Schlotzsky's Inc (hybrid between McDonald and Subway) Message Board

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Non-Tech : Schlotzsky's Inc (hybrid between McDonald and Subway)

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To: Grant Froese of Calgary who wrote (19)	6/29/1997 6:40:00 PM
From: Michael Burry	of 63

Lynch liked restaurant stocks because he felt what is popular in one part of the country will be popular in another part of the country. And if the business is profitable with strong cash flows and has the capital to expand, he feels that you can get fairly solid 25% growth for a lot less risk than in hot sectors like biotech or tech. Au Bon Pain got blindsided by the Starbucks of the world. If Lynch or any of us had seen that coming, we'd be an awful lot more wealthy right now by investing in and/or starting a coffee house chain. Schlotzsky's is doing for delis what McDonald's did for hamburgers and what Starbucks did for coffee/sweet treats. Basically, there are many delis out there of varying quality, mostly independently owned. How many times have you gone to a deli and been disappointed? It's almost 50/50. With Schlotzsky's, it's a known quantity. The brand is just now being developed. It was the same with coffee houses before Starbucks. Schlotzsky's occupies a nice niche -- upper-class fast food. Here in Nashville, they opened up right across from Vanderbilt-- perfect. It ain't cheap, but it's usually packed anyway. My wife and I spend about 16. Given that it would cost us 10 bucks at McD's and my wife wouldnn't even be able to get her "healthier" meal, we'd rather spend 16. The Lynchesque aspect is, if we're willing, so are other people. Schlotzsky's has performance goals for its franchisees, and its been good about buying back ones that disappoint. I really don't feel that Schlotzsky's should expand into breakfast. The food is better for dinner than just about any other fast food place I can think of except for KFC. One fault I see is that BUNZ's menu is too diverse. It violates the KISS rule of the restaurant business. Of course, I go there more often since I can get different stuff each time. If they can pull the diversity off, more power to them. Mike

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