NexCen Brands Is Still Hungry

Pretzel-concept acquisitions follow ice-cream buys, but the company is eyeing other possible brand additions.

By Derek Gale, Associate Editor -- Restaurants & Institutions, 8/15/2007

New York City-based NexCen Brands Inc., which in February acquired the 184-store MaggieMoo’s and 336-unit Marble Slab Creamery ice-cream chains, revisited the treats category this month and bought the Pretzel Time and Pretzelmaker brands (with a combined system of 376 stores) from Mrs. Fields Famous Brands LLC for nearly $30 million. Following the announcement, NexCen CEO Bob D’Loren (an early investor in another multi-chain holding company, Kahala Corp., when he was with UCC Capital Corp.) talked to R&I about NexCen Brands’ strategy and how the brand-acquisition and management firm evaluates potential purchases.

Q: How would you describe NexCen’s quick-service restaurant strategy?

A: We started with ice cream because we were looking for premium products, or concepts that sold premium products, in the QSR segment. We saw a good opportunity to consolidate the two [premium ice-cream] players and pick up scale in purchasing and in back-office operations. We then looked at the business from a marketing and branding perspective to find ways to drive revenue to the stores.

We came to the conclusion that a quick way would be to buy concepts that would enable [stores] to offer additional products, such as different types of treats.

Our goal is to grow average unit revenues in our stores from $250,000 to $350,000 over time.

Q: Are you continuing to look for additional treat-category concepts? If so, what sorts of brands are you targeting?

A: We are actively looking for additional concepts to fold into these systems including but not limited to cookies, doughnuts and coffee. Our strategy is to make acquisitions synergistic to ice-cream and pretzel concepts—other types of treats to offer in the stores. Second, we look to find concepts that have geographic locations where we don’t have concentration with ice cream and/or pretzels. That brings us into new markets.

We like companies with more than 150 locations, and we prefer companies that only franchise. We think there’s a conflict in owning company stores as a franchisor.

We are very acquisitive: We have six full-time mergers-and-acquisitions people working those sectors, looking at anything and everything related to those categories. There are very few rocks we’re not looking under to find those acquisitions.

Q: Once you consider the QSR franchising portfolio complete, what is your long-term strategy?

A: It’s a combination [of things]. There may be co-branding opportunities, it may be a food-court type concept, where we offer franchisees four to five types of treats and they can have side-by-side stores in one location—a sort of treat destination.

That’s the strategy. If we own all the brands, we can create incentives for franchisees to get in at a lower cost than they would otherwise be able to get in for.

We buy brands we can sell in our own channels, but we don’t produce anything—we don’t own any stores. Our business requires no working capital. We’re building brands—that’s what we do.