Market Overview

Giggles N' Hugs (OTCBB:GIGL) Seems to have Great Upside With Multiple Catalysts

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"Giggles N' Hugs (OTCQB:GIGL)" is a grossly undervalued company in its initial stages of expansion to stardom and becoming a household restaurant/kids play place name. It seems like it is the most difficult task in the world when you are shopping at the mall with your kids. I know this because I have 2 kids and always came home with a headache after shopping at the mall. That was until I discovered Giggles N' Hugs, since they are local to me in Los Angeles. I have been to two of their locations and I can tell you that the business concept is excellent and ready to take off. By the way, I have kissed my Headaches goodbye. will be a place where parents will be headed every time they go to the mall to shop, dine, relax while their kids play and learn.

With current value of just $0.30/share, investors should realize the opportunity and the magnitude and the potential once starts rolling out their new locations across a mall near you.

Company Overview

  • A pioneer concept in the family themed restaurant industry with unique children' play space.
  • Organic & nutritious menu with a high quality menu items made from local, fresh foods
  • Trained "aides" promote family-friendly feel and play with kids
  • Multiple revenue drivers generate attractive store- level profitability opportunities
  • Large mall operators have expressed keen interest in rolling out the concept nationwide
  • Family restaurant that addresses an unmet need for high-quality, healthy food in a safe, themed entertainment environment for children.
  • 3 locations as of today and with significant interest from the largest global mall developers who have contributed significant cash and rent concessions.

Company History

  • Founded by CEO, Joey Parsi, and his wife, Dora Parsi, in response to frustration they experienced dining with their children.
  • The 1st Giggles N' Hugs restaurant opened in Brentwood, California in February 2008.
  • Brentwood was an immediate success, which enjoyed profitability and widespread media coverage. Westfield approached them for an expansion proposal, including possible nationwide rollout.
  • In 2010, the second location was opened in the Westfield Century City Mall, with Westfield agreeing to pay 60% of construction costs, with additional concessions.
  • Opened a second location in March 2013 in the Westfield Topanga Shopping Center, and on February 15, 2013 executed a lease for a third location in the Glendale Galleria Mall, which opened in October of 2013.
  • The current landlords, Westfield and General Growth Properties, have offered very favorable tenant improvement concessions and landlord financing on existing leases.

GIGL - Our Modern Generation of Chuck E. Cheese's

  • Kid-friendly play area in a true restaurant environment
  • Delicious, nutritious, organic menu catered to young children (1-10) and accommodative to parents
  • Entertainment, such as puppet shows & themed nights
  • Trained "aides" assist with children's enjoyment while parents relax
  • Child drop-off service (while parents shop)
  • First and only restaurant to offer this service in LA

Multiple Revenue Streams

  • Admission fee of $9 for each child for play area acces
  • Food and Beverages
  • Birthday parties & private rentals
  • Drop-off service
  • Alcohol (beer & wine) with limit of 2 for parents
  • Branded In-store and retail outlet merchandising (licensing & merchandising model)
  • U.S. and International Franchising

Nationwide Popularity

Hollywood Celebrities have generated positive press coverage:

  • Gwen Stefani
  • Jennifer Hudson
  • Adam and Sadie Sandler
  • Ben Affleck
  • Halle Berry
  • Heidi Klum
  • Giggles N' Hugs

Current Locations: 

Westfield Mall - Century City, CA

  • Opened Dec. 2010 - "Flagship location"
  • Annual run rate of $1.4 million in sales and $285,000 in EBITDA
  • 21% net operating margin
  • From SEC Filings

Westfield Topanga Shopping Center - Canoga Park, CA

  • 10-year lease signed - February 2012
  • Opened end of March 2013

Glendale Galleria (General Growth) - Glendale, CA

  • 10-year lease signed - February 2013
  • Opened October 2013

Market Opportunity

  • While fast food restaurants offer cheap food in cookie-cutter buildings, themed restaurants offer a good meal, as well as an experience.
  •  In 2011, there were 19.5 million kids' parties at restaurants according to NPD Group.
  • NPD CREST research finds that kids are eating more healthful food options than ever before.
  • Children five or younger are most likely to influence restaurant visits according to The New American Diner Study.
  • The average visitor stay at a family entertainment center is 2.5 hours, and they typically visit up to 6 times per year according Jam Ventures Managments.

Expansion Goals

Evaluating multiple franchise locations around the U.S. and the world.

The Westfield Opportunity

  • The Westfield Group is highly interested in expanding Giggles N' Hugs to all 55 of its U.S. mall locations
  • Offering to pay +60% of construction costs (i.e., "Tenant Allowance Dollars")
  • Negotiating deals on a per-location basis
  • Also in discussions with other REITs and major mall operators
  • Macerich Group - (NYSE:MAC), $83B market cap: 62 regional shopping centers, 64M sq. ft. of gross leasable area
  • General Growth Properties:GGP: 135 property portfolio
  • From SEC Filings

The following is a diagram of the expected nationwide new store rollout schedule for year 2013 through the end of 2017. The flagship store in Century City has been in existence since December 2010.

 

20132 (A*)

2014

2015

2016

2017

Q1

1 (Topanga*)

0

2

3

4

Q2

0

1

2

3

4

Q3

0

1

3

3

4

Q4

1

1

1

2

4

Projected Cumulative Stores

3

6

14

25

41

The Topanga location showed solid results in its first quarter of operation. This is a testament to a well chosen location and the strength of the Giggles N' Hugs brand.

Three Months Ended June 30, 2013

Topanga

Revenue

$374,459

Total Cost & OP EX

($312,054)

EBITDA margin

16.666%

From recent SEC filings:

Revenue

  • 2011: $1,116,150 (one location)
  • 2012: $1,348,691 (one location)
  • 2013 (6 months): $1,010,431

Licensing & Merchandising = More Revenue

  • Signed Agreement with The Licensing Shop:TLS - to extend the Giggles 'N Hugs restaurant experience into "on-brand" products
  • TLS specializes in the strategic development of consumer products
  • Expertise:
  • Extending brands into licensed products
  • Creating new revenue streams
  • Reaching new customers

Retail Revenue Initiatives

  • Opportunity to sell Giggles N' Hugs branded merchandise in-store as well as to top tier retail outlets
  • Further expansion opportunities into organic, high- quality clothing & food line
  • Top-tier retail targets - Nordstrom, Bloomingdales, Whole Foods, etc.
  • Examples:
  • Food products (i.e., Frozen Pizzas with Mom's Tricky Treat Sauce, Mac N Cheese with Mom's Tricky Treat Sauce and Chicken Littles with Flax Seed)
  • High-quality children's apparel and accessories
  • Drink ware/snack cups (BPA Free)
  • Coloring books & stickers
  • Children's Vitamin Water

The Management Team - As Goos as It Gets

Joey Parsi - Founder, President & Director

  • Founded GIGL in 2007
  • 20+ year career on Wall Street
  • Lehman Brothers
  • Sutro & Co.
  • Investment advisor at TD Waterhouse (managed $350M+ in assets) & StockCross Financial Services

Sean Richards - COO

  • Joined GIGL in 2010
  • 20+ Years of operations management experience
  • Regional Director at Hootwinc, LLC (overseeing operations of 7 Hooters restaurants, 1 casino & 2 bars)
  • General Manager of The Viper Room & Pink Taco
  • General Manager of the House of Blues, Planet Hollywood & Hard Rock Café

Joan Barnes - Advisory Board Member

  • Joined in August 2012
  • Co-founder and former CEO of Gymboree
  • Responsible for growing brand to 400 play centers
  • Sold company for$1.8 billion or ~20x revenue
  • Founder and former principle owner of YOGA STUDIO, sold to Yoga Works in late 2008

Philip Gay, CPA - Advisory Board Member

  •  +25 years experience operating restaurant concepts
  •  Former president & CEO - Grill Concepts, Inc.
  •  Former CFO - California Pizza Kitchen & Wolfgang Puck Food
  •  CEO & COO - Diversified Food Group
  •  Former CEO - Color Me Mine
  •  Managing Director of Triple Enterprises

Todd Star

  •  Joined GIGL in Summer of 2014
  •  Highly-regarded and successful senior executive with nearly three decades of real estate industry experience, to aid in its growth strategy development.
  •  Star's experience as a senior executive for Westfield USA, overseeing its west coast leasing operations for 14 years, is a strong asset to the Company as he leads its expansion negotiations with several of the largest mall owners in the U.S., including General Growth Properties, Simon Property Group, and Westfield Group, who collectively own more than 500 properties worldwide.
  •  Todd will bring a vast amount of Real estate experience and knowlege to the table and
  •  He knows the mall operators the best and as a result, he will help to negotiate terms that will be advantages to the company going forward.
  • From Press Release

Obstacles - Road Block?

I believe that finding investors to fund for the expansion of Giggles N' Hugs will be the main obstacle to overcome. The CEO of Giggles N' Hugs, in a recent conference on October 15, 2014, went over some numbers and it will cost about $1.2 million to open a new location, where the company needs to provide about $700,000 and will get approximately $500,000 from landlord as Tenant allowance.

Current Market:

Giggles N' Hugs is a grossly undervalued company in its initial stages of expansion to stardom and becoming a household restaurant/kids play place name. will be a place where parents will be headed every time they go to the mall to shop, dine, relax while their kids play and learn.

With current market value of just $0.30/share, investors should realize the opportunity and the magnitude and the potential once starts rolling out their new locations across a mall near you.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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