The Nashville bar is an interesting transaction.
BCCI is basically saying that instead of being in the coffee stand business, uniquely positioned by their costumed approach, they are in the broader restaurant business (of which coffee is a sub-sector), uniquely positioned the same way.
There are three points about this:
- Can BCCI bring anything unique to the restaurant business? Certainly, costume variety is a differential with Hooters, but it is not exactly intellectual property. But still, Baristas branded is a positive; can sell their coffee and ice-cream, and potentially merchandise.
- Can they operate a restaurant profitably? Restaurants have a notoriously high failure rate; we have to hope this isn't similar to the prior BCCI acquisition of a failing location (Montana, and arguably some of the Seattle area stores). I could not find a Pavilion 117 in Nashville; I could a Pavilion Kitchen and Bar on Demonbreun which has been open less than a year. And that restaurant replaced Red Rooster by the same owner, which had opened and closed on the same site. Perhaps an iHub poster can clarify.
The good news here is that BMOC (Big Man on Campus?? Don't know, just saying...) has restaurant operation experience, with this particular operation.
- Finances of the deal are unclear, as were finances in the Southwest Florida transaction (reminds me -- where is the third Southwest Florida Baristas outlet, announced as 'early Q2' in the January PR?).
Net, I absolutely like the concept of broadening the brand in this way (I was less impressed with ice cream in grocery stores in 'new' territory, something which cost $500K in stock). But the finances are unclear.
Second quarter financials (showing at least some of the structure, perhaps, in terms of dilution) and third quarter financials (in terms of top and bottom line impact) should be revealing. Perhaps lack of transparency on structure has caused the relatively muted market reaction to this deal.
But first, need to get the first quarter financials, now two weeks overdue and counting...
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