Monday, October 20, 2003

Had a good long conversation with Sally today concerning CB. Got there around 945am. There were about 18 people who came in to buy coffee or eat food. I stopped counting at 11am.

I also had a talk with Kurt today about my meeting with Sally.

Here are some of my findings:

1. They opened about 6 months ago and are not yet cash flow positive. They are still trying to cover expenses.
2. She hopes to be profitable by 1 year
3. It took 6 months to build out her location (I don't remember if this included lease negotiations)
4. When she was going through their buildup, CB did not have any contractors which were available in Chicagoland area. The ones that CB had contracted were going to charge them extra for travel and stuff. Therefore she went out and got her own contractor. Kurt assures me that they now have national contractors in place which may not have been available to Sally two years ago.
5. She did not go through financing with CB. It took her 4 months to secure a loan. Kurt says that they now have 3rd Party Lenders lined up for franchisees. He said that the lenders will not have a problem with providing the loan provided you have the $300K net worth required to secure it.
6. It cost her $180K to build out her location (electrical was $45K, lighting about $45K, signage $2K)
7. It cost another $170K for the equipment.
8. She provides free wireless internet through a satellite dish, costs her about $150/month.
9. She negotiated to have a 7-5-5 renewal. She negotiated a maximum of 3% increase in royalties.
10. She has a protected territory that included nearby western suburbs.
11. She had a lot of leeway in the decor of the location including carpet, wall color, furniture, lighting, artwork.
12. CB did not provide location assistance or lease negotiations. Kurt mentions that they do.
13. CB is rolling out new Quizno's style hot sandwiches. Sally just purchased the oven to do this. This is going to be rolled out this Wednesday. Sandwich prices are going to be in the $5.25 to $6.50 range.
14. Kurt mentions that their biggest competitors are Barney's and It's a Grind besides the obvious Starbucks.
15. Kurt mentions that Gloria Jean's have not yet seemed to perfect the standalone store.
16. He said that 80% of CB's locations are mall locations and not cafes. However, cafes are possibly going to account for 50% of their locations in 4-5 years.
17. He mentioned that one of the locations negotiated a protected area that was possibly up to a 20 minute drive away. So this seems to be a point of negotiation.
18. Kurt indicated that CB is moving to expand their operations from daypart to more a lunchtime or dinner menu.

Sally mentions that she was very happy with her experience with CB and has a good relationship with the JoAnn the company owner. This is possible that since there are not that many standalone stores yet, they are closely monitoring her progress as they can learn from it.

All in all, I had a good feeling about CB, but that maybe they still need more experience in non-mall locations and possibly expanding their resources into the Chicagoland area.

Mood| Optimistic

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