Editor’s note: This column is part of our Best Stocks for 2015 contest. Rick Rouse’s pick for the contest is Pizza Inn Holdings Inc, which has since changed its name to Rave Restaurant Group (RAVE) and now lists on the Nasdaq.
Earlier this year, I made a road trip to Pie Five, one of Pizza Inn Holdings Inc’s (PZZI) trademarked brands, to learn more about their story and, more importantly, try their pizza.
My first impression was that it was very clean and bright and that the store was located in a great area. When I first walked in, I was greeted by a bevy of pizza choices from the company’s hand-crafted menu, but their aim is for you to create your own perfect pie.
Pie Five’s goal is to have you stuffing your face with the perfect pie in less than five minutes. If you were wondering how Pie Five can cook a pizza in under two minutes, it’s due to their patented ovens. They heat up to 700 degrees and can bake a pie in one minute and 45 seconds.
It essentially feels like the Chipotle Mexican Grill, Inc. (CMG) of pizza shops.
And, man, did Pie Five’s knock it out of the park! It was excellent. Instant gratification. I tried the pan crust as well as the thin-crust pizza, and both were fantastic.
Pizza Inn Has Huge Growth Ahead
Of course, managing the bottom line is always important for any company, so I was pleased to see that, much like its pizzas, Pie Five’s recent results came in better-than-expected.
Although the company reported a first-quarter loss of 3 cents per share, it was a penny higher than analysts’ estimates for a loss of 4 cents per share. Revenues came in at $11.3 million versus expectations just north of $10 million for the quarter.
The first Pie Five Pizza location opened in June 2011 in Fort Worth, Texas. With recent multi-unit agreements signed in Colorado and Kentucky, the number of company-owned restaurants is on track to reach 100 over the next five years. The explosive growth will come from franchising, as more than 300 restaurant openings in 16 states and DC are projected over the same period. Pizza Inn gets a nice upfront fee in addition to royalties, which is a beautiful way to expand growth while taking less risk.
The company only had a handful of Pie Five units over the past few quarters, but that number will substantially grow over the next three to five years. The company is also shedding some of its older models and the underperforming Pizza Inn stores to improve its operations. I wouldn’t be surprised to see a change from the iconic name brand Pizza Inn to “Pie Five” or “Pie Five Pizza” at some point in 2015.
How Does PZZI Do it?
The fast-casual pizza market is growing like a weed, and current projections for openings of fast-casual pizza joints over the next five years are as high as 2,000. Pie Five could be the leader in this revolutionary change, as it has a significant leg-up on its competition.
The company also has a top-notch management team, with CEO Randy Gier leading the way. He previously held positions as the chief marketing officer at Yum! Brands, Inc. (YUM) overlooking their Pizza Hut and KFC divisions. He also worked for Dr Pepper/Snapple Group Inc (DPS) and Borden Dairy Company.
Mr. Gier is a hands-on manager, but not in a bad way. He has built a great track record over the years and has implemented slick operating procedures that have helped lead the company to success.
He is able to monitor the company’s point of sales (POS) system to track revenues and inventory from each store from his mobile device. He can also see which employees are working and when. This is a pretty slick way for the captain of a ship to run and manage the crew.