Franchise Investor Adds Italian Ice to Tater Tot Wraps and Acai Bowl Portfolio
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The team that helped make Marco’s Pizza a national franchise brand has brought a third brand under its wing with plans to blend them together in real estate around the country.
Chicago-based Pivotal Growth Partners, founded a year ago by two former Marco’s Pizza executives, has invested in Jeremiah’s Italian Ice, a Florida franchise chain with 23 locations in the Sunshine State.
Pivotal Growth plans to expand the Italian ice franchise nationally along with portfolio companies Conrad’s Grill, an East Lansing, Michigan-based chain with four locations, and Vitality Bowls, a San Ramon, California-based chain with about 100 locations.
The franchises are all small, and that’s intentional. Pivotal Growth is chasing a niche that it sees as underserved: franchises that are under $5 million in EBITDA, or earnings before interest, tax, depreciation and amortization.
“We are pretty much smack dab in the middle of emerging market land,” said Cameron Cummins, Marco’s Pizza’s former chief development officer and Pivotal Growth co-founder.
These types of franchises typically don’t attract big investment for growth until they hit or exceed the $5 million mark.
Key to their plan is packaging the franchises together where possible. With one fell swoop, a retail center could have a mixture of Jeremiah’s selling gelati, Conrad’s serving up wraps mixing meat, cheeses and tater tots and Vitality Bowls balancing it all with healthy acai bowls, smoothies and juices.
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Bringing the franchises as a package “gives us the flexibility to command and control a center without worrying about co-tenancy,” said Bryon Stephens, former president and chief operating officer of Marco’s who founded Pivotal Growth with Cummins.
Cummins said the combination of tenants will depend on traffic and demographics around a retail center.
Stephens and Cummins have blended brands in the past. Stephens did it with A&W Restaurants and Long John Silvers under one roof while he was with Lexington, Kentucky-based Yorkshire Global Restaurants.
Yorkshire worked on co-branding restaurants with Tricon Global Restaurants, PepsicCo’s food division spinoff that owned Pizza Hut, Kentucky Fried Chicken and Taco Bell. Tricon bought Yorkshire in 2002 and renamed the company Yum! Brands.
Cummins also had worked with Yorkshire and Yum! Brands as an outside consultant. He and Stephens carried their experience to Toledo, Ohio-based Marco’s Pizza where they helped build the regional chain from 139 stores to more than 760 around the U.S. and in four other countries.
One of their biggest co-brand deals didn’t involve another restaurant. They worked out a deal with Chicago-based Family Video, a movie and game rental chain with more than 600 stores around the country, to put Marco’s Pizza locations inside the stores.
Cummins said the deal came out of their grassroots approach to finding real estate for franchises he and Stephens represented. The goal was to get to the landlord before the lease sign went up.
“We went and knocked on doors,” Cummins said. “We’ve always been pretty good street fighters.”
They went to Family Video about putting Marco’s in stores. The company liked the idea but they wanted to own the franchises. Cummins said the company “flipped the table on us and became Marco’s biggest franchisee.”
Family Video has more than 150 Marco’s franchises attached to its stores.
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Stephens and Cummins still have a strong relationship with Marco’s, and their franchises could end up in space next to the pizza chain, Cummins said. But he said he has had requests from developers to have Pivotal Growth’s brands anchor a small center that has several spaces to fill and possibly convince Marco’s to follow.
Down the road, Stephens said the idea is to have Pivotal Growth investors own the real estate, whether it’s an existing center or a new development that leases to the franchises under their umbrella. Under such a scenario, they will have a good idea how the franchisees are doing and make adjustments when necessary to ensure they are healthy.
That will help protect the real estate investment. After all, they also will be responsible to the investors in the real estate as well.
“We shouldn’t have any real estate misses because our experience,” Stephens said.