK's CEO Nolan Bushnell invented the first video game Pong and the first video game console Atari.
I believe Nolan Bushnell is going to build UWNK into a billion dollar company just like he did with Chuck E Cheese. (the market cap of UWNK right now is only $40MM)
Nolan Bushnell has a famous quote that says it all, "The critical ingredient is getting off your butt and doing something. It's as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer."
This isn't some concept OTC BB company with a great idea that will never follow through with it. I can guarantee you that Nolan Bushnell will grow this company rapidly during the next year.
I have been playing the Nintendo Wii for the past hour. What I like about it is how simple it is to play. Nintendo realized they need to be different to compete with Sony and Microsoft. The Wii enables anybody to pick up and start playing who never played before.
Nolan Bushnell is using the same concept with UWNK. The games they have developed are very simple to play. He realizes that only 15 million out of 300 million Americans are gamers. He wants to attract the 285 million non-game players. UWNK's games are a catalyst for social interaction, not the obsession of greasy-haired adolescent outcasts.
Once UWNK has 50-100 locations they are going to introduce 2-3 additional games they have developed that will link all of the restaurants together so customers can compete against diners throughout the country.
I am so excited about UWNK. The reaction I have been getting about this company is overwhelming. I have gotten hundreds of emails about it today after sending out my initial alert last night.
<<Uh, not sure what you're reading into my post, but what I meant is that I had hoped that people had taken some profits when it went near $2.50 (assuming they had bought in much lower). If they had, then they would have been able to buy back in under $2.00, thus making for very nice trades. That's why I'm not a buy-and-holder.<<
Truly brilliant, penetrating analysis. You can make so much money daytrading in hindsight!! Do you have the weather for last Tuesday? I think most of us here are in this for a much larger profit than 50 cents...
Yeah. i agree with you now that I think about it. :) Zac
Just got this from Lebed:
Everybody this weekend is going crazy. They are waiting in lines forever to be the first to purchase the new video game consoles PS3 and Wii. None of this would be happening today if it wasn't for UWNK's CEO Nolan Bushnell.
He invented video games. He created the first ever video game Pong. He is the father of the video game industry. He founded and was former CEO of the first ever video game company Atari.
He then came up with the idea for Chuck E Cheese. It would be a restaurant with video arcades, small rides, and other kinds of entertainment for kids. He grew Chuck E Cheese to 200 locations in 5 years and today it is a billion dollar company.
Now he is going to do it again with uWink Bistro. This new restaurant chain is for people of all ages.
UWNK has spent the past four years and over $10 million developing their own proprietary entertainment technology. They are using this technology to create an interactive, social restaurant where at the table touch screens let you be in control of your meal and your fun.
UWNK has developed their own games and terminals where customers can play and interact in a social environment while they are eating, drinking, and having fun. The games are very casual and simple to play so that women who normally don't play games can participate.
The restaurants are designed with a very attractive modern, hip, and chic decor. They are divided up into different activity zones including a central bar and lounge area which features the most active drinking and entertainment experience.
UWNK just opened their first location in LA and they are going to grow as rapidly as possible. They plan to have 50 locations by the end of 2007. They would like 1/3 of their restaurants to be company owned and 2/3 to be franchises.
I believe this is like investing into the Cheesecake Factory or Panera Bread at the ground-floor when they opened their first restaurant. I believe UNWK will become a billion dollar company one day.
Remember that I am not being compensated for UNWK and I don't own a position yet but I intend on accumulating one soon.
-----
Never invest into a stock we discuss unless you can afford to lose your entire investment. For our full disclaimer go to: www.lebed.biz/disclaimer.htm
hehe, fair enough...i could be totally wrong on this...I just don't know why anyone in their right mind would buy based on a rec from lebed...but with something like uwink that 99% of investors haven't even heard of him, this could inspire people to look into it. and people who look into it will buy...who knows...can't wait for the franchise info to come out. i'm interested in seeing what the terms will be.
Yeah, he has no paid subscribers...it's all unpaid, which means that the first anyone heard from lebed about uwink was last night...still don't think it will mean much but we shall see.