Spicy Pickle Franchising Updates Outlook

SOURCE: Spicy Pickle Franchising, Inc.

DENVER, CO–(Marketwire – October 13, 2010) –  Spicy Pickle Franchising, Inc. (OTCBB: SPKL), fast casual restaurant operator and franchisor of its Spicy Pickle® U.S. and BG Urban Café™ Canadian brands, today reported on its outlook for the remainder of this year and through 2011.

The company’s new CEO (since April) Mark Laramie noted, “We have made significant progress in setting the company on the road toward profitability and ultimate success despite the poor overall operating environment in the U. S. in the past six months.

“These are still difficult times for restaurants, including for fast casuals and bakery cafes, as weak consumer spending continues and we are not expecting any significant near term help from the economy. Our comments should be understood in that context.

“Nevertheless, so far this year we have been able to:

  • Consolidate our supply chain and purchasing power in North America into a single new supplier, Sysco Corporation, with a significant reduction in our cost of goods sold;
  • Increase store level profitability, a benefit to franchisees and the company’s restaurants;
  • Reach an agreement with Premium Brands Operating Limited Partnership, owner of the Bread Garden® trademarks, to permit us to re-image our current BREAD GARDEN locations to utilize our new, wholly owned BG URBAN CAFÉ marks. Since we have full ownership of our independent BG URBAN CAFÉ brand, upon completion of the re-imaging, we will have full and independent brand rights and revenue streams for all of our existing and future locations and channel development.
  • Begin a brand re-imaging program for our Canadian locations into BG URBAN CAFÉ locations with a fresh new look and menu;
  • Launch a location focused advertising campaign for SPICY PICKLE stores that has already resulted in positive same store comp sales and increases in average unit volumes;
  • Continue company reorganization with a program to bring in executives known to have had significant successes in this business, while controlling our cost structure;
  • Secure funding that should carry us well into 2012;
  • Visit all franchisees in their individual stores and developed a program of increased franchisee support
  • Embark on new menu development at both chains and began improvements in products, per consumer surveys taken; and
  • Shore up our new franchisee recruitment efforts and prepared for accelerated expansion.

“The results from our efforts so far have gained traction faster and better than anticipated,” said Laramie. “Virtually every aspect of the company has improved and is showing meaningful progress. We have reduced our cash burn other than for new investment spending on advertising and store remodeling. For example, we are investing about $320,000 right now into the Canadian operations to transform them into BG URBAN CAFE locations, with a new image and menu redesign. We have also invested approximately $150,000 in newly created advertising campaigns, which are driving SPICY PICKLE sales.

“We are filling key executive positions with industry veterans who have proven extremely successful in closely related restaurant businesses. Some are initially consultants who will become full time as soon as possible and others are on staff now. Positions recently filled are: Branding and Chief Marketing Consultant Rob Elliott, Chief Financial Officer Clint Woodruff, Vice President/General Manager for Canada Jeff Branton, and Supply Chain and Business Development Consultant Peter Fowler. Together with our very strong board of directors, these executives provide the skills we need to meet our objectives.

“Regarding the Spicy Pickle franchise restaurants, we reviewed the entire program from top to bottom in view of the current economic climate. We looked at everything, from menu, quality, freshness, competitive offerings, sandwich size, suppliers, bread, image, economics, management assistance, staffing, sites and facilities. We improved store economics and we talked to all franchisees about what else we could do to help them. Part of our improved store economics directly results from our new vendor and supplier alliances noted above. While our prior U.S. and Canadian suppliers are fine companies who provided admirable services, the consolidation into a single North American supplier has led to a marked improvement in our overall economy of scale.

“Many of these changes are just beginning to take effect, and we expect to see the results over the next several quarters and more so as we move through 2011. Moreover, while we have cut ongoing general and administrative expenses, we are investing in the company’s operations infrastructure in order to help franchisees become more successful and to create a more attractive opportunity for prospective franchisees. That means having successful, top notch restaurants that are very attractive to prospective business partners.

“For the remainder of 2010, we should add a few franchise restaurants and we should see several more next year. However, we believe as we go through 2011 our franchise program will pick up speed and that by 2012 franchise expansion in terms of restaurant openings should accelerate. We believe the funds we now have available, plus the cash generated from our various revenue streams should be sufficient well into 2012,” the chief executive concluded.

About Spicy Pickle® and BG Urban Café™ Brands:
Founded in 1999, Spicy Pickle Franchising, Inc. (OTCBB: SPKL) serves high quality meats and fine artisan breads baked fresh daily, along with a wide choice of eight cheeses, 22 toppings, and 14 proprietary spreads to create healthy, delicious panini and sub sandwiches with flavors from around the world. As a leading “fast-casual” concept, SPICY PICKLE restaurants offer menu items that are far beyond traditional fast food without the price points of casual dining. The hallmark of a SPICY PICKLE restaurant is quality service in an enjoyable atmosphere. The company is headquartered in Denver, Colorado, with restaurants in 10 states. A Spicy Pickle Franchising subsidiary operates as franchisor for BG Urban Cafes in the metropolitan Vancouver, Canada area. BG Urban Cafes serve coffee, pastries, breakfast items, lunch, dinner and a wide variety of desserts. Visit our website at www.spicypickle.com.

Forward-Looking Statements:
Certain statements in this press release, including statements regarding the number of restaurants we intend to open, are forward-looking statements. We use words such as “anticipate,” “believe,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “predict,” “project,” “target,” and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and the availability of qualified franchisees and employees; risks relating to our expansion into new markets; the risk of food-borne illnesses and other health concerns about our food products; changes in the availability and costs of food; changes in consumer preferences, general economic conditions or consumer discretionary spending; the impact of federal, state or local government regulations relating to our franchisees and employees, and the sale of food or alcoholic beverages; the impact of litigation; our ability to protect our name and logo and other proprietary information; the potential effects of inclement weather; the effect of competition in the restaurant industry; and other risk factors described from time to time in our SEC reports.