Tag Archives: Noble Roman’s



We have written previously about Noble Roman’s and suggest our readers access those articles by way of the SEARCH function on our HOME PAGE.


While NROM has moved up in price over the last few months, there continues to be potential upside. The second quarter provided about $600k of quarterly EBITDA once again, and seems to provide a base on which to build further. As outlined below, potential add-ons “in hand” could take the annual EBITDA to comfortably over $4M annually going into calendar ’22 and be at or above $5M early in ’23. The regional focus with their expanding NRCPP chain seems to minimize operational risk and the total Enterprise Value (currently about $25M) is obviously modest for a well established brand with growth potential.


Noble Roman’s reported their 2nd quarter results, ending 6/30/21. Since PPP loans were received in the 2nd quarter of ’20 and the first quarter of ’21, distorting QTQ comparisons, we will first discuss the six month report, which provides a more accurate picture of the YTY recovery from the pandemic.


For the six months: Restaurant Revenues, from their Craft Pizza and Pubs, were $4.4M, up from $2.5M, as a result of three new Pubs opened during calendar ’20, as well as the ongoing post-pandemic sales rebound. Operating Income was $1.586M almost exactly flat with $1.608M, with both six month periods affected by PPP loans which offset extra expenses. Depreciation was $306k in ’21, up from $164k, as a result of the three new locations, so EBITDA for H1’21 was about $1.8M, a little higher than in ’20. Still, we do not view the $1.8M in H1’21 to be a current EBITDA run rate because of the ongoing operating adjustments, especially in Q1’21. The following discussion of Q2’21 is more indicative of the income and cash flow going forward because of the diminishing, though still material, effects of the pandemic.


Revenues in the Craft Pizza and Pubs was $2.265M vs. $1.407M, as a result of the three successful new Pubs opened during ’20. The store level EBITDA was 14.5% of sales (expected, as stated by management, to improve), not comparable to the 42.8% in ’20 which was driven by the PPP loan/grant. Royalties and Fees from Franchising was $1.046M, up from $905k in ’20 and up sequentially from $890k in Q1’21. Royalties and fees from the grocery segment (becoming relatively immaterial) was down $45k to $317k. The Margin Contribution from the total Royalties Segment (Non-traditional, NRCPP, and Grocery) was $717k, down from $821k, a 59.8% Margin Contribution vs. 75.4% in ’20. This decline in margin on an increase in YTY revenues is due to the receipt in ’20 of the PPP loan, part of which was allocated to expenses of this segment. Q2’21 showed Operating Income of $424k. D&A of $142k and a few small non-cash expenses, which brought the quarterly EBITDA to approximately $600k. We will use this past quarter and first half EBITDA (about $600k/qtr., $2.4M annually) to build upon in terms of potential EBITDA over the next year or two. It is worth noting that NROM has about $15M of tax loss carryforward so that EBITDA, less interest, will approximate the after tax cash flow from operations. The balance sheet includes $2.1M of cash, about $8M of total long term debt, with a current ratio of 4.7 to 1.


Paul Mobley, CFO, expressed his satisfaction that facility cost in  Q2 was lowered to 10.4% from 15.5% last year, due to the higher sales of the first four NRCPPs, the well above average sales at the three new locations, and the new leases. At the end of the call, he interjected that July sales for the seven NRCCPs were up 4.6% over June. Additionally, “August is a transition period where weekends are getting larger, weekdays a little smaller….but it looks like August will be a pretty decent month as well.”

Scott Mobley, President and CEO, described how supply chain (i.e.chicken and packaging) and labor issues were second quarter hurdles but operations were maintained without major disruptions. He noted that when Indiana opted out of the unemployment bonus payments, there was an immediate resurgence of job applications, but the applications dried up when the court reversed the opt out policy. Logically, the labor situation  (for all) will hopefully improve when the Federal programs expire in September. He described the two new announced NRCPP locations with enthusiasm and  noted that signups for non-traditional units are increasing, 19 so far in ’21.

The current sales mix is 47% dine-in, 18% third party delivery (which is not promoted) and 35% takeout (the pizza valet program). In the most recent weeks, carry-out has firmed up as the Covid variant has been in the news. There are no new mask mandates but some customers are obviously concerned.

Scott Mobley talked about a new flatbread pizza that has worked well in test, will be rolled out shortly, and can be done without new operational complexity. He also expressed an expectation that third party delivery charges can be reduced by way of a new local agent.


We build, below, upon the current run rate of EBITDA, to develop expectations over the next year or so.

Three new NRCPPs to come on stream in Q4’21. Two leases are signed, the first to open in late September, the 2nd in October, the 3rd in late Q4. If the three stores average $1.4M of revenues annually, as the last three have done, and generate a store level EBITDA margin of 18-20%, that would contribute $252k-$280k each annually, or $756k-$820k ($788 at the midpoint) for the three locations.

It seems reasonable to assume an additional sales recovery of 5-10% from the existing seven NRCPPs, or $65k/store, bringing the current $1.3M run rate to about $1.4M. The Company has said that the most recent 14.5% store level EBITDA can be improved, especially with the recent 5% menu price rise. If we assume two points of margin improvement on $1.4M, that would be $28k per store, or $196k annually on the existing seven locations.

The non-traditional franchised segment, primarily C-stores and gas stations, numbered close to 650 locations two years ago. Including the royalties and fees from NRCPPs, that segment contributed $1.3-$1.4M of royalties on a quarterly basis, with a margin contribution well above 60%. This segment has been improving sequentially, from a low of $846k in Q4’20 to $890k in Q1’21 to $1046k in Q2’21. If we assume this segment will continue its recovery back to about $1.3M quarterly, that would be about $300k quarterly, with an incremental margin of at least 75%, $225k quarterly, or $900k annualized.

Potentially offsetting the above potential add-ons could be a continued deterioration in the royalties from grocery stores, which could be perhaps $200k of revenues and $150k of EBITDA.

Adding together the above contributions, we get $1.734M of additional EBITDA within the next year or eighteen months. On top of the current annual run rate of $2.4M, that would total $4.134M. This can be considered “in hand” potential over the next twelve months, essentially going into calendar ’22. It can be expected, looking out more than twelve months, that there will be additional NRCPP openings, a new high of non-traditional locations, and additions to the current three franchised NRCPPs.

It does not seem to be a “reach” to think that annual EBITDA could be at a run rate of $5M or more by the beginning calendar ’23. The biggest single variable, which could help or hurt, would be the rate of sales at the fleet of NRCPPs. Mitigating the risk is the fact that the entire fleet of NRCPPs (10 company operated and 3 franchised), are within an hour’s drive of Indianapolis, with the attendant operational focus.

CONCLUSION: Provided above

Roger Lipton



Noble Roman’s (NROM) announced today a lease signing for their ninth company operated Noble Roman’s Craft Pizza and Pub location, to open in Franklin, Indiana, just south of Indianapolis.

While NROM is relatively small, among publicly held restaurant chains, this forty year old brand has been re-invented over the last five years, in particular with the creation of its flagship Noble Roman’s Craft Pizza and Pub (NRCPP). Our previous write-ups, describing the Company, its history and its prospects, can be accessed using the SEARCH function on our Home Page.  As we have previously suggested, the public valuation of NROM should follow, as the Company produces  steady fundamental progress

Recall that Noble Roman’s (NROM), with the first NRCPP location, in Westfield, IN now over four years old, opened three highly successful units during 2020, bringing the current total to seven. The Franklin unit will be the second of three expected during the balance of 2021. There are three franchised locations also operating, so NROM will enter 2022 with thirteen units in their expanding NRCPP system, all within a ninety minute drive from  Indianapolis.

The latest location will be about 3,600 square feet, representing the somewhat smaller  (10-20%) version of the first NRCPPs, and this size location (costing about $750k) and including their innovative curbside “pizza valet” carry-out service,  has shown a capability of generating  annualized volumes  over $1.5M with a store level EBITDA margin at 20% or more. It is worth noting that the Pizza Valet service, introduced over a year before Covid-19, served the Company well during 2020 and should alleviate the traffic risk from any sort of resurgence concern.

The recovery from the pandemic affected 2020, including their 650 franchised non-traditional locations, and new unit growth of the NRCPP system should allow for expanding cash flow and earnings. The stock has moved up materially (from about $0.50 to $0.80-0.90) but the Enterprise Value, still under $30M, continues to be modest relative to the prospective earnings and cash flow.

Roger Lipton




Noble Roman’s (NROM) has dealt with the pandemic related challenges better than most, maintaining corporate liquidity, improving their balance sheet materially, and controlling operating expenses well. The prospect for increasingly profitable growth has been enhanced by the opening, in the heart of the pandemic, of three additional Noble Roman’s Craft Pizza and Pub locations. The seven current NRCPPs can now be expected to annualize at an indicated average of about $1.4M, with store level margins in the high teens generating a cash on cash return of 35% or more. Moreover, If the three latest openings, annualizing at about $1.6M, are any indication, future results could be materially better than that. At the same time, the 650 non-traditional locations, mostly in C-stores and entertainment facilities, generate annually over $4 million of royalties and can be expected to grow as well. The Company has reported an EBITDA of approximately $3M in recent years, but that has been reduced by high interest cost and legal expenses, both of which should be much lower in the future. Over the next twenty four months, it is not hard to project a corporate EBITDA run rate between $4M and $5M, from a combination of company NRCPPs, steady progress in the non-traditional segment, and franchised NRCPPs. As the Company results reflect the expected steady progress, with fewer non-operating adjustments, it seems likely that NROM will be revalued upward.

Relative to the expected stock performance, it should be noted that a substantial holder (Robert Stiller, founder of Green Mountain Coffee), who purchased over 3 million shares of stock something like 10 years ago, has been a seller recently of several hundred thousand shares (about 79,000 shares this month). While he has not directly spoken to the Company, his most recent filing indicates his ownership at 2.8M shares, about 12% of the outstanding shares. We expect that, if the fundamentals of Noble Roman’s develop as expected, the Stiller holdings, worth about $1.1M at the current price will be absorbed by new buyers. His apparent willingness to sell shares at this level could provide an opportunity to a value oriented small cap stock investor.


Noble Roman’s (NROM) reported their March, 2020 quarter last week. Results, as indicated with the ’20 yearend report and subsequent commentary, showed store level operations at the seven company operated Noble Roman’s Craft Pizza & Pub (NRCPP) locations largely recovered from the pandemic, and the 650 franchised non-traditional units steadily recovering (though mores slowly) as well.

We have written about Noble Roman’s previously, and readers can use the SEARCH function on our Home Page to access previous articles. Recall that all company operated NRCPPs are in the Indianapolis metro area. The first four were in Westfield (now open for four years), followed by Whitestown, Carmel and Fishers. The three newest NRCPP locations are in Brownsburg, McCordsville & Greenwood, opened during calendar 2020, in combination materially improving the previous average unit volumes.   The non-traditional locations were not affected as much by the pandemic as the NRCPPs, percentagewise (perhaps 50% at worst versus 75% for the NRCPPs. However, discussed further below, this segment, while steadily recovering, was still down about 30% YTY in the March quarter. Recall also that NROM received $941k of PPP funds in the March quarter, which was obviously a material contribution to the Operating Profit of $1.2M.

Total Revenues in the 3/31/21 quarter were $3.3M, up from $2.7M YTY. The Operating Profit was $1.2M vs. $589k. The Operating Income was improved as a result of the four original NRCPPs almost recovering their pre-pandemic AUVs, the three new NRCPPs doing even better, and the reimbursement of $941k in PPP qualifying expenses, partially offset by the lower fees from non-traditional franchisees ($890k vs. $1,278k). It should be noted that the non-traditional royalties were up sequentially from the $840k in Q4’20.

The total $941k of PPP funds were allocated as follows: $371k toward NRCPP labor, $211k toward NRCPP occupancy and other expenses, $140k toward non-traditional expenses, $29k toward company operated non-traditional, and $190k toward corporate expenses.

The NRCPPs generated $2,108k of Revenues vs. $1,092 last year, and $880k of store level EBITDA vs. $121k.  Adjusting for $371k of PPP funds applied toward labor and about $210k toward occupancy expenses, indicated store level EBITDA would have been $299k or 14.2% of sales. This compares against 11.1% store level EBITDA in Q1’20. The Company points out that both quarters are not “normalized” since expenses were incurred, not necessarily reimbursed, to cope with the pandemic. In any case, the higher volumes from the most recently opened locations should point to improving average store level EBITDA in quarters to come.

The franchising venue, consisting mostly of non-traditional stores, secondarily-grocery store fees, lastly- revenue from the three franchised NRCPPs (in Lafayette, Kokomo and Evansville, IN) reported $1054k of royalties and fees vs. $1,467k. The grocery segment was down $25k to $164k. The non-traditional portion was $890k vs. $1278k. The margin contribution was $714k vs. $977k, after crediting $140k of the PPP funds, so the pre-PPP margin was $574k.

There is one company operated non-traditional location, in a hospital, that generated $116k of revenues and $27k of EBITDA margin, after applying $29k of PPP funds.

Net income in Q1’21 vs. a year ago, both quarters obviously affected by the pandemic, with a profit of $827k vs. a loss in ’20 of $255k. This year was still negatively affected by the pandemic, offset by the PPP receipt. Last year was affected much less by the pandemic but included a non-cash write-off of unamortized loan cost of $658k. Importantly, even without the PPP receipt, and in spite of the continuing operational distortions related to the pandemic, Operating Income was a positive $220k and $165k of D&A provided positive EBITDA of $385k.

In terms of future expectations, as described below from the conference call, operating margins at both the NRCPPs and non-traditional franchising can be expected to improve, from normal seasonality, pandemic effects unwinding, and the inclusion of three very successful newly opened NRCPPs.


Paul Mobley, Executive Chairman and CFO, reviewed the financials, and Scott Mobley discussed operational considerations. Aside from the financial details described above, Paul Mobley pointed out that the $941k PPP receipt in Q1 is expected to be forgiven, just as the $715k received in ’20. He indicated that normalized Operating Income was about $700k in the quarter, since there were pandemic related operational adjustments, partially offset by the $941k PPP receipt. He indicated that the uncertainties related to the pandemic have created hesitancy among potential new franchisees of both the NRCPPs and the non-traditional venue. In spite of that, the first NRCPP franchisee (in Lafayette and Kokomo) is looking for a third location and 12 new non-traditional franchisees have signed up so far this year. Mr. Mobley pointed out that the balance sheet current ratio is a healthy 3.8 to 1 compared to 2.6 to 1 at 12/31/20. The $1.9M of cash plus expected cash flow allows for the Company to plan three new NRCPPs in ’21, each costing about $750k, while still maintaining adequate liquidity.

During the Q&A, Paul Mobley described how the first quarter, while encouraging, had additional pandemic-related expenses that were not fully covered by the PPP receipt, so sales and operating margins in the quarters to come should be more normalized and “significantly improved”.

Scott Mobley described how the break down between dine-in and off premise sales is now about 50-50, versus 35% dine-in just 4-6 weeks ago, varying between locations. He also indicated that lunch ran about 22.5%, dinner 77.5% Pre-Covid. Lunch fell off to about 15%  early in the pandemic, and has recovered only to about 17.5% so is expected to build further as customers return to the workplace. Online ordering was only 8.5% Pre-Covid, grew to 35% and now is running about 20% of sales. Importantly, delivery, which the Company does not promote, ran under 10% of sales pre-Covid, jumped to 22.5% of sales and is now running about 18%. The Company has recently been “working with a third party alternative” which will reduce NROM’s cost by about 50%, thereby saving something over two points of store operating expense from what it ran in Q1’21  (4.5% of sales, up from 3.2% in ‘20). Scott described with pride how, in spite of the unprecedented labor shortage, the Company has met the challenge with recruiting, training and motivation. The Company has kept the labor expense under control. Adding back the $371k credit of PPP funds to the $229k of reported salaries and wages would indicate a labor expense of $600k or 28.4% of sales, versus 29.1% a year ago.

Also during the Q&A, Scott Mobley described how the Company  has engineered the NRCPPs to provide speed (2.5 minutes for the traditional crust, about 6 minutes for Sicilian) along with a high quality end product. The stock equipment from the manufacturer was fine tuned to mesh with the long successful dough recipe that was also modified accordingly. He also described some aspects of the raw ingredient quality: 100% real meats with no fillers, tomatoes processed in the field and never frozen, as well as the never frozen dough. In terms of the varied menu, including pasta, sandwiches and salads, each ingredient can play multiple roles on the menu, which provides velocity for the distributor, higher volume and pricing control with the manufacturer and simplifies handling procedures for employees.

CONCLUSION: Provided at the beginning of this article




Indiana based Noble Roman’s (NROM) has been publicly held for decades, participating in our (then) annual Small-Mid Cap Restaurant Conference back in the 1980s. Readers can confirm within social media commentary the warm recollections that mid-west residents have from their youth, not only in relationship to the pizza but the legendary breadsticks served with a spicy cheese sauce. The Company has been reinvented in the last five years, creating and establishing the ten unit (7C+3F) Noble Roman’s Craft Pizza & Pubs as an attractive growth vehicle. In addition, NROM can build upon their nationwide system of over 600 non-traditional locations. The three 3,600 sq.ft. Pub locations, opened in the middle of the pandemic, are annualizing at well over $1.5M, with an indicated store level EBITDA above 20%, that would generate a cash on cash return of approximately 50%. The total of seven existing company locations are annualizing at $1.4-$1.5M, with an EBITDA margin in the range of 17-20% that generates a cash on cash return of 34% to 43%. The Company was solidly profitable in ’20, in spite of the pandemic, and should be more so as existing Pubs normalize post-pandemic and new units are added. We project the possibility that within eighteen months, there could be 10-12 company Pubs operating, further modest growth in the non-traditional segment, and a corporate EBITDA in the area of $5M, even without significant Pub franchising. The balance sheet has a manageable long term debt component of $6M, net of the $2M in cash. Since the value of the common stock is under $10M, an Enterprise Value of under $16M is obviously very modest relative to the brand value and the EBITDA potential. Obviously a micro-cap valuation at this point, NROM has the opportunity to grow substantially,  attract a larger investment following and be revalued substantially upward.


When a branded chain has been around, and publicly held, for four decades, there is almost always some “baggage” and Noble Roman’s is no exception. Skipping over ancient history, within a few years before and after the financial crisis of ’08-‘09, Noble Roman’s signed up something like 700 non-traditional licensed locations (c-stores, gas stations, hospitals, bowling alleys, etc.). Unfortunately, in ’14 and ’15  (out of Noble Romans’ control) a number of c-store chains re-franchised many locations and the new franchisees proved to be poor operators and/or financially unreliable. Determined to protect the brand, Noble Roman’s management did their best to enforce the franchise contracts, including collection of the royalties (and subsequent legal expenses) receivable. This effort has gone on through the last six years and culminated at the ’20 year end with a full reserve of the last of the long term royalties and legal expenses receivable. It is worth noting that none of the royalties and legal expenses due are from current franchisees. Management has emphatically stated that the royalties now shown as receivable, $879k at 12/31, from the franchise segment that generated $5.0M of revenues in ’19 and $4.1M in pandemic driven ’20, are all current.

The last five to six years have been characterized by steady operating earnings, but corporate cash flow has been reduced by legal expenses and high interest rates on debt. Bottom line GAAP results have in turn been hit by increased reserves against receivables.  If the Company meets its operating objectives, all of these negative factors: burdensome interest rates, high legal expenses, and receivable adjustments would not apply in the future.

For perspective, we recently compared the “state of the Company” at 12/20 versus 12/14, six years ago, covering the period in which the substantial improvements as described above have taken place. Revenues in ’14 were $7.9M, almost all of it royalties, and Net Income Available to Common Shareholders was $1.59M. There was $3.3M of long term debt, offset by $200k of cash. Net (current) Accounts Receivable were $1.7M. In relationship to the “Other Asset” account, just recently reduced to almost zero, it was $5.0M in ‘14, up from $3.1M in ’13, and those receivables were a heavy burden in the succeeding six years.

Six years later: the fourth quarter of ’20, while still affected materially by the pandemic, can be considered to be approaching normality. Revenues ran at an annualized rate of $13.2M. In the full calendar year, there were a number of material non-cash adjustments (to be discussed later) but Net Cash From Operating Activities $1.7M, and, with a tax loss carry forward, that is almost the same as the $1.59M available to common shareholders in ’14. It is true that the first PPP loan of $715k contributed to the calendar ’20 result, those funds replaced lost sales and related costs so the normalized result without PPP would likely not have been much different. The balance sheet is further indebted today than in ‘14, with $8M of long term debt at 12/31/20, offset currently by $2.0M of cash but there is no principal due for several years. Most importantly, Other Assets, including Long Term Receivables, has been reduced to almost zero, so reserve adjustments should not recur, as was the case from ’14 through ’20. Critical to the public shareholder base, the average number of shares fully diluted is up only about 11%, to 23.5M over the last six years.  The absence of major shareholder dilution is likely due in no small part to the fact that Paul and Scott Mobley personally own about 23% of the shares outstanding so have every reason to minimize dilution. They have also voluntarily reduced their salaries during the last several years, committing to annual increases of no more than 5% in the future.

In summary, results the last six years have been affected by a variety of operational and financial adjustments, always difficult in a publicly held environment, but the net cost has been relatively modest , the public shareholders were well protected and the Company now emerges in its best position over many years.


The fourth quarter, while still materially affected by the pandemic, is more indicative of the current “state of the Company” then full year results because the pandemic affected the twelve months much more than the fourth quarter, which was approaching normalization. Fourth quarter results were also not benefited by incorporation of the PPP loan proceeds, as was the case earlier in ’20.

In the fourth quarter, Total Revenues were $3.3M, up from $2.6M, primarily as a result of three new very successful Noble Roman’s Pizza and Pub locations that opened during calendar ’20. Operating Profit before interest, valuation adjustment and taxes was $295k vs. $234k. After interest of $337k (about 45% of which was non-cash amortization of previous loan cost and non-cash PIK interest expense) adjusted (for cash interest) pretax income (before the Increased Reserve for Long Term Receivables) was about $110k. Adding back depreciation of $120k provides an EBITDA of about $230k, still positive in the midst of a pandemic.

By segment in Q4:

The Pubs produced $2.126M vs. $1.136M of Revenues, as a result of three successful openings. Cost of sales was 22.4% vs 22.3%. Salaries and Wages was 27.4%, an improvement of 260 bp. Facility Costs improved 260 bp to 13.6%, as a result of higher sales and lower rents at the three new locations. Packaging Costs were constant at 2.8%. All Other Operating Expenses were 60 bp better at 17.7%. The EBITDA margin contribution was up by 570 bp to 16.0%. Same Store Sales for the four original Pubs was not disclosed and we assume that those volumes, which improved through ’20, were still running modestly behind Q4’19. Overall, the Pubs improved substantially in all important respects, especially impacted by the three new locations.

The Franchising segment produced Royalties and Fees of $1.220M, down slightly from $1.267M. The grocery portion was down $114k to $187K and the Non-Traditional/Pub portion was up about $67k to $1.033k. Backing out our estimate of $75k of royalties/fees from Pubs, it appears that Non-Traditional fee generation was down very modestly, a result of new store fees (signings and openings) offsetting stores (e.g. bowling alleys, hospitals) temporarily closed and lower volume permanent closings. Overall, this segment has steadily recovered throughout the pandemic, is virtually back to the level of a year ago, opened 20 locations in ’20 while permanently closing the same number of presumably lower volume locations. There remains the possibility of steady growth from this segment.

The third segment, financially immaterial, is the one company operated non-traditional location, located in a Covid-limited-access portion of a hospital. This location had revenues of $105k in Q4, down from $174k, and showed a loss of $3.4k vs a profit of $11.7k.

Calendar ’20 Results

Operations were materially affected by the pandemic but the Company remained profitable throughout the year. The major accomplishments included the opening of three very successful company Pubs (for a total of seven), the third (and highest volume) franchised opening (in Kokomo, IN), a refinancing of the long term debt, the receipt of a (now forgiven) $715k PPP loan, the signing and opening of 25 and 20, respectively, new non-traditional locations, the operational adjustments that produced a still profitable year in spite of the pandemic. Also of material importance was the decision to fully reserve $4.9M for the collection of long term receivables from franchisees that have left the non-traditional system, therefore reducing future book keeping adjustments as well as legal expenses in the pursuit of those receivables.

The Pub division generated revenues of $6.2M vs $4.8M, as a result of the new locations. The margin contribution was $1.3M (20.5% of revenues) vs. $580k (12.0%). The PPP loan (since forgiven) of $715, was reflected in these numbers, largely in a reduction of Salaries and Wages (to 21.8% of revenues) an improvement from 30.0%.

The Franchising Venue generated revenues of $4.1M, down from $5.0M, with a margin contribution of $3.1M (64.1% of revenues) vs $4.1M (66.1%).

The year as a whole showed Operating Income of $2.3M. Adding back D&A of $382k, Corporate EBITDA was about $2.7M. Interest expense was $1.9M but $658k of that was non-cash writeoff of unamortized previous loan discount and $221k was non-cash PIK expense. Subtracting cash interest of about $1.0M from $2.7M of EBITDA provides cash generation of $1.7M. Subtracting the $.715M from the PPP loan, since forgiven, indicates that the Company remained cash flow positive, on its own, in spite of Covid-19, a fairly uncommon feat in the world of publicly held restaurant chains.


CFO and Executive Chairman, Paul Mobley, provided the financial update. In addition to the numerical summary, he strongly reiterated that, in the wake of reserving completely for Long Term Receivables, the $879k of net Receivables at yearend are current and collectible. Legal expenses will presumably be  minimal, employed when collectability is likely, and amounts when collected will be reflected in income. The Non-Traditional segment continues to have growth potential. The Company sold 25 new locations and opened 20, with 20 older locations closing. Already in Q1’21, there have been seven signed up and seven openings. Significantly, an additional $940k has been received under the CARES act, expected to be forgiven.

Scott Mobley, President and CEO, provided an operational update. He described some of the challenges of adjusting to pandemic requirements, including expanded and more effective use of the pizza valet curbside pickup service, adjusting service from fast casual to full service to deal with social distancing concerns, and handling sharply higher online ordering. Supply chain and staffing challenges were unprecedented, dealt with as needed, including the temporary use of supervisory personnel to fill in for store crew, and this flexibility and dedication is a corporate strength. Commodity prices, cheese in particular, fluctuated more than normal. Third party delivery continues to not be a priority, running at a relatively modest 15% of sales, since NROM is not anxious to lose control of “the last mile”. The Pizza Valet curbside pickup service, introduced over a year before the pandemic, has been improved further, enjoyed by both customers (who better control the off-premise experience) and crew (who earn tips). To whatever extent third parties are used, the expectation is that competition among them will serve to reduce the loss of  profit margin  from their use.

In response to questions, management reiterated the intention to open several new company operated Pubs in the current year. Paul Mobley indicated his optimism that there still could be some collection of  the now fully reserved Long Term Receivables. Legal assistance will be employed only when success is highly likely and recovery will be reflected in income when received.


The current balance sheet (including the $940k received in ’21 from the CARES ACT, and expected to be forgiven, reflects about $2M of cash and $8M of long term debt. The Company has indicated their intention to open three new company Pubs in ’21. While no guidance has been given beyond ’21, there seems a likelihood of at least three more locations in ’22.

Without consideration of more franchised Pub locations or non-traditional growth, we think it likely that eighteen months from now there will be five more company operated Pubs, bringing the total to twelve. If twelve pubs average $1.4M and generate a store level EBITDA of a reasonable 17%, that would generate $16.8M of revenues and $2.9 store level EBITDA. Adding $4.0M of Margin Contribution from the Non-Traditional system, as generated in ’19, provides $6.9M of EBITDA from those two divisions. The grocery division might fade further but modest growth in franchising could offset that.  G&A has been running about $1.7M for the last three years, and if we assume it becomes a run rate of $1.9M eighteen months from now, that would provide a corporate EBITDA run rate of $5.0M.

CONCLUSION: Provided at the beginning of this article

Roger Lipton



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



As background, we refer our readers to our most recent previous writeups provided below:




The quarter ending 6/30/20, as with most restaurants and retailers, was severely impacted by the coronavirus pandemic. Almost all restaurant companies, other than Domino’s, Wingstop and Papa John’s have reported sharply reduced earnings and cash flow, with balance sheets affected as well. Noble Romans (NROM), small though it may be relative to other publicly held companies, was also an exception to the norm, reporting higher earnings and cash flow. Successful results from the current operating base, combined with a balance sheet that has been sharply improved over the last six months, seems to set the stage for future growth. The current Enterprise Value, with the stock at $0.35-$0.40 per share, is under $20M. Trailing EBITDA has been in the area of $3M annually for several years and should be higher if the new stores perform as expected. The potential for substantial growth for this 50 year old brand would then allow for a materially higher valuation.


Noble Romans reported $696k of net income in Q2, up from $441k a year earlier, with the receipt of a $715k forgivable PPP loan roughly offsetting the same amount of lost sales and incremental expenses. Adding back $323K of interest and $98k of D&A, EBITDA was over $1.1M in Q2 vs. $877k in ‘19. The nature of NROM’s mix of business, including royalty income, the steadily improving (through Q2)  four original Noble Roman’s Craft Pizza and Pub (NRCPP) locations, the addition of the highly successful Brownsburg, IN fifth NRCPP (which opened 3/25/20, and maintained record high volume through Q2), allowed for the performance, detailed further below. One of the most important aspects of this division’s quarter was the steady improvement of the four original locations throughout the quarter, culminating in a (post-quarter) July that was down only 1.99%.

The NRCPP division showed revenues of $1.407M, up from $1.329M. The increase was due to the addition of the Brownsburg location, which opened 3/25 with volume over $50k/week, sustaining a volume in the mid 30k area throughout Q2. The original four NRCPPs bottomed out down 30-33% in early April, improving steadily to single digit negative territory by the end of Q2. Emphasis on the Pizza Valet takeout service, introduced over a year ago, offset the loss of dining room seating. The margin contribution of this division was $602k (42.8%) of sales (subsidized by PPP) vs. $208k (15.7%) in 2019. The directly comparable Cost of Sales expense was 19.8% vs. 20.9%. Packaging Costs were 3.2% (vs. 2.7%) and Delivery fees were 5.2% (vs 1.6%), obviously affected by the recent dominance of takeout and delivery in the quarter.

The franchising division reported revenues of $1.088M, down from $1.62M. Royalties and Fees (from NRCPP franchisees and non-traditional locations) were $914k, down from $1,335k. Royalties and fees from grocery stores were $173k vs. $285k. The non-traditional locations were affected by reduced traffic at locations such as convenience stores and gas stations (which improved through the quarter) and locations such hospitals (with limited visitors and intra-hospital traffic) and entertainment centers that remain closed. Profitability of this division was $820k (75.4% of revenues) down from $1,075k (66.4%), with the PPP loan offsetting the lower volume by subsidizing salaries and wages.

The third division, relatively immaterial in size with one company operated non-traditional location, in a hospital, reported revenues of $111k vs. 160k, with a margin contribution of $34k vs $7k.

Most importantly, the balance sheet is the strongest it has been in many years. Cash was $1.6M vs. $218k at 12/31/19, as a result of the refinancing completed in Q1’20, the receipt of the PPP loan, and almost $1.8M of EBITDA for six months. It is worth noting that, in Q1, interest expense (below the EBITDA line) was abnormally high but about $700k of the $900k was a non-cash writeoff of unamortized loan costs of previous financings. As discussed below, the Company is planning to open several more company operated NRCPPs within the next twelve months.

As outlined in the formal release: the highlights of the quarter included:  the opening of the 5th NRCPP record breaking location in Brownsburg, the signing of a lease for the 6th NRCPP location, and the obtaining of the $715k PPP forgivable loan which helped in the “the avoidance of major financial catastrophe which could have resulted from the shutdown of the economy due to the COVID-19 pandemic.” It was pointed out that the NRCPPs were forced to close dining rooms completely on March 16th. 50% of capacity was allowed on May 11th, 75% on June 14th (with bars open to 50%). 100% was to be allowed on July 4th, but that has been delayed until at least August 27th. Capacity allowances aside, the six foot social distancing requirement holds seating capacity close to 50%, and is still largely dependent on consumer attitudes. The non-traditional venues are still affected by a variety of factors, including continued closures and travel restrictions. As detailed below, commentary on the conference call further described the sales trend.


Paul Mobley, CFO, pointed out that after sales bottomed at the NRCPPs, down 30-33%, there was steady improvement through the quarter to the point that comp sales at the four original NRCPPs were virtually the same in July as a year ago, down 1.99%. At the same time, the Brownsburg location now open over four months, continues to be the best performing company NRCPP location.

The sixth NRCPP location is expected to open, in Greenwood, IN (a suburb of Indianapolis) by the end of the third quarter. The new location in Greenwood will be 3,700 square feet, down from the previous 4,200 square foot model, and close to the new 3,600 square foot prototype. Greenwood will still seat about 160 plus 10 at the bar, will have a separate outdoor dining patio, as well as a separate Pizza Valet station.  A letter of intent has been signed for the 7th company operated NRCPP, and there is also a franchised NRCPP location under construction in Kokomo, IN, to open late in Q3.

Scott Mobley, President, described further how the social distancing requirement has been the primary limitation on seating. The masking requirement has provided a challenge in terms of crew staffing but the Company is managing it, and store management is 100% in place. There have been supply chain challenges, and cheese prices were temporarily at an all time high, but these factors have been overcome as well. Non-traditional franchising has been picking up again, with 14 new agreements signed since 3/31 and ten opened. The new chicken program for non-traditional locations “is making progress, but not as fast as we would like in normal times. We’re now nine units in the program with 10 more units committed and getting started.”

CONCLUSION – provided at the beginning of this update

Roger Lipton



Noble Roman’s (NROM) will report their second quarter results in early August, but they have already described (and we have previously reported) that the sales at the four existing company operated locations (before the fifth, in Brownsburg, IN, that opened in late March, to record sales well over $50k/week) had recovered well from the extreme declines in late March and April. We will presumably learn more as part of the Q2 report.

In the meantime, NROM reported last night that they have signed a lease for the sixth company location, in Greenwood, IN, just south of Indianapolis, which will open by the end of the third quarter.

The new prototype, to be used in Greenwood, is responsive, as NROM management views it, to evolving customer service preferences. The physical box is 3,700 square feet, down from 4,200, still able to seat 160, including a beer and wine bar that seats ten. The on-premise dining experience can therefore be maintained for customers so inclined. Additionally, as Scott Mobley, President, describes it: The prototype, “incorporates new equipment and work-flows in the kitchen that will allow faster production speeds during heavy online ordering and peak hours. Our dining room has been restructured to be much more space efficient and will allow switching between various service systems based on needs arising from events such as Covid-19. It will also feature a separate entrance for our curb-side Pizza Valets designed to enhance the functionality of that important service. Finally, we will have a large outdoor patio seating area, which will be fun, as well as advantageous during Covid-19 restrictions”.

The Company also reported that the first franchisee of the Noble Roman’s Craft Pizza and Pub, with their initial successful location in Lafayette, IN, now open a little over a year, is  under construction with a second location, based in Kokomo, IN.

While NROM is one of the smallest publicly held restaurant companies, and the “micro-cap” stock could be a worthwhile investment over time from these levels, we believe the direction they are moving in terms of the physical plant and its ability to service the evolving restaurant customer is worth broader attention.

Roger Lipton



Indianapolis based Noble Roman’s, Inc. (NROM)  reported their first quarter, ending 3/31, as described below. Our previous writeups relative to NROM are available through the SEARCH function on our Home Page:


Noble Roman’s (NROM) is one of the smallest publicly held restaurant companies, but  seems to enjoy a good reputation in the markets, especially Indiana and surrounding areas, where they have operated for decades. The recently improved balance sheet,  the continued profitability  of existing company operated Noble Roman’s Craft Pizza and Pub (NRCPP) locations (including the mid-pandemic exceptional opening in Brownsburg),  the maintenance of company wide operating profit through the pandemic, the ongoing prospect for successful franchising of both NRCPP units and the non-traditional venue should allow for a new growth period for the brand. The number of fully diluted shares is about 25M (down about 10% as a result of the new financing) so the enterprise value (including $8.5M of debt) is comfortably under $20M. A large portion of the $3M EBITDA the last several years has been used to service debt, but a much higher percentage should be available to support growth in the future. As we like to say, we are all living in a new world, and Noble Roman’s is no exception.


Results, as with all companies, were influenced by the pandemic in the three months ending March. Total revenues were $2.719M compared to $2.922M in 2019. Operating profit before interest and taxes was $589k compared to $754k a year earlier. Heavy interest charges this year ($926k, of which $718k was non-cash), partially offset by a tax benefit of $82k,  provided a GAAP loss of $255k (vs. a GAAP profit of $476 in 2019). The weighted average shares outstanding was reduced to 22.853M vs. 25.585M, due to fewer fully diluted shares after a constructive balance sheet restructuring.

The highlights of the quarter, as outlined in the corporate release, were:  a new $8M debt package, plus obtaining a $715k loan from the PPP which is expected to be forgiven, the highly successful opening of the 5th company operated NRCPP,  the $321k Adjusted Net Income, after adding back the $658k writeoff of non-cash interest of unamortized previous debt costs.

The franchising division (royalties and fees from non-traditional locations, NRCPPs franchising, grocery store royalties and fees) provided revenues of $1.467M vs $1.593M. Royalties and fees were virtually the same for the non-traditional venue at $1.278M vs $1.287M and the decline was in the grocery segment ($189k vs $305k) as labor became an issue in the deli departments of grocery stores when the pandemic hit. The margin contribution was $.977M vs. $1.098M, a still impressive 66.6% of revenues, vs. 69.0% in 2019.

The company operated Noble Roman’s Craft Pizza and Pub division, including the latest location that opened in Brownsburg, IN on 3/25, generated $1.092M vs. $1.143M. The store level EBITDA margin (after about 1.0% of non-cash rent expense) was $121k (11.1%) vs $132k (11.5%). Revenue was increased by the Brownsburg opening on 3/25 but the State of Indiana closed all dining rooms on 3/14. We estimate that sales for the four locations  (prior to Brownsburg) were slightly positive in January and February before pandemic concerns affected sales starting in early March. Cost of sales was 21.6% vs. 20.8%. Labor expense was 29.1% vs 32.0%. Facility cost was 18.6% vs. 17.6%. Packaging cost was 2.8% vs 3.6% Delivery Fees was 3.2% vs. 1.3%. Other operating expenses was 13.6% vs. 13.2%. Total store level expenses were 88.9% vs 88.5%.

There is a third operating division, relatively immaterial, in which the company operates one non-traditional location. That location generated $154k in revenues and $2.4k in EBITDA  margin, vs. $170k and $16.8k. This division is not expected to grow.

NROM had previously announced that the Brownsburg location, opened at the peak of the pandemic on 3/25, without the normal inside dining, generated over $50k of weekly sales in its first week. The Company has since indicated  that Brownsburg is still generating weekly volume in the mid-thirties, the highest of the five existing locations, obviously very encouraging.

The new $8M five year debt package was closed, fortunately, in early February, providing liquidity to ride out the pandemic storm as well as provide growth capital once the health crisis abates. The Company has described that the interest rate is high at LIBOR plus 7.75% plus 3% of annual PIK interest, added to the loan principal, plus warrants, but there is no principal due for several years and previously issued warrants have been eliminated. The result is $33,333 of debt service on the $8M, plust $60k per year on the remaining convertible debenture for the next several years (less than half the previous debt service), reduction of about 2.5M fully diluted shares, and $1.6M of additional funds that will come in from the new warrants. The proceeds paid off all previous bank debt and the convertible debt that had not been extended and provided capital for approximately four new locations, including Brownsburg.

Per the Conference Call:

Relative to the most important growth segment, the NRCPP locations, Scott Mobley, CEO, described how dining rooms were closed on 3/14. Prior to the pandemic, off-premise sales were about 20% of the total. He had indicated previously that sales bottomed at  a relatively modest  30% decline from pre-Covid levels, as a result of the success of the year old Pizza Valet curbside pickup  service. Several weeks ago, the Governor of Indiana allowed dining rooms to open at 50% of capacity. Since then, sales have increased steadily so are most recently running down 20-25%. On-premise sales are about 30% of the total and the increase is a combination of fresh on-premise revenues, while cannibalizing a portion of the previous off-premise increase. Mobley informed listeners that it had just been announced that dining rooms can operate at 75% of capacity this coming Friday. Mobley volunteered that staffing is always a concern, but less so for NROM than many others since store level staff was largely maintained through the pandemic.

Scott Mobley also pointed out that some of the non-traditional franchisees, hospitals, c-stores, etc. were challenged by staffing over the last several months. Some, like entertainment centers and bowling alleys are completely closed. Hospitals have generally not allowed visitors. Sales within this venue are expected to recover and grow over time, but he cautioned that the rate of recovery is uncertain and could be slower than desired.

Paul Mobley, CFO, pointed out that the increase in A/R was largely the result of a $77k A/R from the landlord in Brownsburg, which was collected in April, and a $50,000 increase in A/R from manufacturers, which is now current. The Company currently has a cash balance of $1.4M so should be able to comfortably fund the addition of 3 more stores over the next nine months. In response to a question, he indicated that the Company should be cash flow positive in Q2 and the balance of the year, obviously assuming that there is no major macro-economic and/or health related disruptions. He also indicated that both existing franchisees of the NRCPP are interested in building new locations. The franchisee in Lafayette is already developing a unit in Kokomo, IN, targeted to open later this summer, and the Evansville franchisee is evaluating possible new locations, yet to be selected and financed. Mobley also indicated that he is having serious discussions with a potential new franchisee, but that is yet to be finalized.

CONCLUSION: Provided at the beginning of this article

Roger Lipton




It’s a fresh start in our new world for Noble Romans, Inc. (NROM), a fifty year old well established Midwest brand. Their flagship Noble Romans Craft Pizza and Pubs survived the pandemic relatively well and an $8M financing in early February significantly improved their balance sheet. Though NROM is one of the smallest publicly held restaurant companies, with an enterprise value of under $20 million, we continue to follow their progress because the stock seems to represent good value statistically and there continues to be substantial potential for growth.


2019 RESULTS Noble Romans, Inc. (NROM) reported calendar 2019 results last week. We have written a number of articles describing NROM, which can be accessed through SEARCH and under Corporate Descriptions. In order of current importance: Indianapolis based NROM Romans operates five Noble Roman’s Craft Pizza & Pubs (NRCPP) in their home market, is actively looking for several additional locations, franchises two NRCPP units in Indiana with a third under development, franchise/licenses about 640 non-traditional locations (c-stores, entertainment centers, hospitals, etc.) all over the US and have licensed 2,402 grocery stores to sell Noble Roman’s products made fresh in their deli departments.

The largest source of revenues, $6.2M in 2019, comes from royalties and fees, including $1.136M from the grocery store venue. The least important segment currently is the grocery venue, declining in recent years ($1.423M in ’18) as a strong economy limited labor availability to assemble pizzas in the deli departments. Though that could improve in the post-pandemic  world,  Noble Roman’s has focused  on franchising, both the NRCPPs and non-traditional  venues. The four NRCPPs generated $4.8M in 2019. Details of these operations, as well as the 50 year history of the brand are described in our previous reports. As shown in the table below, there were a number of fourth quarter non-cash adjustments, so the full year operating results, combined with the balance sheet improvement, from ’19 to February’20, are most relevant to the prospects.

The table above is excerpted from the ’19 10-K. The Franchising division generated revenues of $6.2M in ’19, down from $6.4M, as grocery fees declined, partially offset by an increase in non-traditional and NRCPPs fees.  The margin contribution was $4.071M vs. $3.794M, up 7.3% YTY, and the margin improved sharply to 66.0% from 59.0%, as operating expenses were reduced. The 4 NRCPPs that were operating in ’19 generated $4.8M of revenues, exactly flat with ’18. Food and Packaging Cost was 24.1% vs 24.6%. Labor was 30.0% vs. 31.4%. Though those Prime Costs were well controlled, Facility Costs (including common area charges, and a $134,544 non-cash accounting required rent adjustment, ASU 2016-02 accounting for leases) jumped to 17.2% from 13.6% and Other Operating Expenses (including marketing, delivery charges, and insurance, the latter two of which are expected to be lower in ‘20) jumped to 16.7% from 11.6%. Store level margin contribution therefore declined to 12.0% from 18.8%. Adding back the $134,544 non-cash rent charge, the margin contribution was a more respectable 14.8%. The Company also operates one non-traditional location, down from three a year earlier. That small venue generated $48k of operating cash flow, up from $12k in ’18. General & Administrative Expenses were $1.74M in ’19, up 4.2% from $1.67M in ’18, preparing for growth which was delayed until the new financing  took place in February,  2020.


The 12/31/19 balance sheet, although important, and improving through ’19, was dramatically restructured in early February 2020. Immediately after the restructuring in early February, the company had current assets of approximately $4.4M and current liabilities of $1.1M, or net working capital of $3.3M, for a current ratio of 4-to-1. At 12/31/18 and 12/31/19, the company reported net A/R from franchisees of $4.4M and $4.0M, respectively, each of which were net of valuation allowances of $4.3M and $5.6M, respectively. These A/R adjustments  in large part go back to 2014-2015, arising from contract breaches of approximately 80 non-traditional franchisees. The receivables include NROM legal costs, as spelled out in the franchise agreements.

Immediately after the balance sheet restructuring in early February, the company had two pieces of long-term debt. The largest is an $8M note due in 2025 which has no required principal payments due until 2/28/23 at which time monthly principal payments begin in the amount of $33,333 and continue until maturity. The new note bears interest of LIBOR plus 7.75%, plus 3% payment in kind to be added to the principal. There are also principal payments due based on consolidated excess cash flow as defined. As management said on the conference call: “We know full well that this is expensive financing. However, it was the best we had available…we made the decision in early 2020..to start growing and carry out our business plan….we closed just in time…so fortunately we had the liquidity to both withstand the Covid-19 changes and continue growing our business at the same time.” Also, while warrants were attached to the new financing, retirement of warrants attached to the previously outstanding convertible notes result in a net reduction of about 2.9M shares, from about 28M to 25M. Cash provided by the exercise of the new warrants would also generate an incremental $1.6M from the new warrants, which could be used for additional growth.

The other long-term debt is $625k of subordinated convertible (at $0.50/share) unsecured notes which mature 1/31/23. With no required principal payments on either piece of debt until 2023, the annual amount of cash to service its debt is approximately $800k, versus about $1.5M previously.

Additionally, on April 25th, the Company borrowed $715k under the PPP, which the Company anticipates will be forgiven in accordance with provisions of the CARES Act.”


Management was working on the new financing package prior to the pandemic, as well as constructing their fifth NRCPP location. The first of the two successful NRCPP franchisees was also moving forward with an additional location, in Kokomo , IN, which is currently under development. The result of the above described financing is that previous debt is repaid and the Company has the funds to open four new NRCPPs in the near future, one of which has already opened. While the financing is expensive, as management says, the lack of principal payments, which the Company was making with the previous financing, provides substantial additional free cash flow for the next several years.

The pandemic has obviously produced major adjustments. Since sales at the NRCPPs were not disastrous, store level managers were maintained at full salary and most crew members were retained. The NRCPP units were previously doing about 20% of their sales off-premise. The Company had fortunately introduced a “Pizza Valet” curbside pickup approach about a year ago, as well as working with, though not promoting, third party delivery services. That emphasis served them well and sales, according the conference call, have been running down YTY a relatively modest 30%. Other changes made in the last year included a modified dough formula that travels better and a new carry out box that holds temperature more effectively. Dining rooms have reopened at 50% of capacity as of 5/11, two weeks ago today and  it is anybody’s guess how fast and how far dining room activity rebuilds.

The fifth Company operated NRCPP opened on March 25th in Brownsburg, IND,  a small city just outside of Indianapolis , and did an extraordinary $50000+ in its first week.  It goes without saying that the reception of the Brownsburg community, in the heart of the Coronavirus pandemic, speaks volumes about the value, and the potential for growth, of the Noble Romans brand. As President, Scott Mobley, described it on the conference call: “in my thirty years of industry experience I have never seen anything like it….during the first two days of opening, the entire lot, maybe 200 parking spaces were occupied at one time, with a line of cars 20 deep along the street to enter the parking lot….. we ended up having to make numerous system adjustments on the fly as well as instituting controls on the order rate”. He indicated later in the call that Brownsburg is still doing an impressive $36,000/week.

Relative to non-traditional locations, specifics were not given about sales levels, other than indicating that they vary widely between convenience stores, entertainment facilities, hospitals, etc. Scott Mobley did indicate that a new product extension is planned for the non-traditional venue that will target existing franchisees as well as new ones. It is an entirely new sales opportunity, has been tested, and several franchisees have already shown interest. Scott Mobley indicated that this development could be significant, indicating his comment was just a teaser in terms of potential benefits.

Another significant development is the creation of new somewhat  smaller version of the NRCPP, 3,600 sq.ft., down from about 4,200 sq.ft. This new version incorporates what has been learned about off-premise service, improving the carry out option for both the Company and the customer, at the same time maintaining the seating capacity and ambience of the full service experience.

CONCLUSION: Provided at the beginning of this article



.The following update should be read in conjunction with our previous descriptions of the corporate developments of NROM, which can be accessed with the SEARCH function on our home page. There have been no operating results reported since those of 9/30/19 so our further update in that regard awaits the audited yearend report.

Noble Roman’s announced last week the most substantial financing in recent years, allowing for consolidation of previous debt, reducing potential equity dilution, and providing funds for renewed expansion.

The new financing consists of an $8M Senior Secured Promissory Note and Warrant Purchase Agreement. It has allowed for retirement of the $4.2 million previous bank note (down from the original $6.1M) as well as $1.275M convertible subordinated debt. The portion of the $8M above the $5.5M debt repayment will be earmarked for the construction in 2020 of three new Craft Pizza and Pub (NRCPP) locations as well as general working capital and the debt issuance cost. That will bring the company-owned total NRCPP locations to seven, targeted by 12/31/20.


The new note bears an interest rate of LIBOR plus 7.75%, which at the current time would be about 9.4%, plus “payment-in-kind, ‘PIK'” interest of 3%, which will be added to the principal amount of the note. The note matures on 2/7/2025 and does not require principal payments until 2/28/2023 when monthly principal payments of $33,333 will commence and continue monthly until maturity. There are warrants, which mature in  6 years, attached to the new note, to purchase 1.2M shares at $0.57, 900K shares at $0.72 and 150K shares at $0.97. The purchaser is required to exercise the $0.57 warrant if the Common Stock trades over $1.40 per share for a specified period, the $0.72 warrant if the Common Stock trades over $1.50. Only the third tranche (for 150,000 shares at $0.97) can be exercised on a cashless basis, so the first two tranches will provide new funds, when exercised, to the Company at no additional transaction cost. The dilutive result of the new financing (before saving on the old) would then be a total 2.25M shares which will bring in $1.33M of funds to use for growth.

While the total interest rate on the note is obviously steep, NROM management is reacting to the  desirability to renew its expansion of NRCPP units and is confident that the return on investment will be substantially more than the cost of capital. Also, there are prepayment terms that would allow for refinancing (presumably at a more attractive rate) if the company’s financial progress takes place as management expects over the next year or two. Lastly, substantial dilution has been avoided by the retirement of $1.275M worth of convertible debentures (at $0.50/share) with warrants attached at $1.00 per share, all of which (3.82M shares)could have been exercised on a “cashless” basis, without bringing any funds into Noble Roman’s.

The comparative situation therefore provides 1.6M fewer shares of dilution and $1.33M of extra equity capital, clearly an advantageous situation. While $1.9M more debt must be paid down by 2025, the extra $1.33M of capital would provide most of it.


This new financing amounts to what might be considered a fresh start for the expansion plans of Noble Roman’s. Management has new capital for expansion, as well as support of their franchising effort, and the next new company operated NRCPP (in Brownsburg, outside of Indianapolis) is already planned to open in late March.  According to Scott Mobley, President, this new location “will have a surprise addition”, to be described further “close to the grand opening late in March”.

While we await the final operating results from calendar 2019, if developments proceed as planned over the next year or two, NROM should have demonstrated a great deal more progress relative to the build out of company NRCPPs, expansion of the franchise network of NRCPPs, and further expansion of the 700 plus franchised non-traditional locations.

Roger Lipton