Spicy Pickle Franchising Inc. (OTC:SPKL).
If you didn't see it already, you may want to take a look at the latest update from our favorite eatery, Spicy Pickle Franchising Inc. (OTC:SPKL). The company's been laying low as the recession's kinks have been worked out. 'Laying low', however, is nowhere near the same thing as laying down or giving up. Indeed, this company continues to have a refreshing number of things working in its favor.
The candid look - both pro and con - from the company is at the bottom of this newsletter. We'll add our two cents before we get to that though.
Rising Up To Meet The Challenges
You've gotta' love a company that tells it like it is. Too many CEO's are standing at the company's front door saying everything is hunky-dory, while the CFO is selling the company's furniture out of the back door. Investors don't know what to think.
Spicy Pickle, however, is putting it all on the table... the challenges, the victories, the setbacks, and most importantly, what they're doing about all of that. I think that's crucial for investors right now - to know exactly what they own. It's a matter of trust.
In any case, if I had to grade the SPKL update, I'd give the company a B (which is not a bad grade, all things considered). I'd be willing to give 'em a higher score, but the shrinking economy has somewhat stifled their expansion. I can't score them any lower though, because they've basically done all the right things to preserve shareholder value in this terrible environment.
Here's a list of the major actions/changes implemented by the company over the course of the last few months.
1) Financing for small businesses is tougher to get, which means new restaurants are not being added as briskly. So, rather than devote resources to fight an uphill expansion battle, Spicy Pickle has focused on widening the margins created by existing units.
Specifically, travel costs (which tend to be high when real estate is being shopped) have been greatly reduced, and food costs have been negotiated to better prices. In short, overhead has been reduced. The top line may not be getting bigger, but the bottom line can when expenses are lower.
2) Not all restaurateurs or franchisees necessarily need to borrow, and some can still obtain a loan. So, for those who don't have a financing issue but rather a total cost issue, the start-up costs have been reduced.
How so? Construction costs have been lowered for new builds, and the kitchen line has been restructured to be more cost-efficient. Other in-store changes are being worked out that will reduce the franchisee's total cost. So, selective expansion can continue. (And, lease terms for real estate are outstanding right now.)
3) Attracting customers to the stores is not as easy as it was in 2007, and even early 2008. So, local franchisees are becoming savvy and efficient marketers. Many stores have started to cultivate more catering business.
The point is, Spicy Pickle took action. While some other companies were frozen like a deer caught in headlights, Spicy Pickle responded to the challenges.
AI
