Restaurant Finance Monitor
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Everyone likes a success story, and we could all use one, with uncertainty on so many levels these days.

Noble Roman’s (NROM) continues to make substantial progress, even with the ongoing challenges of the pandemic. We have written in the past of their improved balance sheet and the expansion of their Craft Pizza and Pub concept (NRCPP), now several years old since inception. We suggest that interested readers use the SEARCH function on our home page for our previous reports on NROM.

Recall that the Noble Roman’s brand has been well regarded by consumers over more than four decades, especially close to home in Indiana and surrounding states. Social media commentary ever since the Westfield, IN NRCPP opened several years ago has been consistently complimentary, often referring with nostalgia to an experience in their youth at Noble Roman’s.

Putting the latest developments into context, the Westfield opening, the first NRCPP was the best of the first four company openings, generating an initial annual sales volume over $1.5M, with store EBITDA margins in the twenties. This obviously generates a very high cash on cash return, for a 4,200 square foot facility that costs about $650k to put in place. The next several NRCPP units have been successful and generated an acceptable return for company operated locations, but the average volume (in 2019) for the four locations came in at $1.2M, with an overall store level EBITDA of 12%. There were several mitigating factors (unexpectedly large CAM charges at two locations, non-cash lease expense, and heavy delivery charges) so the “adjusted” store level EBITDA was more like 17-18%, but this was clearly less than Westfield had originally generated. The resultant average 31-33% cash on cash return is more than adequate for company locations, but materially less so for franchisees that pay a 5% royalty, have advertising expenses and local G&A. Still, the Noble Roman’s brand is well enough known that two franchisees successfully opened stores within the last year or so, and the first (with a location in Lafayette, IN) is about to open a second location, in Kokomo, IN.

With that as background, NROM had the courage to open their fifth company operated NRCPP location, on March 25th of this year, virtually the worst week of the pandemic. The Pizza Valet curbside pickup service, introduced in January, 2019, served the effort well, and the Brownsburg store “shocked the world” by doing over $50,000 the first week, still doing comfortably over $30k at last report. The sixth company location, in Greenwood, IN, opened a week ago and the Company announced yesterday a record opening week, at almost $60k. A breakdown of in-store vs. off-premise sales was not provided, but the Pizza Valet service which has been enhanced over the last six months, was no doubt instrumental. It is worth noting that the Company has introduced a “smaller box”, 3,700 square feet, 500 square feet smaller than the 1.0 version, which is designed to generate at least as much volume with quality and service improvements.

The result is that six company locations can now be said to be annualizing at $1.4-1.5M, generating  store level EBITDA close to 20%, perhaps even higher if delivery charges and CAM charges become less of a burden. The $280k-$300k (generating 43-46% cash on cash return) estimated annualized store level EBITDA is obviously a far more attractive cash on cash return than the 31-33% estimated above, could and should be important to attracting more franchisees.

It is equally important that the Company, while reporting their Q2 results on the mid-August conference call, indicated that YTY comps for the 4 original company stores had improved steadily from March to July, from down 25-30% at the beginning of the pandemic to a single digit decline in July, much better than most of their restaurant peer group. Dining rooms are open 100% in Indiana, but social distancing still limits the practical capacity to about 50% in-store, so the Pizza Valet service, enhanced by the Company and embraced by customers, will no doubt be a continued strength going forward.


The Company’s progress this year, coping with the pandemic and moving the NRCPP expansion vehicle forward, should provide a new level of confidence and investor enthusiasm for NROM stock. This is an admittedly small Company and NROM often trades thinly, as stocks often do when Company value is such that sellers are hard to find. Still, the news should continue to be encouraging relative to the sales and margins at Company NRCPP locations, with the seventh Company location to open in Q4 and the third franchise location as well. In spite of the uncertainty relative to the restaurant industry in general, NROM seems capable of distinguishing itself from the crowd. Considering the much improved balance sheet, the demonstrated long term appeal of the brand and the long runway for growth, as higher earnings and cash flow are demonstrated the real world value of the Noble Roman’s company should be increasingly reflected in its stock price.

Roger Lipton