Tag Archives: NROM




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




Noble Roman’s (NROM) reported their third quarter results, which were once again profitable in spite of the pandemic. More important than the exact operating results is that (1) Same store sales for the original four Noble Roman’s Craft Pizza and Pubs (NRCPPs) have steadily recovered and were negative by only 2% in October. (2) The two most recently opened NRCPPs look like they will generate sales and store level margins almost 50% higher than the first four locations.  Brownsburg and Greenwood, IN have changed the NROM equation. Average store level EBITDA margins among the current six locations  can now be expected to approximate 18%, generating a 40% cash on cash return on investment, among the best in the restaurant space.  (3) The balance sheet is the strongest in many years (4) The corporate cash flow has been positive all year, in spite of the pandemic, and can be utilized in the next several years for growth rather than debt service.

The corporate EBITDA which has been in the area of $3M in recent years, with much of it necessarily servicing debt, could expand over the next eighteen months to something on the order of $5M, most of which can fund growth. Though the NRCPP concept is still small among publicly traded restaurant companies, with only six (soon to be seven) company units and three franchised locations, the Brand has legs, in the Midwest at the very least, which leaves a very long runway for growth from this modest base in Indianapolis. The 650 unit non-traditional franchised locations, while currently inhibited by the pandemic,  provide another long term growth opportunity.  The Enterprise Value currently is in the range of $16-$17M, obviously a very modest valuation considering the cash flow considerations as described below.


Noble Roman’s, Inc. (NROM) reported their third quarter, ending 9/30, results on Tuesday. The quarter was profitable, as same store sales for their flagship Noble Roman’s Craft Pizza Pubs chain improved steadily through the quarter. The non-traditional fleet of over 600 franchised C-stores, convenience stores, etc., is recovering more slowly but the franchising division was solidly profitable as well. Overall corporate results for the quarter showed Operating Income of $411k. After deducting $328k of interest, $105k of which was non-cash, pretax income was $83k. GAAP EBITDA for the quarter, adding back $98k of D&A to operating income, was $509k.

The now six unit Company operated Noble Roman’s Craft Pizza & Pub (plus 3 franchised locations, including Kokomo which opened yesterday) showed a modest negative comp for Q3 of 6%, sharply improved from a negative 28.1% in Q2. October, importantly was down only 2%. Store level EBITDA of the 5 NRCPPs in Q3, improved to 13.2%, up from 11.8% in 2019, with the addition of Brownsburg that opened 3/25. The Company noted that, after adding back 1% cost of sales from pandemic related commodity shortages, about 2% from additional pandemic related operating expenses, and 1% from non-cash lease expense. the Adjusted store level EBITDA was about 17%. It was pointed out that Brownsburg is projected  to do about $1.7M of annual volume and contribute $383k (22.5%) EBITDA at the store level, generating a 59% cash on cash return on the approximate cash cost of $650k. Management pointed out on the conference call that the 3 points of pandemic related expenses applies to these numbers as well, so the post-pandemic margin could be even higher.

The non-traditional franchising venue is recovering more slowly, with revenues of $1,252k vs, $1,681k, down 25.6%. The margin contribution from this segment was 62.5%, down from 69.7%. The uncertainty regarding the duration of the pandemic make it unclear how quickly the results from this division will recover.


The sixth company operated NRCPP location opened to record weekly sales in Greenwood on 10/12. Management indicated, on the conference call, the possibility that sales and margins could exceed those of Brownsburg. Though Greenwood is only open one month, so it is early to draw conclusions, Greenwood sales after one month are exceeding those of Brownsburg at the same point. The third franchised location, in Kokomo, IN opened two days ago. The seventh company location opens just after Thanksgiving in McCordsville, IN. The Company refrained from making projections relative to future openings, but reflected on the comfortable balance sheet ($1.6M in cash) and the consistently positive cash flow, concluding that they are continuously screening location prospects and an eighth location could open in Q1’21.


The most important consideration in terms of investment prospects for any  restaurant chain is the return on investment at the unit level, which depends on the “operating profit”, or “store level EBITDA” compared to the investment per unit. That outlook, while more than adequate prior to the recent openings, has been enhanced substantially by Brownsburg and Greenwood. The four original NRCPPs, the first of which opened in January 2017, produced an average of $1.2M of sales in calendar 2019, with an average operating profit of 12%. A case can be made that there were some non-recurring factors, amounting to at least two points, that affected those results, including the operating learning curve from introducing a brand new concept, shockingly high Common Area Charges at two locations, third party delivery charges, and some degree of cannibalization of sales from the highest volume original Westfield location. A 14% Adjusted Return generates $168k of average annual operating profit, or a very acceptable 26% cash on cash return on the $650k of average investment per store. However, the fifth and sixth location look like they will do something like $1.7M of sales, with a normalized operating margin above 26%. That would bring the average annual volume to $1.37M with an average store level EBITDA margin of $261k, which is 18% of sales generating a 40% cash on cash return. This  is obviously a huge improvement in the outlook in the wake of the two most recent openings. Future openings can, of course add or detract from the 18% on $1.37M but it seems like a reasonable bet that McCordsville and others will at least match the new average.


Scott and Paul Mobley, CEO and CFO respectively, commented further that labor is a continuing challenge, especially with the masking requirement but the Company has managed to adequately cope. Relative to the non-traditional venue, 20 new locations have opened this year, in spite of pandemic related hesitancy of potential franchisees, matching the 20 lower volume locations that have closed. The dine-in portion of sales at the two newest NRCPP locations is about 40%, and it varies more widely at the first four locations. Partitioning and other physical adjustments have allowed for almost 100% of pre-pandemic seating, but customer attitudes still affect the sales mix. Third party delivery, which hurt margins in 2019 and early 2020 and which the Company has never promoted, has trailed off to minimal levels. The proprietary Pizza Valet curbside pickup service has been embraced by both customers and staff (who like the tips). In terms of the number of potential NRCPPs in the vicinity of Indianapolis, Scott Mobley referred to the twenty Buffalo Wild Wings as just a starting point, so the geographical pipeline close to home is substantial.


The balance sheet showed $1.645M of cash at 9/30, up from $1.577 at 6/30, with Greenwood (now open) and McCordsville (to open by December 1st) almost fully funded. Corporate EBITDA was over $500k in the third quarter, obviously still affected by the Pandemic, obviously with no contribution from the new Greenwood location. Nine month reported EBITDA was $2.3M, which included the forgivable $715k PPP loan, but that loan replaced lost sales and profits so the normalized EBITDA would likely still be in the same range. It seems reasonable that 2021, in a more normalized environment, with Brownsburg (opened in March’20), Greenwood (opened in October ’20) and McCordsville (about to open) could generate something at or above $4M of corporate EBITDA. As opposed to last several years, when debt service absorbed a large part of corporate cash flow, aside for the possibility of principal payments out of excess cash flow, as defined, there are no principal payments due on the $8M of current long term debt until 2023. Management has not committed to a further schedule of company NRCPP openings, primarily because of pandemic related uncertainties, but they have demonstrated an ability to open stores within 90 days of a lease signing, are continuously evaluating locations, and it would be surprising if two or three new company operated locations don’t happen in 2021. It is not hard to picture therefore a $5M run rate of corporate EBITDA within 18 months from today.

CONCLUSION: provided above

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




Noble Roman’s is steadily earning at an annualized untaxed rate of about $.12/share, with about $15M of tax protected earnings. EBITDA is running at around $3.5M annually, the highest level over the last several years, though a variety of “clean-up” issues have eaten into that calculation.  With a total enterprise value not much more than $15M, this established mid-west brand holds growth potential both with new company operated Pub locations as well as from franchising the Pubs and non-traditional locations. Just as a bank financing several years ago “transformed” the prospects, and allowed the company to create the Pub concept and establish the present much improved situation, a larger financing currently being negotiated promises to take NROM to the next level. Absent that, slower but steady company operated growth, while servicing the current debt, should still be possible, and franchising would take the lead.


Noble Roman’s Q2 results was consistent with Q1 in terms of increased earnings and EBITDA. Progress in the franchising segment outweighed margin pressure within the Craft Pizza & Pub operation. Net Income, which is tax protected for about $15 million, was $580k, up 5.5% for the quarter and 1.21M, up 11.0% for six months. EBITDA was $877.1k for three months, up 9.2%, and $1.724 for six months, up 9.5%. Both numbers annualize to a $3.5M annual rate (almost exactly the same as calendar ’18), and could improve to a $4M rate with a strong seasonal period ahead. Franchising revenues was essentially flat for three month and six months, with growth elsewhere offsetting a continuing decline in the relatively small grocery store segment. The extreme weather in the winter and early spring affected sales and margins in the Craft Pizza & Pub company stores in the early part of the second quarter, though to a much lesser degree than in the first quarter.


The Noble Roman’s Craft Pizza & Pub remains the most promising portion of the current operations. The four existing company stores, as disclosed in the recent 10Q, generated approximately $900k of store level EBITDA margin in 2018. Considering that these locations cost about $2.4M to establish, that represents a 37.5% cash on cash return. Especially since only one of the restaurants was open more than eighteen months in Q2’19, this represents one of the most attractive returns within the fast casual restaurant industry. In Q2’19, however, the store level margin came down from 22.6% to 15.7%, much of it beyond the company control, and part of which could be recoverable over time. The good news is that prime costs were better in Q2, cost of sales 140 bp better to an impressively  low 20.9%. Salaries and wages also improved by 160 bp to 28.6%. Paper and Packaging was up 10 bp to 2.7%.  Facility costs increased by 310 bp, mostly from an unexpected increase in common area charges based on (supposedly) actual expenses in 2018 and the company has requested an audit of these numbers. While the company cannot predict the outcome of their “negotiation”, we think there could be at least some partial positive adjustment going forward and higher sales would obviously reduce this impact in any event. Other Operating Expenses increased 590 bp to 16.4%. Per the 10Q, 140 bp was an increase in insurance cost (which the company is currently renegotiating), 190 bp was advertising and 150 bp was delivery expense. The advertising expense, not a lot of dollars ($25,000) relative to $1.3M of sales, can obviously be leveraged as more company and/or franchised  locations are built within the trade area. The delivery expense burden will more likely come down than go up, in our view. From a macro standpoint, we believe that the third party delivery agents have seen their best days in terms of margin, and restaurant operators in general will carry less of a burden. Also, Noble Roman’s is doing their best to encourage use of their curbside pickup Pizza Valet service, which is increasingly being embraced by customers. Overall, we view it likely that store level margins can be improved over time, and higher sales would obviously be a big help. In the meantime, the four current operated locations at the current average annualized sales level of $1.33M, are generated an attractive cash on cash return. Relative to the franchising of the Pizza Pub, the first franchised operator, after a highly successful opening in Lafayette, IN., is exploring sites for a second location, and a second franchised operator, in Evansville, IN is expected to open late this fall.

The franchising segment, excluding grocery stores (which has been de-emphasized), reported revenues up 4.5% and 9.8% for three months and six months, respectively. Most impressively, the margin contribution from this segment increased by 850 bp to 66.4% and 960 bp to 67.6%, for three and six months, respectively. In the most recent quarter, salaries and wages came down 520 bp to 10.8%, trade show expense was reduced 80 bp to 6.5%, insurance by 50bp to 4.0%, travel and auto expense by 170 bp to 1.7%.The company noted in their quarterly release that in the period from 1/1 through 8/14, 21 new non-traditional locations have opened versus 17 a year earlier. Also: “the first two weeks’ sales of all non-traditional franchise openings in 2019 have averaged 32.8% higher than openings from previous years.”

The least important segment, in terms of revenue contribution, is the royalties and fees from grocery stores, which came down by $84k to $285k, and by $199k to $590k, for three and six months, respectively. As has been discussed previously, with the labor market tight, grocery stores have been challenged in terms of staffing deli departments, so have been reluctant to take on new products. Noble Roman’s has therefore decided to employ capital and personnel in the two other highly productive and more promising areas.


Cash improved by about $150k between 12/31 and 6/30, while paying off about $400k of bank debt and reducing accounts payable and accrued expenses by about $415k. Current Accounts Receivable went up by about $210k over six months to $1.78M but this is a seasonal factor and the amount is down by about $80k since June 30, 2018. Total Current Assets of $3.6M is 2.7x Current Liabilities. The question of the Company’s ability to repay the $1.9M remaining amount of convertible subordinated notes outstanding, which mature between November ’19 and February ’20 was raised on the Q2 conference call. $675,000 of those notes were voluntarily extended for three years. As the 10Q filing puts it: “the remaining Notes, in the amount of $1.225 million must either be converted into common stock, extended beyond the maturity of the senior debt or replaced with other like securities.” The Company has said that a new financing is being negotiated that would, if finalized, allow for repayment of all existing debt, including the convertible Notes, as well as provide funds for five additional Pizza Pubs. Should that financing not materialize, we view it as likely than any Convertible Notes remaining can be re-marketed for essentially the same terms, with an extended maturity date. It seems obvious to us that a 10% coupon, convertible at $0.50/share, with warrants attached (at $1.00) is a far better piece of paper today than when originally issued in 2017, and the general interest rate environment is even lower today than it was then.


CEO and President, Scott Mobley, presided over the Q2 conference call. After financial results were provide in summary form by Chairman and CFO, Paul Mobley, Scott provided an operating summary in which he summarized operating initiatives designed to improve both sales and margins at the company operated Pubs. New sub sandwiches, combo meals and side items are being introduced, using local area marketing tactics. Online ordering, essential these days, has just been rolled out. Though the Company is not advertising the delivery option, relying on their Pizza Valet curbside pickup offering, Grubhub is now joining DoorDash as a third party vendor. A new and improved website is being introduced. Split pricing on the various pizza crusts is being added. Since the Sicilian crust is viewed as a premium product, the price is being raised by a modest $0.25 on the personal size, $0.50 for medium, $1.00 for large. Relative to the non-traditional franchising opportunity, Scott talked about a record setting location on an Indian reservation in Arizona. While no promises are being made relative to building sales at the Pubs beyond the $1.33M annualized level (Per Q2), the company clearly thinks this is possible and is bending every effort to do so.

CONCLUSION: Provided at the beginning of this article

Roger Lipton

P.S. – For more information, consult our full writeup of NROM, accessible from the Home Page @ Corporate Description, Public and Private Companies


Lipton Financial Services

RECENT DEVELOPMENTS, Per Q1’19 Quarterly Release and Conference Call

Our recent full writeup, dated April 3, is provided again, below, with our Conclusion updated in the wake of the Q1 report

The first quarter of 2019 was released two days ago, with management elaboration on a conference call yesterday afternoon.

The highlight of the Q1 report was an update on the post quarter opening, on 5/2, of the first franchised Noble Roman’s Pizza & Pub in Lafayette Indiana. This location, operated by Holly and Patrick O’Neil, franchisee of 18 Dairy Queens in Indiana, averaged $57,000 per week in the first two weeks, perhaps twice the most optimistic expectations. The O’Neils have already subsequently signed on to open their second location, this time in West Lafayette, adjacent to Purdue University. Relative to the first location, all observers are prepared for sales to moderate after a honeymoon period, but sales down the road should still be very impressive and highly profitable. More generally, the O’Neils obviously have the capability to build quite a few more NRCPPs and other potential franchisees will likely surface in the wake of the dramatic results in Lafayette. As demonstrated by the four company operated stores in ’18, store level EBITDA of over 20% (before royalties) is possible, at an average volume of $1.3-$1.4M so higher volumes will obviously be even more profitable.

Per Q1 operating results: As previously disclosed, the abnormally difficult winter weather affected first quarter results, and total revenues was virtually flat at $2.92M vs. $2.95M,  but income before taxes was $627k, up 16.3% year to year, as a result of good cost control in all divisions.  About $15M of earnings is tax protected so taxes will not be a consideration for a  while. EBITDA was $847K, up 9.8%, obviously annualizing to about $3.4M. We should note that cash generation was reduced by $242k, mostly from  outlays that are (contractually) added to long term receivables. Subtracting the $242k from $847k of EBITDA, the conservatively stated $605k of cash generation was promising in a quarter which should be improved upon as the year progresses.

Looking at each division, in order of importance:

The NRCPP saw store level EBITDA margins declined to 11.5% from 21.9%, obviously a function of the abnormal winter weather.  The company release did say that sales rebounded in March, with store level EBITDA at 20.5%. On the conference call, the company further said that weekly sales in April and early May have continued to improve from March levels. The 10Q revealed that March sales were $450,000 for the four stores, which would annualize to $1.35M and be consistent with  previous performance and current expectations. The new Pizza Valet and delivery through Doordash have been well received by customers and promise to add to sales over time.

The total non-traditional revenues were up 3.3% to $1.593M, as non-traditional franchising (C stores, gas stations,  etc.) was up 16% to $1.287M, more than offsetting a decline in the the grocery store segment (which is being de-emphasized, as previously discussed) to only $305k in Q1. It is noteworthy that effective expense control created a margin contribution of 69.0% in this segment, up 1100 bp from 58.0%. 13 new locations have opened in 2019 vs. 8 closed, and the higher volume at new vs. old locations generated the 16% increase in revenues.

In terms of further news, Paul Mobley indicated on the conference call that “we would like to open another five company owned stores over the next 18  months or so…and we’re currently in process of discussions and talks with firms, investors who are interested in that financing, but we–I can’t tell you which ones or what will happen at this point..and that will be debt financing, not equity financing”.


We need not make precise projections in terms of cash flow and earnings, other than presenting the rough parameters below, even if some of the developments as described above could affect results. Our statistical template provided above assumes only a continuation of the four company operated stores that are in place, maintenance of the other two operating segments, no material contribution from franchising, and no surprises, positive or negative. Substantial progress has been made over the last two years, both operationally and in terms of balance sheet restructuring. With $3.4M of EBITDA in the last twelve months, and the possibility of substantial growth from here, the stock is obviously cheap statistically. There would normally be a great deal of private equity interest at this kind of a valuation, but this is a very small deal in today’s environment and management has no desire to change ownership at anywhere near the current valuation. Time will obviously tell as to what extent this management team capitalizes on the current opportunity, but it seems like the necessary pieces are in place to take this reincarnated brand a great deal further.


Noble Roman’s, Inc. (NROM) is over forty years old as an Indiana Corporation, having operated, franchised and licensed versions of the “Noble Roman’s Pizza” brand. Founder and Chairman, Paul Mobley, formed NROM in 1972, still leads the company from a strategic standpoint, plays an active CFO and shareholder relations role, and his son, Scott, is President and CEO. Locations selling NROM Pizza today include 50 states and Canada. While the company has operated and franchised stores with varying degrees of success over the years, the underlying reputation for serving a high quality product has been generally maintained. This is evidenced by the most recent commentary in social media (Yelp and Facebook) relative to the openings of Noble Roman’s Craft Pizza and Pub locations (NRCPP), the most recent incarnation of the brand.

Though customers of Noble Roman’s mostly remember the brand with the nostalgia of their youth, the long operating history has included a number of starts and stops. In particular, the six years ending in ‘17 were burdened by losses related to the unsuccessful effort to build a “Take ‘N Bake” version of Noble Roman’s, and the Company paid a predictable price for the failure. We describe below, when discussing the improved balance sheet, some of those costs.


Noble Roman’s today has three primary areas of focus, in order of current emphasis: (1) Expansion of a new generation of NRCPPs, which, following the successful openings of four company operated locations, has recently begun to award franchise rights. (2) Franchises-Licenses for “non-traditional” locations, primarily in convenience stores (often affiliated with gas stations) and entertainment facilities. (3) Licenses to sell Noble Roman’s products within grocery stores.


This is by far the most attractive expansion opportunity for the Company. The fast casual restaurant features two styles of crust, both thin and Deep Dish Sicilian, with their famous breadsticks served with spicy cheese sauce, specialty salads, four pasta dishes, all “designed to be fast, easy to prepare and delicious to eat.” New pizza oven technology provides bake times of only 2.5 minutes for the regular crust, 5.75 minutes for Sicilian, with the dough preparation room visible to customers.

The concept as we would describe it is: similar to Blaze, MOD, and so many other participants in the fast casual pizza segment, but “evolved” and “differentiated” in major ways. NRCPP serves personal size pies as well as family sized, serves traditional crust as well as Sicilian (for the same price), serves a limited number of salads, sandwiches, chicken wings, and desserts. Wine & Beer (including Craft Beers) is served at a modest but comfortable bar, where you can also dine. Half a dozen TV sets create a low key sports bar “vibe”.  Anecdotally, we have personally been to all four locations, several times to the first of them, and have been impressed with the quality of operations that has been taking place.  Social media commentary, including Yelp and Facebook, confirms our reaction, and the public’s view of The Brand seems to be a combination of nostalgia combined with admiration of the current updated approach. The hospitality quotient provided so far should presumably be replicable in the foreseeable future because the company operated stores, as well as initial franchised locations, will continue to be in NROM’s “back yard”. The first location (Westfield) opened  1/31/17. A second location (Whitestown) opened 11/17/17. The third location (Fishers) opened 1/18/18 and the fourth (Carmel) opened 5/29/18.  The Company has shown an ability to open these four stores, at budgeted cost, in only 3-4 months after lease signing. Naturally, the speed of future openings is dependent on lease negotiations, real estate variance requirements, and the configuration of the proposed site.


The locations are about 4,000 square feet, cost about $630,000 (including about $50,000 of pre-opening expenses). The targeted average annual volume is $1.35M  with a first year store level EBITDA above 20%. Cost of Goods combined with Labor (including fringe benefits) is expected to average no more than 50% of sales. These parameters provide an immediate 43% cash on cash return, allowing for just over a 2 year cash payback. The first four locations are collectively meeting, and sometimes (Westfield) individually exceeding all these targeted parameters (ex the extreme weather in Q4) on an annualized basis, though only the first (Westfield) has been open for more than one year. It is important to note that many successful restaurant franchisors project targeted cash on cash returns in year three much lower than shown above (and don’t include pre-opening expenses in their calculation), obviously far less attractive than the indicated fully loaded immediate returns of NRCPP. Since the company, as well as the first of the franchised locations, will be located near Indianapolis, pre-opening costs and initial opening inefficiencies should continue to be minimized. 


While four locations in Indiana (only one of which is two years old) does not imply worldwide expansion opportunities, NROM management has many years of multi-unit operating, and franchising, experience and there are very few concepts in the restaurant industry that have generated the returns as described above. Average Unit Volumes (AUVs) could build further as the Indiana market is penetrated, or perhaps be cannibalized, but delivery (in conjunction with DoorDash) and a new curbside Pizza Valet pickup service has both just started in January, a mobile app is starting its beta test, and many other operating and marketing initiatives are in the works. Greater Indianapolis alone could support at least 20 units, the State of Indiana many more, so an obviously unlimited growth runway is in place. The Company, operationally led by President and CEO, Scott Mobley, has done an admirable job of getting NRCPP off and running, profitable from the very beginning. Noble Roman’s brand is known, to varying degrees, in all 50 states, and could no doubt succeed in well run, properly situated locations almost anywhere, but Indiana and the immediately surrounding geography represent the most obvious expansion opportunities. It is noteworthy that well located non-traditional locations in C stores and hospitals do impressive enough volumes to indicate that NROM pizzas can attract customers far from Indianapolis but stores close to the home base are naturally the current priority.

The franchising strategy for NRCPPs is to sign single unit, experienced, operators close to home. Further away, only very well capitalized operators, fully committed (operationally, financially, psychologically) to building out markets, will be enrolled. Since an operating organization is in place at NROM that can support local franchisees in their startup phase, and multi-unit franchisees will pay non-refundable up front franchise fees that should more than offset support services, the franchising effort should contribute immediate incremental profits and cash flow to NROM. The initial franchisee fee is $30,000 for a single unit, $25,000 for the second, $20,000 thereafter. Ongoing royalties are 5%, plus a 2% contribution to a creative fund.

The first franchisee is under construction and should open around 5/1/19, a highly regarded Indiana based Dairy Queen franchisee, Holly and Patrick O’Neil, who currently operate nineteen DQ locations. Since they have been expanding their number of DQ locations in recent years, they seem to have the financial and operating resources to open additional NRCPP locations if the first location is successful. The excellent reputation of Holly and Patrick (who has been head of the DQ franchise association) will no doubt be encouraging to other potential franchisees. They could also provide operating expertise to the NRCPP system. Nobody has all the answers and every successful franchisor has learned a great deal from their experienced franchise partners. Their first location will be in Lafayette, Indiana, a previously successful jurisdiction for Noble Roman’s.


The company has franchised about 750 units, including convenience stores, travel plazas, entertainment venues, hospitals, most several Wal-Mart and Circle K locations.  A prototype counter top unit was introduced in early ’16 and expansion within this division is picking up momentum in recent months. There is obviously a time lag from when a new license is signed to when a location opens for business. This steady source of revenues amounted to $4.5M in ’17, up from $4.4M in ’16. Revenues from this segment were flat at $4.5M in calendar ’18, but up about $100,000 (9%) in Q4, presumably a harbinger of more growth to come. 38 non-traditional franchised locations joined the system in calendar ’18, and 19 left. Since signings, reflected by “Upfront Fees” increased from $286k in ’17 to $379k (which included $30k from the first NRCPP) in ’18 (up 22% net of the NRCPP fee), an increase in non-traditional royalty revenues can be expected in the future. This momentum is continuing in Q1’19, as the company announced that, through 3/26/19, 14 new locations have been signed up versus 6 in ’18. It should be noted that non-traditional locations closed are typically older low volume units, and are being replaced by higher volume new units. It should also be understood that while a few units have opened within Circle Ks and WalMarts, those retail systems are difficult to quickly penetrate for a number of reasons and we expect independent operators to be the more predictable source of growth. Overall, the pace of signings within this segment, with tens of thousands of potential outlets throughout the country, has clearly picked up over the last eighteen months, and could be capable of, at least offsetting the current slippage in the grocery channel described below. The initial franchise fee is $7,500, except for $10,000 at hospitals. The ongoing royalty is 7% of sales, with no advertising contribution since customers in these locations are mostly on the premises for other reasons.


Noble Roman’s has licensed, by way of a supply agreement, sales of its products to 2,106 grocery stores. The licensed grocery store must purchase proprietary ingredients through a Noble Roman’s approved distributor. The deli department of the grocery store then assembles the products and displays them using Noble Roman’s point of sale marketing materials. The distributors collect for Noble Roman’s a fee in lieu of royalty as they sell ingredients to the grocery stores and remit this amount within ten days of each month end. While the number of grocery stores under license expanded steadily for several years, especially until the end of 2016, the labor requirement within the grocery deli departments has limited further growth, and the improving economy has reduced the number of budget driven pizza consumers, so license revenues from this segment has contracted in the last two years. It is unknown how many of the 2106 grocery locations are currently offering product, especially since stores sometimes are removed and then later return. NROM management has explored the possibility of assembling the pies at the distribution level, reducing the labor requirement at the individual grocery store, but a solution has not yet been developed. Royalties and fees from grocery store distribution was $1.4M in calendar 2018, down from $1.8M in ’17. While this division’s revenue has slipped in the last two years, the economy seems to be slowing once again, which would make deli-workers more available and consumers more interested in a take and bake product. This division can therefore be considered “counter cyclical”. With two other far larger and more promising divisions, NROM management is concentrating efforts elsewhere and a change in results from this division shouldn’t affect overall performance by much.


During ’15, ’16 and early ’17, as the Take ‘n Bake version was winding down, and the NRCPP version was incubating, the Company was carrying short term debt with an interest rate over 20%, especially burdensome when the company was still reporting operating losses from termination of the Take ‘N Bake adventure. $2.4M was raised in late 2016 and early 2017 in the form of 10% debentures, maturing in December 2019 and January 2020, convertible at $0.50/share, with 2.4M warrants @ $1.00 attached. It is worth noting that both Paul Mobley, Chairman, and Marcel Herbst, Director, participated in this private placement. While the terms of the convertible debt were not pretty, it was a lot better than what had been in place. More importantly, in September ’17 the Company put in place $4.5M of conventional bank debt, maturing in September 2022, at an interest rate of LIBOR plus 4.25%. Additionally, a $1.6M Development Line of credit facility was established to fund three new company operated locations.  Each tranche of the Development Line is repaid starting four months after being drawn, on a seven year amortization schedule. As described earlier, the rapid cash on cash returns from the new locations are easily capable of servicing the Development Line and generating excess cash as well. Overall, the new financing arrangements have provided NROM with adequate financial flexibility, allowing steady further development of NRCPP locations, building a franchise operation, also further developing the two other segments. Calendar 2018 results benefited from over $500k of cash interest savings YTY. It is also important to note that NROM has a Deferred Tax Asset on their balance sheet of $5.6M, sheltering about $15M of pretax earnings.

In the Q3’18 report, the Company indicated its plan to extend the maturity date of the 10% convertible (at $0.50) notes, (with warrants at $1.00/share attached), by three years, $650k of which has been accepted to date. According to the 10-K, “The Company is prohibited by its loan agreement with its senior debt lender from repaying the Notes as long as its senior debt is outstanding. In order to meet the maturity schedules in late 2019 and 2020, the Notes must either be converted to common stock, extended beyond the maturity of the senior debt or replaced with other like securities. The Company may not be able to accomplish any of those alternatives. The Company intends to extend or refinance with external capital the Notes maturing in 2019 and 2020. However, the Company may not be able to refinance its debt or sell additional debt or equity securities on favorable terms, or at all.”

The above paragraph in the 10-K is appropriately conservative in its description. We believe that the Company can “remarket” the 10% Convertible (at $.50, with warrants attached) Notes, since the balance sheet and cash generation of the Company is much improved since those securities were originally placed in late 2016.

It is noteworthy that Current Accounts Receivable, at 12/31/18, were down 12.4% to $1.574M from a year earlier, and the Company stated in their year end report that all existing franchisees are current in their payments. Non-cash writedowns of the Carrying Value of Receivables over the last several years, including the largest, $4.1M in calendar 2018, do not relate to current franchisees. While there will be an ongoing collection effort, legal expenses in this area are expected to be lower than in the past.


2018 as a whole demonstrated significant corporate progress. Adjusted Net Income was $2.5M, up 70% from 2017. Adjusted EBITDA was $3.4M, up 6.6% from 2017.

The largest addback adjustments to the GAAP net loss of $3.1M were $4.1M non-cash adjustment of receivables from 2014 and 2015, and $930k adjustment of the value of deferred tax credits. Adjusted EBITDA was affected by the same items, with Depreciation and Interest comparisons added. We supply the full tables of Adjustments to Net Income and EBITDA as an Appendix to this article.

The dominant portion of fourth quarter results was the operation of four NRCPP units versus two a year earlier, which obviously affected revenues and related costs. Weather, especially in December, affected sales, so store level EBITDA margin was 10.5% from 18.4% in Q4’17. Store level EBITDA for the year was 18.9% (vs.23.7%), still impressive considering the inefficiencies of operating three units less than a year old and the Q4 weather. Most importantly, the Company stated in their latest  release that March sales were running 23% over the December level and “the margin is expected to move back above 20% in the coming months”. While Q4 average annualized sales were about $1.15M, the full year annualized average volume was $1.36M by our calculation of operating store-weeks. The demonstrated recovery in March, combined with the customer (and staff) enthusiasm over the Pizza Valet service, delivery through DoorDash, and other operating and marketing initiatives, should continue to support the targeted average annual run rate of $1.35M per unit.

Up front fees, reflecting franchise signups were up 13.6% for the quarter and 32.5% for the year. Non-traditional franchise fees (ongoing royalties) were flat for the year but up 9.1% in Q4. As the signups convert to operating units, and with new signups in ’19 (14 vs 6 as of 3/26), both of these categories should build further.

Grocery store license fees were down 28.2% in Q4 and 22.2% for the year. As discussed earlier, this division can be considered counter cyclical and could at least stabilize in a slowing economy. Moreover, with only $1.4M of revenues for all of ’18, $323k in Q4, this division is far less important going forward than non-traditional locations generating $4.5M annually and now growing and, of course,  the expansion of the NRCPP division.

The conference call discussion briefly discussed the results, talked about the recovery of sales and margins in March, estimated that the first franchised location in Lafayette, IN, will open around May 1st. Most importantly, CEO, Scott Mobley, discussed the success of the Pizza Valet curbside pickup and the implementation of delivery through DoorDash. He described at length a large number of recent and planned initiatives, including: a bar enhancement program, expansion of an already successful catering effort, introduction of daily food specials, pending introduction of online ordering,  expansion of their award winning social media effort, and others. Paul Mobley, Executive Chairman, indicated that two new company operated locations could open later this year. He disclosed, as we have already  referenced,  the signup rate of non-traditional locations and the recovery in NRCPP sales in March.


There is currently about $6.8M of total debt, and about 21.6M shares currently outstanding. The debt consists of $4.8M bank debt, including the current portion, and $2.0M of convertible debt (at $0.50/share). There are 2.4M warrants, that were attached to the original convertible debentures, at $1.00 per share, which would obviously bring in $2.4M of equity if exercised. There are about 1M additional shares due to various options and warrants, which would bring in roughly $500k if exercised. In total therefore, about 27M shares would be outstanding, fully diluted, but that would have brought in over $5M of equity, reducing the current $6.8M of current debt very substantially. We can therefore consider that the total enterprise value of NROM is something like ($0.47/share x 27M shares=$12.7M) plus $1.8M of remaining debt after cash generated from exercise of all options and warrants, or a total enterprise value of about $14.5M. Dividing by the $3.4M of trailing twelve month EBITDA, the Enterprise Value is 4.3x TTM EBITDA.  When questioned on the conference call about the possibility of broadening the Board of Directors (currently four members, two of which are independent, plus Paul and Scott Mobley), Paul Mobley indicated that this is under active consideration.

CONCLUSION – Provided at the beginning of this article