It's a good bet you've never heard of Focus Brands. But you definitely know the company's holdings. They include restaurant and snack chains like Carvel Ice Cream, Cinnabon, Schlotzsky's and Moe's Southwest Grill.
Well, this week Focus has picked up another marquee name: Auntie Anne's. It is the world's largest hand-rolled soft pretzel chain.
While the price tag on the deal was not disclosed, it was likely several hundred million dollars. Auntie Anne's has 1,100 stores in 44 states and is in 21 countries. As of last year, the company posted record sales of $353 million and rolled more than 500,000 pretzels every two days.
A Mistake Was Anne's Big Break
Yes, there is a real Auntie Anne. But her full name is Anne Beiler (pictured). Back in 1987, she made some extra money at the farmer's market by twisting pretzels. But she quickly realized there was a big business opportunity. So Beiler set up a retail location in Downingtown, Pa.
Interestingly enough, like all great businesses, Auntie Anne's benefited from a foul-up. That is, Beiler ordered the wrong ingredients. So she improvised and actually came up with a very tasty pretzel.
With a minimal marketing budget, she had to rely on word of mouth to get foot traffic. No doubt, the unique pretzels were enough to make this happen. Another differentiator was a social mission. Over the years, Auntie Anne's has been a generous benefactor of a variety of causes, such as the Children's Miracle Network and First Book.
Another key to the growth of Auntie Anne's was the franchise model. That brought about a boost in locations as well as recurring revenues.
A Powerful Business Model
The private equity backer of Focus Brands is Roark Capital. The firm has built a powerhouse in the franchise industry, with 19 acquisitions. In all, there are 2,200 locations in its system and revenues are over $1.4 billion.
As seen with companies like Yum! Brands (YUM), which owns KFC, Pizza Hut and Taco Bell, the franchise model can be powerful and allow for steady growth. It's the kind of operation that often gets traction on Wall Street.
It seems inevitable that Focus Brands will eventually gear up for a public offering. And in light of the strong portfolio and its scale, the company has the right ingredients to get investors interested.
Managing your Portfolio
Keeping your portfolio and financial life fit!View Course »