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$GIGL ~ What's Rule 506(c), and Why Would

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Thoth Member Level  Friday, 05/19/17 03:14:24 PM
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$GIGL ~ What's Rule 506(c), and Why Would Giggles N Hugs Investors Care?

Quick - what do Westfield Corp. Ltd (ASX:WFD), General Growth Properties Inc. (NYSE:GGP), and Simon Property Group Inc. (NYSE:SPG) all have in common? They're all mall operators? That's true, but that's not the most relevant or meaningful answer to fans of underappreciated small cap stocks. SPG, WFD, and GGP are also potential landlords of the fast-growing restaurant concept Giggles N Hugs Inc. (OTCMKTS:GIGL), which is on the verge of a major expansion from two stores to who-knows-how-many once it begins its franchising operation

If Westfield Corp. Ltd (ASX:WFD), General Growth Properties Inc. (NYSE:GGP), and Simon Property Group Inc. (NYSE:SPG) are all welcoming it, Giggles N Hugs Inc. (OTCMKTS:GIGL) must be doing something right.

For those not familiar with the name, Giggles N Hugs is part restaurant, part playground part babysitter, and 100% focused on healthy, wholesome fun for kids and adults. The easiest comparison is to Chuck-E-Cheese, but it's a woefully inadequate comparison. GIGL offers fresh, healthy, low-calorie/high-nutrition meals using organic, fresh, and locally-sourced ingredients whenever possible. It also steers kids clear of video games and ticket-winning games and points them towards bouncies, ball pits, and story-time, along with other adult-led activities. It would be more accurate to say Giggles N Hugs is what Chuck-E-Cheese should have tried to become but never did, since parents are more concerned than ever about what kids eat, and parents are thrilled to see their kids take an interest in something besides video games.

And the concept is proving itself. At its two stores -- all in the L.A. area -- sales improved by 5% last year, which is impressive given the weather. Being mild, would-be consumers had plenty of reason to "play" outdoors rather than indoors. If, or when, the weather becomes too hot, too cold, or too wet, that's when Giggles N Hugs really starts to rock a crowd.

Westfield Corp., General Growth Properties, and Simon Property Group all know this about GIGL, but Westfield Corp. knows it so well that it's willing to assist in the build out costs of a new GIGL from Westfield, and a huge vote of confidence in the concept.

As for the future, Giggles N Hugs recently engaged Chardan Capital to help handle its fund-raising necessary to not just begin the expansion of footprint of company-owned stores, but franchised units as well. The initial goal is the securing of $5 million in capital, but this particular fund-raising is a little different than capitalization investors of small cap stocks may have seen in the past.

Put the term "506(c)" in your lexicon if you haven't already. That's the fairly new SEC rule prompted by the JOBS Act that allows a company to advertise the fact that it's raising capital. Until last year(2015), it hadn't been allowed, making it tough to young companies to find the money they needed to expand, which, of course, creates jobs. With the ability to tell the full story of its budding franchising and corporate expansion plans, Giggles N Hugs should have little trouble securing the money it needs and begin what could be a very exciting and very fruitful expansion. The payback period is just a little over two years for a new unit (phenomenal within the restaurant world), after which EBITDA turns positive and then starts to widen. Franchisees are going to love that math.

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