In response to the consumer demand for more health-conscious products, Cold Stone Creamery is looking to the NRgize brand, a Kahala-developed concept, to provide a tangy yogurt product similar to PinkBerry. Introducing NRgize products inside Cold Stone Creamery will give customers more healthy options they crave without sacrificing quality and provide the franchisees with additional ways to generate sales. NRgize products will be introduced in Cold Stone Creamery locations in 2008.
D’Loren: We have been successful in the past 10 months in consolidating all of our operations into one location in Altanta, called NexCen University. It has 80 staff members to date and is also a training facility with classrooms, IT, real estate and construction teams, and even mock stores with broadcast training capabilities.
Where some companies might find it hard to integrate new brands, we’ve been doing this for many years. We have whole teams dedicated to the task. And where some teams might work slowly, we have the structure in place to move very quickly.
LaMastra: There are two levels when you have a portfolio company. Of course you want to get leverage and synergy from the portfolio itself, in areas like supplies, real estate, and people. Size itself helps simply because you get leverage.
But at the same time, when you build a portfolio, you are better off having diversity so when you offer to franchise you can present different dayparts, investment levels, different brands, and categories.
Romaniello: With Carvel and Cinnabon, we brought the brands together and it worked well, particularly in nontraditional environments like in airport locations. With Schlotzsky’s, we do a good amount of business at lunch and a fair amount at dinner, but the hours between lunch and dinner are not a strong suit. Cinnabon and Carvel do well between lunch and dinner.
So we are currently testing Cinnabon and Carvel together with Schlotzsky’s. We’ve opened a Carvel or a Cinnabon (sometimes both) in seven Schlotzsky’s sites so far, and have been testing since April. We created micro-concepts, and as a result we can now do a Cinnabon that costs $60,000 to $70,000 to build out but can perform with AUVs on par with the rest of the Cinnabon system. Basically, new technology allows us to downsize the build out without sacrificing potential for revenues.
There is also potential to activate purchasing power. Now with Moe’s and Schlotzsky’s, we have many similar products. Certainly we expect we could do better with purchasing.
As for merging people, one thing we learned early on when we bought Cinnabon was that we had had some of the best professionals in the business join our company. In each case, there are some things the acquiring company does better and some things the acquired company does better. We learn, then apply the knowledge across our brands as appropriate.
Rutkauskas: We are leveraging our real estate department, architecture department, distribution network, and vendors all across the board. We’re saving money on our chicken, for instance. And these are all non-competing brands, so we are offering them to our franchisee base so they can have additional investment opportunities.
When is it time to sell a brand?
LaMastra: The key is to look at your own company and decide what its core competencies are. If your core competency is the early stage of concepting and development, your competencies might not be in long-term management and growth. Likewise, if a company is particularly strong at running large concepts with a national footprint, its core competency might not be the care and nurturing of a developing concept. You have to ask: “Is the brand going to be well served by continuing to be part of your company?” If the answer is no, then it’s wise to at least take a look around.
Rutkauskas: If the right price came along, obviously we’d have to consider that, something 10 or 12 times EBITDA (earnings before interest, taxes, depreciation, and amortization) instead of the standard six to eight. If we’d taken the brand as far as we could take it and future growth was not up to our abilities, then we’d need to look at it. If selling was the best thing for our staff, franchisees, and company, then we could certainly entertain the thought.