In 2007, Denver-based Spicy Pickle enjoyed a growth spurt that more than doubled its unit count from 16 to 36 locations. But when tightened credit markets reduced its growth goal by 60 percent this year, Marc Geman, chief executive at parent company Spicy Pickle Franchising Inc., didn’t want to idle expansion. He decided to acquire another concept that complemented the business model of the fast-casual, sandwich-centered chain using the equity in Spicy Pickle’s over-the-counter stock. The hunt led to 11-unit Bread Garden Urban Cafe in Vancouver, British Columbia. The 30-year-old chain was well-known among consumers, but was in need of a face-lift, and its owner, Zahir Dhanani, was looking for a partner with deeper operational experience. Spicy Pickle bought Bread Garden for about $2.2 million in stock in September.
Why did you decide to buy Bread Garden?
We looked at probably 15 different concepts before I got a call in January from a guy in Vancouver. He was looking to sell his company, and we were looking to buy. The more we looked at Bread Garden, the more we liked it. It’s more like Panera than Spicy Pickle, more of a fast-casual cafe and coffeehouse than we are, and we liked that difference. The concept and the stores need to be freshened up some, but the stores are in triple-A locations. Eventually, I’d love to have those 11 stores as a corporate set, but right now they’re going to stay as franchised stores.
Why was the purchase made with stock rather than cash?
We’re a growth company and not yet profitable, so we’re using [available cash funding] for that. We believed it best to acquire a chain using the currency of our stock.
Are you thinking about any more acquisitions?
Yes, we are still looking around, but getting as lucky as we just did probably won’t be as easy the second time around. I’m also not sure that [our stock] will have the same value going forward as it did for this transaction. But from an infrastructure perspective, we have the capacity to handle more than what we have now.