One of the most consistently successful industries in the United States is the restaurant
industry. Even in the country’s current economic state, it remains prosperous and continues to
grow. The restaurant industry has projected total sales for 2009 of $566 billion, which is an
increase of $187 billion over the last nine years (See Graph)1. This increase in sales means the
industry will advance 2.5% and equal 4% of the U.S. GDP. Leading to this success is a greater
share of the food dollar, the restaurant industry accounts for 48% of the food dollar. People are
spending more of their money for food at restaurants, than ever before.
The Industry is always changing and has a constant influx of new concepts, offering a plethora of
options for investors. We researched the hottest concepts reviewed over the 3/21/09 – 6/20/09
quarter with the mission of selecting which concept offered the best potential return on
investment. We were given ten million dollars to invest in one concept and the following pages
present our research, analysis, and choice.
Able Leaders was very meticulous with its research and analysis of the top ten restaurant
concepts. We used a specific set of criteria for our selection of the top three companies to invest
in along with our final selection. The following were the most important questions we had to
answer before we made our decision. Our ultimate goal was to use the information we gathered
to select the concept that offered the best potential return on investment.
Restaurant Trends
o What is trending up and down in the industry?
Growth Potential
o What is the growth plan in place, what is the growth to date?
o Who are the major competitors, how successful are they?
Market Share
o What is our main competitors market share in comparison to ours?
o What is the management’s vision for the future of the company? Has the
management been successful in the past?
Restaurant &
-Offers Happy Hour bargains that appeal to families
on a budget
-Open 24/7
-Offers casual dining2
-Main competitor is Denny’s
-Denny’s has 394 company owned
restaurants and 1,152 franchised and licensed
units in the United States, Canada, Costa
Rica, Guam, Mexico, New Zealand and
Puerto Rico.3
-Du-Par’s has 5 locations all in California.
Dazbog Coffee
-Offers support to a myriad of organizations; which
appeals to customers.4
-Offers online ordering; this is convenient.
-Competitor with Starbucks
-Starbucks’ target market is any person at
any age. Starbucks continues to refine and
target their product offerings to the changing
tastes of consumers.5
-over 8,229 locations just in the United
El Taco Tote
-It is fast and casual.
-Offers an ethnic flavor; which is a trend that has
been developing in the restaurant business. 7
-Competitor with Chipotle
-Chipotle is a chain of over 800 quick-casual
restaurants in more than 30 states.8
Happy’s Pizza
-Offers take-out and delivery.9
-Commodity prices have fallen; the prices of
cheese, wheat, and most pizza toppings have fallen
in 2009.10
-Pizza market is experiencing a financial
down turn in 2008 and it is expected to
-Many competitors such as Pizza Hut,
Domino’s Pizza, and Papa John’s.
-Menu has variety while the prices are still
comparable to fast food
-Offers casual family dining and serves alcohol
which draws in extra revenue. 12
-Buffalo Wild Wings has 620 locations and
in the 3rd quarter of 2009, sales were reported
to be $132.7 million.13
-Fluctuating chicken prices that are at an all
time high.14
-It’s quick service and fast casual appeals to
-Competitor with American Coney Island
and Lafeyette Coney Island.16
-In Chicago alone, there are over 1,800 hot
dog vendors.17
-The sandwich market should continue to grow
because of price and it’s a healthier option. 18
-Competitor with Subway
-Subway has over 21,000 locations in 75
Buffalo Wings &
Leo’s Coney
Sandwich Shop
Crumbs Bake Shop
Crumbs Bake Shop was founded in March of 2003 in Manhattan by Mia & Jason
Bauer. Crumbs specializes in gourmet cupcakes and offers 50 different variations, three
different sizes and are prices at around $4.5020 each. They also offer personalized cakes for
special events. Since its founding, they have rapidly expanded in New York and started
stores in three other states with 23 stores.
Cupcakes prove to be trendy and hip.21 22
Crumbs offers shipping options on their cupcakes. Online retail sales rose 17 percent from
2007 to 2008 to $204billion and are expected to continue growing exponentially.23
Strong market position in gourmet cupcakes market. Has clear head start in the industry and
is aggressively expanding. 2
Cupcake Franchise
Yummy Bakeshop
Famous Cupcakes
Sprinkes Cupcakes
Dots Cupcakes
Mrs Beasley's
Red Velvet
GiGi's Cupcakes USA
Cupcake Station
Magnolia's Cupcakes
Crumb's Cupcakes
number of stores
Identifiable growth. Opened 16 stores in the last year alone. Has currently 23 open stores
and 4 stores opening soon. Plans to open a dozen stores within the next twelve months not
only in the NYC area but also in Boston, San Diego, Philadelphia as well as Washington
D.C.25 Broader expansion plan is to have 150 stores over the next five years2.
 Crumbs offers carryout, and delivery in LA and NYC areas while 61% of adults says
carryout and delivery makes their lives easier to manage.26
 Crumbs carries a New York Yankee's cupcake, this shows support for their local community.
52% of adults will make a restaurant choice based on support for local community.
 Cupcakes offer great value compared to a conventional meal.
 Crumbs uses technology, including the trendy Facebook and Twitter to promote, as well as a
sheik website which provides a shipping option of their cupcakes.
 Experienced and motivated management. Mia Bauer has baking expertise while CEO and
president Jason Bauer has had previous entrepreneurial experience in founding a company
which developed, manufactured, and distributed celebrity-licensed products.27
* As of November 2009, 23 stores are open while four are opening soon.
Cupcakes not considered a health conscious food.28
Financial Information
Revenue grew to $8million in 2008 from $2.2million in 20078.
Crumbs business grew at a rate of 40% (year over year) prior to recession and still maintains
a 20% growth rate during recession.29
Has had a percent revenue growth rate of more than double the industry mean.
(based on 2005-2008)
Genghis Grill
Genghis Grill was founded in 2001 in Dallas, Texas. The first location was a success that the
concept’s founder decided to start its franchise program in August of 2001. They currently have
37 stores in 16 states and plan to have more in the near future. They offer Fast-Casual, “Build
Your Own” Asian Stir Fry.
Aggressive expansion: Plans to have 100 locations by the middle of 2011. 31
Sales from 2007 to 2008 increased by 12%. 10
Genghis Grill is the largest Mongolian Barbeque Restaurant with 37(16 states) stores
compared to BD’s Mongolian Grill, which only has 36 (14 states). 10
Flat Top Grill and Stir Crazy have merged into one company to fight for market share
with BD’s Mongolian Grill and Genghis Grill. They have 28 restaurants in 8 states. 32
15 more locations within 18 months (May 2009). 10
Genghis Grill is still growing despite the economic situation
A prevalent assumption is that the Fast-casual market will continue to expand in the
future based on a projected increasing demand for value, convenience, and healthconscious options.
Fast Casual magazine named them to their 2008 and 2009 listings of the Top 100 Movers
and Shakers. 33
Ranked in Franchise 500 by Entrepreneur magazine. 34
Genghis Grill has some impressive supporters, including franchise vet and Pizza Hut
founder Frank Carney. In 2007, Carney signed a 10-unit franchise agreement with
Genghis Grill. 35
Genghis Grill has been also looking to promote its concept through education about
healthy eating habits. The chain has worked with local schools. They have introduced a
“Heart Healthy” line. 35
Despite the economy and the restaurants industry struggle, Genghis Grill has seen
continued growth due to an average ticket price of $11 and the chain’s healthy fare. 35
Financial Information
Total Initial Investment: $289,000 to $650,00036
Annual Sales: $29.5 million 37
Average Unit Revenue: $1.4-1.6 million38
Average check: $9(lunch), $14(dinner) 39
Genghis Grill charges $30,000 for the initial franchise fee, and weekly, 5% royalty payments. 40
Vapiano was founded in Germany in 2002 and found success in Europe before crossing the
Atlantic in 2006. The concept is fresh, authentic Italian fare served a-la-carte in a modern setting
which fuses café with lounge. Chip-card technology, in-house herb gardens, and interactive
cooking are a few of the unique features used to attract a target demographic of young urban
professionals. The chain currently has 46 locations worldwide, six of those in the US, and plans
to open 100 more US stores by 2012.41
Management team with impressive credentials42:
President and Founder Kent Hahn began his restaurant career at McDonald’s at age 15 and went
on to open 14 McDonald’s franchises before founding Vapiano in 2002. He is also founder and
owner of three other restaurants as well as a restaurant and retail management company.
CEO of Vapiano USA, Middle & South America,Bill Bessette, began his career in the restaurant
industry working with Outback Steakhouse. His achievements led him to the Chart House
Restaurants where he spent 8 years and worked his way up to Regional Manager. He accepted
the position of Director of Operations for Legal Sea Food in 2004 and later rose to the position of
Senior Vice President of Operations.
CFO Gregor Berlach was Vapiano’s original investor and continues to serve as the Chairman of
the Board. He is currently the CEO of Seaside Hotels, a European boutique hotel chain with 7
world class hotels.
 Aggressive expansion: Planned expansion of 44 to 55 new locations by the end of 200943
(aprox. 108% growth from present 46 units): 100 US stores by 2012
 Sales increased by 20% over 200844
 The Vapiano concept has proven solid in Europe but has also successfully navigated
transition into the US market.
 Vapiano has created its own niche
 Vapiano is well aligned with current industry trends and balances innovation with
elements of comfort, convenience, and value:
o Key Features of Vapiano restaurants:
 In-house herb gardens
 Homemade pasta and pizzas based on Italian recipes
 Interactive cooking method/communal tables
 Chip-card technology allows guests to pay at exit
 A-la-carte
 Alcoholic beverages
Predicted trends include increasing demand for authentic, ethnic, and comfort foods as well as
greater emphasis on nutrition and freshness.45 Vapiano fits the bill in all of these areas.
 Vapiano has a history of steady growth since the company began franchising in 2004 46;
expansion has persisted despite a faltering economy.
 A prevalent assumption is that the Fast-casual market will continue to expand in the
future based on a projected increasing demand for value, convenience, and healthconscious options.47
 Fast Casual magazine named them to their 2007 and 2008 listings of the Top 100 Movers
and Shakers.48
 Was named one of the top ten “Best Employers” in Germany for 2008.47
 Vapiano President, Kent Hahne, was named a finalist for CMO of the Year by Booz
Allen Hamilton in 2007.47
 In 2006, Vapiano won the coveted European Hot Concept Award from Food Service
Europe & Middle East.47
Vapiano has created its own sub-niche inside Fast-casual dining and the concept is still in
infancy in the US (since 2007). These factors, along with the hiring of Mr. Bessette as CEO in
January 2009, add to the allure of the company but also to its potential risk for investors.
Financial Analysis
 Net worth requirement: $2M-4M49
 Cash liquidity requirement: $300K-600K47
 Franchise fee: $45,00047
 Total Initial Investment: $711,350 to $1,847,00050
 Royalty fee: 6% of gross sales (paid monthly)47
 Annual Sales: $200 million50
 Average Unit Volume: $2.5 - $3 million51
 Average check: $14.50(lunch), $22.00(dinner)52
 Vapiano made major changes in January 2009 to kick-start expansion43:
 Hired Bill Bessette as CEO of US operations
 Received $62.5 million from three European banks to fund expansion
 Acquired strategic equity partner who will provide another $7 million
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