Einstein Noah Restaurant Group, Inc. (BAGL), Bob Evans Farms Inc (BOBE), Jamba, Inc. (JMBA) – Asset-Light Models: The Future for These Restaurant Chains

Page 1 of 2

Despite the fact that the restaurant industry is quite cyclical, companies can find ways to soften the cycles. Franchising is one of the best ways to achieve expansion and widen margins while at the same time assuring some revenue stability.

Although Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL)Bob Evans Farms Inc (NASDAQ:BOBE), and Jamba, Inc. (NASDAQ:JMBA) do not initially seem to be great investment opportunities, their transitions toward asset-light models will bode well for them. On their way to increased profitability, are these restaurant chains worth your money?

Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL)

Holding such a name…
Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL) is a leading operator of sandwich restaurants including the Einstein Bros, Noah’s New York Bagels, and Manhattan Bagel brands. With a market cap of less than $300 million, this small company caught my eye because of its ongoing restructuring program. Einstein Noah is shifting away from its company-owned stores business model and into a capital-light franchise and licensing model, and this augurs well for its future.

Offering one of the best unit economics in the industry, the company is certainly an attractive franchise opportunity. This already shows on the 14.7% (year-over-year) increase in franchise and license revenues reported last quarter, compared to the 0.7% growth in company-owned restaurant sales . More than 200 new location commitments currently in the franchisee pipeline confirm that this trend should only accentuate going forward. With barely 10% of its locations operating under a franchise model, there’s plenty of room left for refranchising and expansion, both nationally and internationally.

Another growth driver for the next few years stems on the management´s focus on increasing the profitability of its existing restaurants. Initiatives to achieve this goal include everyday value menus for breakfast and lunch, an expansion of the product offering, and an incursion into the specialty beverages segment. These steps should help the company reach the broader public while retaining existing customers.

Trading at 23 times its trailing earnings but only 0.7 times its sales, considerably below its peers’ average, while paying out a 3% dividend yield, this is a stock to buy and hold.

These farms can be harvested
Bob Evans Farms Inc (NASDAQ:BOBE) operates restaurant chains, and it also produces food products for national grocery stores. With a market cap of $1.4 billion, its scale is much greater than that of Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL)’s. Although the company seems poised to expand, most analysts expect it to under-perform its industry peers in terms of earnings-per-share growth over the years to come .

These projections are reflected in Bob Evans Farms Inc (NASDAQ:BOBE)’ valuation at 0.9 times its sales, less than half the industry’s average valuation . Although growth will be moderate, does the current valuation (and a 2.4% dividend yield) make this stock a good investment option?

By operating in both the restaurant and grocery segments, the company can better weather fluctuations in consumer spending. This added to the fact that Bob Evans Farms Inc (NASDAQ:BOBE) actually owns most of its restaurants´ real estate, provides it with considerable stability and predictability, as well as some backup in case things go wrong in one end of the business.

Similar to Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL), I believe that Bob Evans Farms Inc (NASDAQ:BOBE)’ future is reliant on the expansion of its licensing model, Bob Evans Express. Although the first Express store was opened only a few days ago, opportunities abound and growth prospects look promising. In addition, a remodeling plan for its existing stores should also drive growth and margins in the years to come.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!