Documents 5-21-2010 Blog

May
20 10 01:58p
Irwin Barkan
802-49G-G9GE
p.1
4. 1
To: Candidates for Acquiring the Shops and a Territory in Downtown Providence, RI
)
From: David Harrington
e•-)•1 ".=
Cc: Grant Benson
Bill Rogers
James•Vincenzi
Rich Zuromski
1-tN%4,
? \o,c. e.
ei-67
Date: December 20, 2000
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Background
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Allied Domecq QSR (ADQSR) has entered into agreements to acquire the Dunkin'
Donuts Shops at 78 Dorrance Street, 183 Weybosset Street, 75 Empire Street, and 66
Fountain Street in Providence, RI. ADQSR intends to -re-franchise the shops by
assigning these agreements to purchase the shops to the candidate that best demonstrates
the operational and financial ability to transform the downtown Providence market_
ADQSR will require the in coming franchisee to relocate the Waybosset Street, Empire
Street, and Fountain Street shops to marquee locations featuring the Dunkin' Donuts'
'Retail Business Innovation" image and the Togo's brand wherever possible. ADQSR
-
will require that these three locations are re-located to new sites that are approved by
ADQSR within three years fiom acquiring the existing shops_
ADQSR will sell the rights to
acquire the shops along with assigning the current leases.
ADQSR controls the prime lease at the Dorrance Street and the Weyboiset Street
locations. ADQSR will allow the in-co us g franchisee to terminate the lease at
Weybosset Street as soon as it can be relocat.t at no cost. The Fountain Street and the
Empire Street leases will be assigned directly. to the in coming franchisee and they will
be responsible for all of its obligations even if the shop is relocated.
-
ADQSR will assign the existing EBO contracts with fees of 4_9% of sales at the premises
for the Dorrance Street and the Fountain Street !shops. In addition, ADQSR will provide
new twenty (20) year franchise agreements reqUiring weekly franchise fees of five point
nine percent (5.9%) of all sales at the WeybosSet and Empire shops_ It will also require
weekly advertising fees of five percent (5.0%) of all sales at the premises, plus any
greater percent agreed upon by a majority of franchisees in the market. The franchise
agreements are transferable to the sites where the shops are relocated.
Another component of this transaction is the exclusive development rights to the
downtown Providence, RI market as illustrated in the attached map. These rights will last
for three years and will require the following development schedule:
DUNK 00059
May
20 10 01:58p
Irwin Barkan
Project
Relocate shop and add Togo's
. Relocate shop
Relocate shop and add Togo's
Develop Trombo
802-49G-G9GE
p.2
Timeline
Initial Franchise Fee
12 months
18 months
24 months
30 months
$25,000
$0
$25,000
$60,000
To maintain these rights you must maintain an "A" rating as a franchisee.
Requirements for Making a Bid
If you are interested in purchasing the shops and the territory from ADQSR please submit
a bid including the following:
1.
2.
3.
4.
5.
- Your proposed purchase price.
A break-even for the network.
A.three year proforma for the network.
An outline of your organizational structure for operating the network.
A detailed three year business plan on your existing business (if an existing
franchisee) and your plans for operating the shops and developing the Providence
market (i.e. multi-branding, potential development opportunities, how production
will be handled ...).
6.
A commitment letter from a lending institution or other proof of financial ability
to support your proposed acquisition price_
F
ar.
All of the above materials should be sent to:
Allied Domecq QSR
15 Pacell a Park Drive
Randolph, MA 02368
Attention: David Harrington
All packages must contain all the necessary information and be received by 12:00 noon
on January 19, 2000. Incomplete proposals will not be considered. The proposals will be
reviewed to assess the different candidate's operational and financial ability to execute
the transaction and operate the shops. ADQSR is not obligated to accept any of the bids.
Additional Information
To help- you develop your proposal, below is a synopsis of some relevant information on
shop:
DUNK 00060
May 20 10 01:58p
.4."-•
-
Irwin Barkan
802-496-6966
p.3
•
Location
Image
78 Dorrance Street RBI
183 Weybosset St. Gray
75 Empire Street Gray
66 Fountain Street Gray
Franchise Fees
Franchise Term
4.9%
5.9%
5.9%
4.9%
expires July19, 2015
expires 20 years from closing
expires 20 years from closing
*expires May 13, 2022
Please refer to the CD in the Uniform Franchise Offering Circular that was provided for a
copy of the standard franchise agreement. Also on the CD is a copy the standard leaSe
that would be used for the Dorrance Street and Weybosset Street locations. Current rent
at the. Dorrance Street shop requires the greater .of $68,400 . annual base rent or 10% of
gross sales. Current rent at the Weybosset Street shop requires the greater of $45,000
base rent or 10% of gross sales. Attached are copies of the current leases for Dorrance
Street and Weybosset Street as well as copies of the Empire Street and Fountain Street
leases, both of which will be assigned.
Finally, below are sales histories as reported by the franchisee for each shop from
January 1997 through November 2000. ADQSR does not know whether the sales
information that was provided to us and is reporting to you is accurate.
Location
1997
1998
1999
Jan
Dorrance Street
Weybosset Street
Empire Street
Fountain Street
$442,510
$505,468
$295,766
$351,222
$463,970
$459,757
$292,748
$360,142
$515,901
$448,757
$332,752
$393,016
570
$519,846 t-r.
$422,897
t
374:
$333,393 4. r
3
5
s
yr
f=
$372,960x
Total
$1,594,966
$1,606,617
$1,690,426 $1,649,096*
—
Nov 2000
Annualized sales for the calendar year 2000 are estimated to be $1,799,013.
Asking Price for Shops and Territory
The asking price for the shops along with the opportunity to control the area marked in
the attached map is $1,500,000. The purchase price will be due in cash or certified funds
at the closing for acquiring the shops and leases. In addition, the $110,000 for initial
franchise fees as indicated in the development schedule would be due at the time of
purchasing the shops and territory. Any variances between actual fees owed or over paid
due to the type of shop and the brands incorporated in the new shop would be settled
upon the opening of each site.
If you have any questions regarding this transaction please call David Harrington at (781)
961-4020 extension 2543.
Thank you for your time and consideration.
DUNK 00061
1,ct
May 20 10 01:59p
Irwin Barkan
p.4
802-496-6966
To: Candidates for Acquiring the Shops and a Territory in Downtown Providence, RI
From: David Harrington
Cc: Grant Benson
Bill Rogers
James Vincenzi
Rich Zuromski
Date: May 4, 2001
We would like to update you on the progress Allied Domecq QSR (ADQSR) has had on
selling the shops as well as a territory in downtown Providence, RI. Since we met with
you , on December 20, 2000 to discuss the opportunity, we have modified the offer to
better our prospects of attracting the optimum candidate. To entice the best operator to
undertake a significant project lfice transforming the downtown area, we have reduced the
price, the number of relocations, and the number of multi-brand locations to be
developed. Although our vision of having more shops, all in our current image, with
better sites and multi-branding shops with Togo's has not changed, we recognized the
need to help ensure our offer is attractive from an operational, financial, and logistical
standpoint.
The new proposal is to relocate the Weybosset Street and Fountain Street shops while
remodeling the Empire Street shop instead of relocating it. We would also include the
IFF to add another Dunkin' Donuts shop and per the amended multi-brand offer, the IFF
for the additional two Togo's to be added would be waived. All the other added benefits
of the new multi-brand offering would be provided for the two combo shops to be
developed. The purchase price has been lowered from $1,500,000 with the incremental
IFF to an all-inclusive price of $1,250,000. The timeline of 30 months for this project
remains unchanged with the intent of having a network of least 3 RBI image Dunkin'
Donuts shops along with 2 Dunkin' Donuts/ Togo's combo shops.
In addition, we have identified a multi-brand site in the Arcade area that we have signed a
Letter of Intent on. - If you are interested we can talk about the possibility of assigning the
lease or the potential of corporately developing the location to save your capital. We
have just begun working with our external candidates on this revised offer this week and
we have received some positive feedback. Because the offer has changed significantly
since we first presented the opportunity, we wanted to advise our original preferred
internal candidates of the . enhancements.
If you have any interest in the offer or would like to know more about the changes please
contact Dave Harrington at (781) 961-4020 extension 2543.
Thank you.
DUNK 00058
May 20 10 01:59p
Irwin Barkan
p.5
802-496-6966
vow LlitpTiiv5.{oxtn‘lriet,opirilcskustomDialomnilinri.r viewks?session key= 7 .31370 1274221926 100265501*ctI0=20010591 niq .uciD=011iolD7Page 1 of 3
David Harrington
07116/01 11:09 AM
To: [email protected]
cc:
Subject: Providence, RI
Irwin,
Congratulations, Don LaRose has told me you passed the Gallup exam and are qualified to become a
franchisee_ Per our conversation, I have attached an outline of what we are looking for from the
candidates interested in purchasing our deal for Providence, RI along with the modifications we
discussed (i.e . building out the Westminster St. location, allowing the kitchen to stay in Weybosset St.
for the short term, and flip-flopping the franchise agreement dates for the Empire and Fountain Street
shops). Please review it and call me to discuss. We will chose the candidate we will be working with in
the next couple weeks. I look forward to meeting you along with Grant Benson our Senior Market
Executive for Providence on July 25th at 8:30 at the Dorrance Street shop. Due to the timing we would
need your commitment to the attached fairly quickly after meeting.
I hope you have a good vacation.
Regards.
140
barkan group.doc
DUNK 00068
May 20 10 02:00p
n?,r
Irwin Barkan
802-496-8986
p.6
viqw.. . n. ps;.. NS1xtr.q.pgtcprOcsicustomE.JBlornniiirtner Oevv.lcs?session key=25570 12741.98518 1€ 02635ObjeciiD 20D0100uni deID=GfileD= 0DPEgE
July 25, 2001
Irwin Barkan
P.O. Box 353
Lynnfield, MA 01940
Re:
Dunkin' Donuts Shops at:
75 Empire Street, Providence, RI PC # 310245
66 Fountain Street, Providence, RI PC# 307298
78 Dorrance Street, Providence, RI PC# 310110
183 Weybosset Street, Providence, RI PC# 300273
Dear Irwin:
The following will serve to confirm the mutual understanding between Allied
Domecq QSR ("ADR") and you regarding your purchase of the above referenced
Dunkin' Donuts Shops ("The Shops") and a territory in downtown Providence, RI.
As we discussed, you have agreed to purchase The Shops from or through ADR
in accordance with the terms summarized below:
1.
Your Purchase of The Shops
ADR has contracted for the right to purchase The Shops. At its option,
ADR will sell to you or assign to you ADR's rights to buy The Shops,
provide you with an exclusive development territory, and provide
additional franchise term.
The purchase price will be payable as follows:
Deposits to ADR, payable by certified or bank
check on or before August 3, 2001:
$25,000.00
The balance shall be payable by certified
or bank check on the date of closing:
$1,475,600.00
Total Purchase Price:
1,.500,000.,00*
BARK 00314
_,l of
May 20 10 02:00p
Irwin Barkan
802 - 496-8986
p.7
yiey4.tcs7sesszn key=25670 1274 i 9551EI OC2r2559Plect10=23po1gq..y n!c,2,..telD=Orilselar-200Pa2 , 5_of
relocate the retail portion of the shop within eighteen (18) moths of taking
control of the shop. The cost for this relobation will be your sole
responsibility. You agree to remodel the kitchen portion of the shop to
ensure all equipment is in working order and complies to Dunkin' Donuts
standards. The cost for remodeling the kitchen is your sole responsibility.
4.
ADR's development of the Barolav's location
ADR will enter into a lease for the property at 141 Westminister Street,
Providence, RI. ADR will construct a Dunkin' Donuts/ Togo's combo shop
at this„jocation at ADR's sole expense. This shop will be ettuipped and
4eiigned ...operate Dunkin' Donuts/ Togo's franchise to ADR's
• standards and specifications.
ADR will be responsible for obtaining the necessary zoning approvals and
permits to assume day-to-day management of the remodel project for this
shop. You agree that all leasehold improvements to the shop shall be
. ADR's leasehold improvements. ADR will ensure compliance with the
Americans with Disabilities Act and any and all other laws. The remodel
shall include:
•
•
•
•
•
•
•
•
•
•
Professional Services (legal, architectural, etc)
Permitting
Demolition (if applicable)
Removal of Debris
Construction Labor
Construction Materials
Site Work
Landscaping (if applicable)
Paving (if applicable)
Equipment including a POS system
ADR will provide no guarantee on the equipment, however we will assign
to you any manufacturer's or installer's warranties we have on the new
equipment. All equipment will meet ADR's standards and specifications.
Although ADR will consult with you regarding the remodel plans, you
agree that the design and sequencing of the construction is at ADR's sole
discretion.
ADR will provide you with a new multi-brand franchise agreement for a
term of twenty (20) years from the date you take control of this shop. The
BARK 00318
Mao 20 10 02:00p
rear
Irwin Barkan
802-496 - 89 86
[https:liv51exyanttc.qD36eicuston -C.Blomr€Vinnerviewics?..sessioniy=25§70 1 .27.4. 19.018_1002655objectID -, 2qp0 1 .00
weekly franchise fee for the twenty (20) years is five point nine percent
(5.9%) of all sales at or from the premises. Franchise fees of 5.9% of
sales on Togo's for years one and two would be collected, however, 2%
would be refunded to you and 3.9% would be added to the advertising
fund for Togo's. Franchise fees for years three, four, and five would be
collected however, 1% would be refunded to you and 3% would be added
to Togo's advertising fund. The weekly advertising fee for the entire
twenty (20) year term is five percent (5.0%) of all sales at the premises,
plus any greater percent agreed upon by a majority of franchisees in the
market.
in addition,_ADR will provide you with a triple-net sublease for each shop.
The annual rents for the shops will require $54,000.00 base rent plus 5%
of annual Gross Sales at the location. The leases will require the base
rent to increase 20% every five years.
Real Estate Taxes: You must pay taxes monthly in advance. If taxes are
paid in advance of the tax period, you will need to establish a prepaid tax
account at closing. We will inform you of the exact amount prior to
closing
Common Area Maintenance and Other Charges: You will be required to
pay a monthly advance payment of these charges (if applicable).
* If for any reason ADR is unable or decides not to deliver'the franchise
or lease for this location the purchase price will be chahged to
$1,275,000.00.
5.
Development Rights and Exclusive Territory
ADR will provide you the exclusive territory (as defined by the attached
map) to develop at least one additional Dunkin' Donuts/ Togo's combo
shop and another Dunkin' Donuts shop. The cost to develop these shops
will be at your expense, however ADR will provide the franchise
agreements for these shops as part of the purchase price. The additional
combo shop must be developed within 24 months of the closing. You will
retain this territory and it's rights for a three (3) year period and as long as
you meet this development schedule and you maintain an "A' rating as a
franchisee.
6.
Grand Opening Fee
`BARK 00319
P.
May 20 10 02:01p
Irwin Barkan
802-496-6966
ADR Brands Overview
Allied Domecq, based in England, has established itself as a formidable global consumer products
company operating the world's second-largest spirits maker and one of the world's largest QSR franchises
(Dunkin' Donuts, Togo's and Baskin-Robbins), combining for more than 11,000 locations worldwide. The
company had over $3.1 Billion in revenues in 2000, including 5486 Million in QSR revenues and a pre-tax
profit of $88 Million. Same store sales for all three brands exceeded 5% in 2000, outpacing the QSR
segment.
DUNKIN'
DONUTS*
Dunkin' Donuts is the largest coffee and baked goods chain in the world, selling 4.4 million donuts and 1.8
million cups of coffee daily, or a whopping 1.6 billion donuts sold on an annualized basis. Founded in
1950 in Quincy, Massachusetts by William Rosenberg, Dunkin' Donuts became part of ADR in 19S9.. It is
famous for its many varieties of donuts and a wide range of bakery products - muffins, bagels, cinnamon
buns and Munchkins donut hole treats. Dunkin' Donuts is also the place for beverages - choose from fresh
hot coffee in nine flavors, or a refreshing Iced Coffee. There are over 5,000 distribution points worldwide.
Approximately 3,600 of which are in the US. Key international markets include Asia-Pacific, Latin
America, Canada and the Middle East.
Baskin jaRobbins.
•
Baskin-Robbins is the world's largest ice cream franchise, with nearly 4,500 outlets in over 50 countries. It
acquired by I. Lyons in 1973 (now part of Allied Damecq). Baskin-Robbins was founded in 1945 in
Glendale, California, USA. Today there are more than 2,300 outlets in the U.S. Baskin-Robbins is famous
for its innovative flavors, popular "Flavor of the Month" program and flavor library approaching 1,000
different offerings- Serving more than 10 million people each week, Baskin-Robbins develops and retails a
full range of frozen ice cream treats such as ice cream cones, sundaes, shakes and its frozen-coffee line of
Cappuccino, Kahlua, Mocha and Chocolate Blasts. All Baskin-Robbins ice cream products are produced to
exact Baskin-Robbins secret recipe specifications.
was
GO/s
vocrazatzczo -
California's most loved sandwich brand. It has earned this distinction by providing high-quality,
great tasting sandwiches for over 30 years. In 1968 a sandwich shop, Togo's Subs, was established near the
San Jose State University campus in California_ In 1971, Mike Gabler, a former student purchased the
Togo's is
store, upgraded the menu, and changed the name to Togo's Eatery. There are now over 300 stores in the
US, with approximately 60,000 Togo's sandwiches served every day. The Togo's menu offers "something
for everyone", from traditional deli combinations to vegetarian selections and salads. The catering menu
includes box lunches and party size sandwiches - which can be up to eight foot long. Togo's is committed
to providing customers with quality food and fast, courteous service. Only the finest ingredients available
are used - premium meats and the highest quality cheeses. Bread is baked daily at Togo's dedicated
bakeries.
13
CIT 000110
May 20
10 02: Olp
802-496-6966
Irwin Barkan
p . 10
AWED D'OMECA)
QSR
SIMPLE RESOURCE APPROPRIATION REQUEST (RAR)
Contingency of Approval:
Treasury Management Dept. Only
Date Received:
67-3
RAR System Number:
-
This information is for internal purposes only. Providing this information to non-Allied Domecq QSR personnel may be a
violation of the law.
SIGN AND DATE HERE TO APPROVE (Please print name below signature)
Nar: Steve Gabellieri
efiruyor. )
0.1
Grant Benson
Na
,t.n
Name: Gina Powers
Betheny Blowers - Originator
Na
Date
11+1
Date
-
Maur Stet /2
Date
/90
1-31L-e-SC-7-----
1. Summary of Request:
APPRO\ PE
PCIf(s) or Cost Center:
300273,310110. 310245, 307298, and 33
Location:
300273 - 183 Weybosset Street; Providence, RI
3 101 10 - 78 Dorrance Street; Providence, RIDATE:
310245 -75 Empire Street; Providence, RI
307298 - 66 Fountain Street; Providence, RI
337245 - 141 Westminister Street, ProvidencSiellATURP
•
NANCE Cda'oliVilITEE
()/
,
x2a*
Bullet Point Summary of Rea nest: Guaranteed financing in the amount of $1.5M through Tyco Capital for a term of 84
months. The project is broken down as follows:
$750,000 - to acquire full producers - PC #300273 and PC #310110 (This will occur in late November 2001)
$525,000 - to acquire satellites - PC #310245 and PC #307298 (This will occur in January 2002)
$225,000 - to acquire DDiTE combo - PC #337245 (This will occur in February 2002 -Combo is Corporately Developed)
$100,000 Project start up costs
$400 000 - Upgr
ade costs
----,...
...\.
1$2,13-66ATTOrr—
a
$
$500,000
- Less 25% equity injection
„v
$1,500,000 Total Financing Request
-
-
2. Re s uest Rationale and Back ound:
Please see attached Tyco Capital credit write-up
Weaknesses
Strengths
- Principals new to AD QSR business
- Business savvy Managing Partner with multito be acquired were performing poorly
,'LShops
unit• store experience
Collateral
- Family owned and operated shops
- "A" locations, excellent DD brand awareness - TRW reporting 22/27 satisfactory accounts
- Exclusive developnient rights
- Projected DSC
DUNK 00089
May 20 10 02:01p
802-496-6966
Irwin Barkan
p . 11
- Sufficient capital available
- Satisfactory Fleet Bank reference (No NSF's)
Please see the attached Original RAR #01-010-024
O Assign 2 purchase options on the 4 DD shops to Irwin Barkan
Provide a new development territory for 2 combos and 1 DD only shop
• Corporately develop the new DD/TE combo, sign a new lease and provide the turn-key location
• Enter into a prime lease (Barclay location)
• Provide 2 new franchise agreements on Weybosset and Fountain locations.
Require all 4 shops be remodeled by December 31, 2004.
Amount of Request: $1,500,000
2. Financial information:
PC #'s 300273, 310110, 310245, 307298, 337245
Ca pp
15 rate..1p06 gATetWasgra t!g;Ottlfi EleMiii -6.$41F166115:e.edi$::.
.
Receivables (A/R and Notes)
DOI Net book value
Guaranteed Lending
Other
Estimated Market Value
Net Equity/(Exposure)•
57,900
0
30,000
0
1,792.300
1,704,400
0
0
1,500,000
0
3,550.200
2,050.200
Please complete lease information below if applicable (i.e., real
estate deal, etc.)
Leaidliifcii--
M
- ar4,:.+--rSrt:PEicMitiIrkTropiaTeti
Prime
Years 1-5 (please note actual dates)
Years 5-10
Years 10-15
etc
yes
yes
?
?
?
?
?
9
Options
Sub-Lease *
Years 1-5 (please note actual dates)
Years 6-10
Years 11-15
Years 16 - 20
?
?
?
?
?
?
?
?
•
Please describe circumstances behind any sublease below 10% in
"Request Rationale and Background" above.
4. Details of Request:
DUNK 00090
May 20 10 02:02p
Irwin Barkan
Franchisee Name
,_ Number of stores in network
Franchisee Rating
Brands
1(1'
p. 12
802-496-6966
.. . Barka n
1,
, Will own 5
A
DD and TE
r
Shop Type
FP's and Sat's
Image
Building Type
Sq. Feet
# Parking Spaces
# Seats
Drive Thru yin
Gray to RBI
...
,
5. Risk Level:
Explain: The risk of this deal is moderate now that AD .QSR will be guaranteeing 75% of the total ,
projects.IfMBaknhouldet5-srnwok,ADQSRuldbeigato
make whole Tyco Capital. However, our net equity position remains positive even with the guaranteed
financing. The projected sales and positive DSC are reasonable. Now that the same owner will be
----iTiairicheeW-711`,52;Cible to focus on the locations and grow
operating and managing the stores inPro
them to theirfull potential in sales. The buyer of the network is an excellent candidate to join the AD
QSR business. Granted he may have little QSR experience, but the man has been in business 25 years
and has the knowledge and ability to improve . store conditions, make efficient store layouts and to
employ the right management teams to operate his stores. If he were not business savvy, Mr. Barkan
would not have net worth of over $6M.
According to the original RAR, "The criteria for entry into this market was to recruit a professional,
well capitalized individual that is able and committed to operating the existing asset base at the highest
standards while growing the market through multi-branding." Irwin Barkan fits the criteria and with
the support and help of his family, will grow the Providence Central Business District to its highest
capacity of AD QSR's brands.
6. Alternatives/Workout Plan (where applicable):
Explain:
DUNK 00091
Mai 20 10 02:02p
Irwin Barkan
802 - 496 - 6966
p.13
> TOTAL SALES $1,792.3
The'above sales figures are considered very low by Dunkin standards,
especially when compared to other Providence Dunkin shops. Sales per unit
are less than half of the average volume for the 185 Dunkin shops in the
Providence area - average unit volume is $21.0/week, or $1.0 million
annually. Thus, the LLC projects revenues to nearly double in the first year
"1.-.,of operations:
Total projected sales Year 1: $3,550.2 (98% increase); 2.07 DSC
> Total projected sales Year 2: $5,171.9 (46% increase); 3.87 DSC
> Total projected sales Year 3: $5,663.6 (10% increase): 4.30 DSC
The LLC plans to increase sales and reduce expenses by:
>
>
>
>
>
>
>
>
Expand and relocate the Fountain shop by Year 2
Add cosmetic improvements/equipment upgrades to all shops
Increase operating hours
Add a single central kitchen
Improved/trageted marketing
Improved P.O.P. marketing
Replace managers/employees where necessary; improve morale.
Improved operating expense management
FIRM HISTORY
DD BARRAN LLC
The LLC was formed by Barkan family members to operate Allied QSR brands.
The Managing Partner of DD Barkan is Irwin J Barkan and ownership interests
are. distributed among the immediate Barkin families of Irwin, Abram and
Martin Barkan.
The LLC has signed a Purchase and Sale agreement to acquire (4) existing
Dunkin Donuts shops and (1) combo Dunkin/Togo's (to be constructed by
Allied), all located in Providence RI. The LLC has also acquired the
exclusive development rights to the Providence Central Business District and
will develop a minimum of (2) additional stores over the next three years.
The shop acquisitions will occur in three phases. The $750.0 acquisition of
the full Producers, Weybosset Street and Dorrance Street, is expected to
take place by late November 2001. The $525.0 acquisition of the satellites,
Empire Street and Fountain Street, is expected to take place January 2002.
The final acquisition, the $225.0 turnkey combo shop built by Allied, will EIl
1 E
take place February 2002.
IRWIN J BARMAN
Irwin Barkan has . 25 years of diverse business experience; 18 years as a
business owner, manager and investor in retail, real estate and e-commerce
operations. From 1996-00, Mr Barkan developed, financed and .operated a
group of Save-A-Lot Supermarkets as Managing Partner of New England Food
Associates LLC. The stores were developed from ground up and annual sales
grew tram $0 to $20.0MM in annualized sales in 48 months. In April 2000, the
stores were sold to Super Valu, the US's largest food wholesaler/retailer.
Other enterprises Mr Barkin has been involved with include:
> IJ Barkan Inc (1984-present), a full service real state company started in
1984. The company developed and managed over 2.0 million sf of retail space
throughout New England (mainly grocery/discount store anchored community
shopping centers).
> IJB Retailers (1984-1990), a regional master franchise for MailBoxes, etC
and a chain of self service laundries owned 100% by the Barkan family_
Mr Barkan is involved in a number of civic/trade activities including the
DUNK 00094
Irwin Barkan
p. 14
802-496-6966
American Society of Real Estate Counselors, and was Co-chair of the National
Building Owners and Managers Association National Convention in 1984. Mr
Darken has appeared on MSNBC to comment on e--commerce. Mr Barkan is also the
General Partner Of Haverhill Plaza Associates, owner of a 63,000 sf shopping
center. That company generated $929.6 in 2000 revenues.
LOCATION
The LLCs exclusive development area is in a mature and thriving .office,
retail and hotel market comprising 6.0 million sf of office space, 12,000
business establishments and 154,000 employees within a 5 minute driving time
trade area with very heavy vehicular and foot traffic volumes, Providence has enjoyed a resurgence over the last decade, acquiring the nickname of
'Renaissance City'. Downtown Providence has been transformed by a decade
long $1.5 billion facelift that is considered to be one of the most
successful urban redevelopments in recent history. Providence has also
experienced a significant increase in population (8% over 1990), while other
urban areas of New England experienced static/negative growth. Providence.
isnowthecdlargstiynNewEglad.
COMPETITION
There are currently 23 Dunkin shops within Providence. Dunkin's closest
competition is HoneyDew Donuts with 4 stores, Starbucks with 2 stores and
Bess Eaton with 1 store_ Krispy Kreme does not operate in the area. None
are located in the Central Business District.
RECOMMENDATION
.Analyst recommends APPROVAL, noting the following:
(+) Business savy Managing Partner with multi-unit store experience.
V. (+) Family owned and operated shops.
(+) 'A' locations; excellent Dunkin brand awareness.
4,2 (+) Exclusive development rights to Providence Central Business District..
(+) Allied UNL support.
(+) Projected DSC.
(+) Sufficient capital available_.
`W. .(0-) Satisfactory Fleet Bank reference_ (2) accts opened 6/97;. both ave
low five figures. No NSFs.
Obligor/principals new to Allied QSR business.
(-) Shops to be acquired perforMing poorly.
3/7 (-) Collateral.
0! (-) TRW reporting 22/27 satisfactory accounts.
Vie
CONDITIONS
1. Copy of franchise agreement, term to match or exceed term of loan.
2. Cony of lease, term to match or exceed term of loan.
3. Copy of LLC agreement, term to match or exceed term of loan_
4. Satisfactory documentation, including first lien filing on business
assets..
5. Allied UNL support.
6. PG of Irwin J Barkan.
7. Purchase and sale agreement_
8. verification of business name, address and status.
DUNK 00095
May
20 10 02:03p
Irwin Barkan
002 - 49G-G9GE
Store-by-Store Operational Plan
The existing stores arc all currently significantly under performing and have received failing grades from
ADR. DDB has devised a specific store-by-store operational plan which will significantly revenues and
decrease store expense ratios.
DUB projects that sales volumes of the four (4) existing stores will increase by AT LEAST 20% (to
nt program. The projected sale increases
$2 200 000) FROM CY 2000 TO CY 2002 uner otir management
are in line with the current franchisees' reports and Dunkin' Donut system growth rates without taking into
consideration the extensive marketing initiatives to implemented on behalf of these stores.
DDB has identified the following issues at all four existing stores:
•
Poor Store Conditions.
▪
Labor cost and expense ratios which are much higher than typical Dunkin' Donut system
expenses.
•
Unit sales significantly lower than typical Dunkin' Donut system stores.
The CY 2002 performance of these stores will rely on these measures put into place by DDB at all four
existing stores:
•
Adjust work schedules to lower labor costs while maintaining effective operations.
•
Review food production procedures to reduce waste and improve overall production procedures and
product appearance.
•
Conduct equipment analysis and repair and replace damaged or missing equipment.
•
Replace managers where necessary and retrain staff in basic Dunkin' Donuts operational procedures.
•
Improve staff moral and adherence to proper teamwork.
•
Implement new cleaning schedules.
•
Improve the overall store appearance by updating the exterior and interior with new promotional
advertisements including POS materials.
•
Implement camera security program.
•
Extend hours of operation.
•
Utilize the operational efficiencies of a single central kitchen to support the market.
Additionally, DDB will address these specific individual store issues:
183 Weybosset Street, Providence, RI
This store is well-located on a
busy downtown street but currently suffers from the following problems:
•
A poor visual layout relating to the poor use of the existing storefront and interior store area for
signage.
•
Visual blight associated with a poorly maintained sidewalk planter located directly in front of the
store.
•
Poor store conditions.
20
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Irwin Barkan
802 - 49G—G9GE
p. 1G
le
Financial Projections
DDB has provided a Statement of Projected Income and Cash Flows and Management Program Budget for
review. This analysis was prepared by DDS's CFO, who has extensive experience in the financial
operations of Dunkin' Donuts stores and the other ADR Brands.
Projected Income & Cash Flows (Five Years)
These projections were prepared with a thorough review of the historical sales and operating expenses of
: these stores and our knowledge of the financial benchmarks that properly managed Dunkin' Donuts store
should achieve.
1
It should be noted that the four existing stores received the lowest quality grades (Weybosset and Dorra.nce
received a 'B' grade, Empire and Fountain received a 'C' grade) that the franchisor can deliver, reflecting a
serious breakdown in the management operations of these stores. With this in mind, DDB is utilizing the
following primary business assumptions in its financial projections:
•
Increasing Sales 20% in Year One and 25% in Year Two, followed by an annual sales increase of 8%
(commiserate with Dunkin' Donuts and ADR system operations).
•
Projecting cost of food (21%) and payroll (24%) at 45%. This is a key COS parameter within the
Dunkin' Donuts and ADR system, reflecting a properly managed store and was not being achieved by
the current franchisees,
•
Projecting the historical operating expenses, although DDB believes that several line items associated
with utilities, cleaning and rubbish removal appear to be too high for these stores. DDB believes this
could be an area of potential savings although not projected in the financial analysis.
DDB believes its Management Program will achieve the projected sales increase for the following reasons:
•
The current sales figures are more than 50% below the average per unit sales achieved in the Dunkin'
Donuts system in the Providence Marketing area. After the Year One increase the weekly gross sales
of the stores will range from $8,000 — $12,800, still far below the median sales figures of the Dunkin'
Donuts stores in the Providence Marketing area (523,000 ±).
•
The existing stores suffer from poor store conditions, which will be corrected by DDB.
•
The stores suffer from poor use of P.O.P. merchandising, which DDB will correct.
•
The existing stores do not operate as long as typical Dunkin' Donuts stores, DDB will increase store
hours.
•
DDB believes the stores are currently poorly managed and will retrain and replace store managers
employees when necessary.
•
DDB will implement an aggressive marketing and advertising campaign to reintroduce the upgraded
and properly functioning stores to the public.
•
DDB will implement direct marketing efforts to secure catering opportunities from nearby offices.
DDB believes this represents a major source of revenue that the previous franchisees failed to leverage.
•
The Fountain Street store is grossly undersized store is not fulfilling its sales potential on one of the
CBD's busiest streets. DDB projects it will expand or relocate this store by Year Two.
•
The Weybosset Street store currently suffers from poor signage and visual blight along its sidewalk.
DD/3 is taking steps to immediately correct this problem
•
The Weybosset Street store will benefit from the recent opening (in September) of the 180,000 S/F
Johnson & Wales dormitory hall located directly across the sheet.
and
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Irwin Barkan
802-496-6966
p. 17
Assumptions relating to the opening of new stores and other considerations include:
DDB will open the combination Dunkin' Donuts — Togo's store in Year One and has utilized sales
volume commiserate with ADP. system operations.
DDB projects it will open a combination Dunkin' Donuts — Togo's store in Providence Place in Year
Two and has utilized sales volume commiserate with ADP- system operations.
•
DDB projects it will open a Dunkin' Donuts store on South Main Street in Year Three and has utilized
sales volume commiserate with ADR system operations. The food, labor and operational costs have
been lowered to match the ADR and Dunkin' Donuts system operations. DDB believes it can adhere
to these cost ratios given the strength of its management team.
•
A loan amount of $1,500,000 with an interest rate of 7.25% with a term of 7 years has been utilized for
this analysis.
Key Ratios
ear One: TotaLs
111—‘.2"S
Totals Sales:
COS:
Gross Profit:
Operating Expenses:
Operating Income:
$3,550,157
$2,411,353
$1,138,804
$689,012
$449,792
EBITA:
$589,792
Debt Service:
$254,701
COVERAGE RATIO
2.32
(67.9%)
(32.0%)
(19.4%)
(12.7%)
Ng 1
3 5'6-0
tti
i!
36-0 //'.
28
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Irwin Barkan
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p. 18
MARKETING & SALES STRATEGY
DDB has extensively analyzed the business opportunity and formulated an operational and marketing
program to substantially increase stores revenues and lower expenses, including:
•
improve the operational quality of the existing four stores to an 'A' rating through compliance with
ADR operational standards, improved management, upgraded equipment, a team-oriented retraining
program, improved customer service and new cleaning schedules.
•
Provide cosmetic upgrades to the existing four stores, including updated promotional and P.O.P.
materials to all the stores and new signage to the Weybosset Street store.
•
Improve the customer flow of the Empire and Dorrance Street stores with new customer entrances.
•
•
Bring labor and food costs to the typical ADR range of 45% of total sales.
Implement an aggessive marketing plan to reintroduce the upgraded stores to the market.
Expand or relocate the Fountain Street store, which is badly undersized and unable to leverage its
excellent retail location.
Open a combination Dunkin' Donuts - Togo's store to leverage the available lunch business from the
nearby office towers.
Current store revenues
Existing stores volumes for 1999- 2000 as reported by prior owners were:
Empire
364,429
Fountain
413,132
Dorrance
557,402
Weybosset
457,357
Total
L792,323
T.
These sales volume figures are considered to be extremely low by Dunkin' Donuts standards, especially
when compared to the entire Providence Marketing area, considered the best performing marketing in the
U.S.
•
Sales per unit are less than half of the average volume for the 185 Dunkin' stores in the
Providence Marketing area, despite prime locations and modest competition.
•
The average unit volume in the Providence Marketing area is $21,000 per week, or $1,100„000
annually.
•
Substantial numbers of Rhode Island stores achieve revenues of $1.5 million and higher. Other
than unit size and drive thru limitations, DDB should increase store sales, at a minimum, to the
system-wide averages.
•
Current Net Income at store level is significantly below typical DD system levels. Information
supplied by franchisees to DDB indicates a typical range of store level ErwrDA at 15-25% of
sales, subject to fixed costs, efficient central kitchen operations and product mix. DDB expects to
immediately improve store level profitability and has demonstrated a track record in retail
businesses.
Specific financials projections are located in the Selected Financial Data section of this Offering
19
• BARK 00184