Monday, November 10, 2014

Research report ZOES

Zoes kitchen is a young fast growing restaurant concept.  They prepare fresh food only and do not fry or nuke anything.  They indicated many strengths in their S-1.  70% shoppers are women whose household incomes exceed 100K.  60% lunch, 17% catering.  I would not be good to evaluate real estate team, but site selection is key, they have experienced people in house and have standards for real estate brokers to submit properties for consideration.  750K to open a restauarant, 3yr CAGR 30%.  122 locations now, they predict they can have in excess of 1600 in the future, opening about 30 new spots this year.  If they grown at this rate 1600 is a long time away, I would like to see them over time increase the number of stores opened per year.  They regularly train new managers at multiple locations.  Experienced management team has grown them from 20 stores.

BASM check

I plan on following this company.  I plan on buying some shares and holding for as long as they execute.  Difficult to come up with a target price, but based upon current price and future number of stores, I expect 13 x current price is possible in the future ($455).

Ownership data that exists suggests not so many funds are in at present though I do see Lord Abbott, an early owner in Tesla.  Fido seems to be buying.

Market cap 637million on 16 weeks sales of 46 million.

Attached is map of local location along two major roads.  It is an odd location in that it is difficult to see from either of the roads.  The one time I've been there it was crowded, I walked by this week and it was crowded.  I hope the real estate teams choose locations with better visibility in the future.

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