business review · 2.07.2019 · undercover auditors aged 21-25 visit 1 -2x per month evaluate...

BUSINESS REVIEW

Annual Shareholder Meeting

July 2, 2019

PRESENTATION OVERVIEW

Brief Overview of the Company’s Revenue Growth Strategy

Developments in Non-Traditional Venues

Developments in Stand-Alone Venue

Overview of Industry Commodity Price Trends

2

A review of the company’s business strategy and summary of recent and future planned developments.

TWO REVENUE GROWTH VENUES

3

Non-Traditional Noble Roman’s Franchising &

Licensing

Craft Pizza & Pub Unit Development

4

Non-Traditional Franchising & Licensing

NON-TRADITIONAL UNITS DEFINED

5

Non-Restaurant

Host Facility

• Revenue Center• Facility Draw

• Employee Benefit

Host Facility Owner Usually the Franchisee

Flexible Menu to Fit the Context

NON-TRADITIONAL VENUE

6

Targeted Growth Sources• Convenience Stores• Entertainment Facilities• (Retail Outlets)• (Bowling Centers)• (Hospitals)• (Military Bases)

REVENUE GENERATION

7

• Percentage of Sales• Paid weekly by ACH• Majority of Units Work this Way

Royalty

• Added to Price of Ingredients• Collected as NRI Trust Funds by Distributors• Remitted to NRI Monthly• Franchisee Opts for this Arrangement Based on Structure• NRI Opts for this Arrangement if Previous Non-Compliance

Fee in Lieu of Royalty

C-STORE VENUE FACTS

8Sources: www.convenience.org, NACS Daily & National Association of Convenience Store Operators

Total Number of C-Stores in US is 153,237

Single Store Operators Own 95,445 C-Stores – 62%

In-Store Sales Generated $11 Billion in Profit on $654.3 Billion in Revenue

Foodservice Accounted for 22.6% of In-Store Sales

FOODSERVICE SEEN AS KEY

9

Top Quartile Operators Had 10x the Average Store Operating Profit vs the Bottom Quartile

Top Quartile Operators Increased Foodservice Sales by 12.3% vs Bottom Quartile Decrease of .8%

Top Quartile Operators Average $75,245 in Foodservice Sales vs Bottom Quartile Average of $12,850

Sources: NACS State of the Industry Report 2018; CSP Daily News at cspdailynews.com.

2018 C-Store Industry Comparison: Top Quartile vs Bottom Quartile

REFRESHED CONVENIENCE STORE LOOK

LED Digital Monitor Menu Board System

Warmer Mounted Promo TV Display

Custom Counter Graphics

Up-Front Ordering for Custom Pizzas

Up-Front Production Area

Units Opened in 2019 are Averaging 60%+ Higher Sales than Unit Average from Previous Years

10Data as of 5/31/19

C-STORE PROGRAM INVESTMENT

Complete Program: $28,975

Investment Includes:

All Equipment

All Restaurant Smallwares

Complete LED Signage Package

Point of Sale Advertising Materials

Start-Up Marketing Program

Franchise Fee

11

Based on estimated equipment and other costs as of 6/21/19; does not include such items as internal remodeling, counter costs or shipping, etc.

NEW CONVENIENCE STORE UNITS

12

Tallahassee, FL


13

Belvidere, IL


14Rockford, IL


15

Pendleton, IN


16

Luna Pier, MI


17

Red Mesa, AZ


18

Red Mesa, AZ(Navajo Nation)

Highest Opening Volume for a Convenience Store Location!

Previous Generation Kiosk Design

AZ

CO

NM

UT

GRAND OPENING PROMOTION

19

Grand Opening Postcard - Front

(Rockford, IL)

Grand Opening Postcard - Back(Wewahitchka, FL)

“100 FREE PIZZAS” GIVEAWAY

PIZZA PROMO NIGHT

20Howe, IN

COMPLETED R&D PRODUCTS

Chicken Bacon Ranch Line Biscuit & Croissant Breakfast

Sandwiches Baked Sub Sandwich Specialty Pizza

21

UPCOMING PRODUCT DEVELOPMENT

Breakfast Enhancements Chicken Breast Biscuit

Sandwiches French Toast Sticks Double Decker Biscuit

Sandwiches

22

SELLING NON-TRADITIONAL FRANCHISES

23

National & Regional Trade Shows

Cold Calling

Generalized Web, Email and Direct Mail Solicitation

Referrals & By Reputation and History

Specialized Direct Mail

SPECIALIZED DIRECT MAIL

24

Clickback Email Services

Targeted Email from a Variety of List Sources

Actively Curated for Cleanliness and Deliverability

Service Manages Mailing Releases and Opt-outs

Click-Thrus Go to Noble Roman’s Landing Page

Click-Thrus Traced by Contact Name for Sales follow-Up

CURRENT MULTI-UNIT EXPANSION

25

• Opened 6 so far• Anticipating 1-2 more

Kelley Williamson Corporation

• 2 opened so far in 2019• 3-4 more anticipated yet this year• First unit set sales record

Red Mesa Trading

• 3 opened so far• 4 more anticipated

I-55 Development LLC

PRIMARY SELLING ATTRIBUTES

Product Quality – Taste

Simplicity – Fully Prepared Crust

Low Investment Cost

Branded Offering

Unique advantage as a restaurant pizzeria inside a convenience store rather than a convenience store merely offering pizza Creates a draw Increased customer traffic Increases other sales simultaneously

26

MISSION, VISION & ATTITUDE

Creating WOW! Creating

Exceeding Customer Expectations in Product, Features and ServiceExceeding

28

WOW! BY SERVICE

29

Putting on the WOW! Attitude

• Management Focus• Hiring Standards• Training Process• Positive Reinforcement

1Giving Employees the Power to Satisfy Guests

• Anticipating and Fulfilling Needs

• Over-Solving Problems

2Creating a Spirit of Teamwork

•Friendly Competition

•Fun Work Environment

•People Believe in the Concept and Work Together for Success

3

WOW! BY DESIGN

30

Hanging Pizza Paddle Menus

Glass-Enclosed, Temp-

Controlled Dough Room

Open Kitchen Super Fast Pizza Baking Times

Interior Design Beer & Wine Selections

Outstanding Food Quality

Wide Variety of Menu & Topping

Choices

Diet-Restricted Menu Options

Dust & Drizzle Station for

Customizing

Craft Root Beer Self-Service Tap

MENU PADDLES

Individual Pizza Peel Menus

Screen Printed on Pine

Hanging on S-Hooks from Metal Rods Throughout the Entry

Customer Returns at Cashier

31

DOUGH ROOM

Glass Enclosed

Focal Point Upon Entry

Climate Controlled

Computer Controlled Water Temperatures

Dough Masters Intensive Training

Process Apprenticeship Quarterly Practical

Exam Tenure Requirements Special Lab Coats

32

OPEN KITCHEN

Pizza Preparation in Full View of Guests Along Aisleway

Oven Operation in Full View

Fresh Salad Station in Full View of Guests Along Aisleway

All Other Food Prep in Full View of Guests

33

CRAFT ROOT BEER SELF-SERVE TAP

Featuring SprecherCraft Barrel Root Beer from Milwaukee

Favorite with Kids

(Adult Favorite, too!)

CPP is the Highest Volume User in the State

34

BEER & WINE BAR

16 Beers on Tap

16 Beers by the Bottle

8 White Wines by the Glass or Bottle

8 Red Wines by the Glass or Bottle

1 Sparkling White Wine

House Sangria Coolers

Beer & Wine Flights

Specialty Drinks Using Beer & WIne

35

DUST & DRIZZLE STATION

Cheeses

Peppers & Salts

Infused Olive Oils

Spices

Vinegar & Oils

Hot Sauces

36

MODERN, RELAXING & NOSTALGIC DINING ROOM

Approximately 4,200 Square Feet

Dining Room Seats Approximately 155

Bar Seating for Approximately 15

Booth Seating

Solid Maple Block Table

Modular Table Seating

Open Ceilings

Wall Murals

13-16 Large Screen TVs

37

CPP -VS- FAST CASUAL

38

Craft Pizza & Pub Typical Fast Casual Pizza Concept

Broader Menu Limited Menu

Personal, Medium & Large Pizzas Individual Pizzas Only

Extensive Beer & Wine with Bar None or Limited

Refined & Relaxing Dining Room Fast Food Ambiance

Modern Interior with Entertainment No Special Appeal

Family Friendly Not Appealing to Kids

Increased Dining Service Self-Serve Only

More Flavorful Yeast Doughs Low Yeast, Low Flavor

True Deep Dish Crust None or Par Baked

CPP -VS- FAST CASUAL

39

CPP Menu Makes Dinner Timeframe Highly

Productive

CPP Interior Design Features More Inviting

CPP Beer & Wine Bar Offering is a Draw

CPP Product Quality and Topping Quantity

Induces Repeat Visits

CPP Broader Menu Attracts More and

Increases Frequency

BENEFITS OF LARGER PIZZA SIZES

40

Fast Casuals Tend to Focus Only on Individual Pizzas

Larger Pizzas Fit Customer Experience with Food Category

Pizza for Dinner Traditionally a Social, “Family Style” Shared Event

Availability of Larger Sizes Significantly Enhance Dinner Segment

CPP OVEN TECHNOLOGY –KEY ADVANTAGE OVER FAST CASUAL

Conveyor Ovens vs Fixed Shelf Units Much Higher Throughput More Intensive Baking Greater Customization No Recovery Time No Training or Staffing Cook Large Pizzas as Well/Fast as Individual Pizzas

CPP Utilizes Unique Customization

CPP Pairs Oven Customization with Dough Recipes

41

CRAFT PIZZA & PUB SERVES QUICKLY!

OVEN BELT SPEED TIMES

Traditional Pizza = 2 min 45 sec

Sicilian Pizza = 5 min 50 sec

Breadsticks = 2 min 45 sec

42Oven speeds vary slightly by location.

MARKETING

43

Postcard Mailings

Marriage Mail Inserts

Social Media

Email Club

Special events

Catering

Fund Raisers

Local Store Marketing

10” X 6” POSTCARDS

44

11” X 12”MARRIAGE

MAIL

45

SOCIAL MEDIA

Social Media Management Integral Part of our Guest Relations and Sales Development Efforts Partner with Social Media Management Company Daily In-House Corporate Supervision Fast, Personalized Responses to Guest Praises, Questions and

Problems Conceptually Driven by the WOW! Attitude Principle

46

Social MediaManagement Company

FACEBOOK

Facebook Remains Primary Interactive Social Media Tool

10,361 Followers as of June 15, 2019 Approximately double from 2018

Used to Promote Special Events

Used to Promote New Products and Services

Used to Create Fun and Excitement

Used to Capture and Manage Guest Feedback

47

OTHER SOCIAL MEDIA CHANNELS

48

TWITTER INSTAGRAM SNAPCHAT

FACEBOOK “COLTS TIX” DRAWING

49

WINNERS RESPOND AND POST

50

WINNERS POSTING PHOTOS

51

SOCIAL MEDIA AWARDS

53

SNAPCHAT

Photo-Based Social Media

Craft Pizza & Pub has Geo-Coded Art

Art Seen In-Store 124,740 Times

4,665 Pictures Sent with CPP Art

Pictures with CPP Art Viewed by 67,087 People

54

SOCIAL MEDIA & GUEST RELATIONS

55

100% Social Media Interactive Rate

Many Guest Suggestions Have Been Implemented

Issues Responded to Quickly, Personally and to

Generate WOW!WOW! Means Solving Problems in a

Way that Exceeds Customer Expectations

Addressed Through a Combination of Director of Operations, Director of

Corporate Communications and President

Almost Always Followed-Up on within 24 Hours

EMAIL CLUB STATISTICS

56

9,130 Total Membership as of

6/15/19

Used for Weekly Promotions and Product & Event Announcements

25.0% Open Rate vs 14.6% Industry

Average

Only 324 Unsubscribes thru

6/15/19

BEER & WINE COMPLIANCE

Contract with ‘The BARS Program’

Undercover Auditors Aged 21-25 Visit 1-2x per Month

Evaluate Proper ID & Serving Procedures

Record Date & Time of Visit and Server’s Name

Deliver a “Green” Pass Card or a “Red” Fail Card

BARS Reporting Sent Electronically to NRI

Zero Tolerance Policy!

57

BEER & WINE COMPLIANCE

58

130 6

GREEN CARDS vs RED CARDSFrom program initiation on 1/31/17 through 6/26/19.

CARRY-OUT SALES

59

25.6% of Total Net Sales

Targeted Area for Service

Enhancement

Pizza Valet Service

Traditional Dough Weight

Increase

Traditional Pizza Box Volume

Decrease

PIZZA VALET® SERVICE

60

Enhanced Curbside Carry-Out Service

“Valet” Because it Implies Fast, Personal Service

Provided Daily from 4:30 pm to 8:00 pm

Customer Orders by Phone or Online

Pay Before or After Arrival

Temporary Designated Spots Near Entrance

Valet Delivers Food to the Car

PIZZA VALET® SERVICE

Roll-Out Completed January 23, 2019

90.0% of Carry-Out Customers Have Converted

Increases Service Satisfaction and Relieves Interior Congestion at the Counter

61

CARRY-OUT PRODUCT - TEMP

62

Increase Traditional Dough Weight 30%

Decrease Traditional Pizza Box Volume

12.6%

Combined Changes Increase Internal Pizza

Temperature 8-12 Degrees after 20

Minutes

Due to Greater Heat Mass Having to Warm

Less Air in The Box

CARRY-OUT PRODUCT - DOUGH

3 R&D Challenges

1. Alter Traditional Dough Recipe to Stay Softer Longer2. Eliminate Bromated Flour 3. Maintain Exact Flavor Profile

63

TRADITIONAL DOUGH RECIPE

Switching to King Arthur Brand “Sir Lancelot” Flour

Highest Quality High Protein Flour

Unbleached and Unbromated

Required Significant Formulation Change

Maintains Exact Flavor Profile

Traditional Dough Resists Hardening Over Time

Side Benefit of Faster and Easier to Make Pizza

Side Benefit of Increased Strength of Sicilian Pizza

Roll-Out is 50% Complete

64

LUNCH SEGMENT

65

Currently 21.8% of Total Sales

$20.19 Average Check vs $23.68 Dinner Average Check

Indicates Substantial Opportunity for Sales Growth

LUNCH ENHANCEMENTS

66

Focus on Speed (6

minutes or less)

Expanded Food

Variety

New Combo Meals

Morning Flyering of Businesses

“CHICKEN SALAD ON A SALAD”

67

BAKED SANDWICHES7 NEW OR RECREATED SANDWICHES

68

NEW SIDE ITEMS

69

Cole Slaw Cottage Cheese Pasta Salad

Fruit Cup Chicken Salad

LUNCH COMBO MEALS

70

ROTATING SPECIALTY

PIZZAS

71

“She’s No Sour Grape” PizzaRosemary Infused Olive Oil, Mozzarella

& Muenster Cheese, Italian Sausage, Sliced Red Grapes and Gorgonzola

Cheese with a Honey Drizzle

NEW PIZZA TOPPINGCRISPY CURL PEPPERONI

72

LIMITED TIME PROMOTIONS

73

SUMMER PROMOTIONRoot Beer Float

Featuring Sprecher’s Craft Root Beer and 2 Scoops of Vanilla Ice Cream

NEW DAILY FOOD & DRINK

SPECIALS

74

BAR BRANDING & DEVELOPMENT

75

Bar with Separate Branding Identity

New Afternoon and Late Night Bar-Only Food Specials

Six New “Specialty” Drinks Made with Beer & Wine

New Casual Bartender Uniform Shirt

3RD PARTY DELIVERY SERVICE

DoorDash Added in January 2019

GrubHub Added in July 2019

Together the 2 Largest in Indy Metro

Negotiated Reduced Fees

Do Not Accept Coupons

DoorDash at 7.6% of Sales in 2nd Quarter

No Plans for Additional Services

76

3RD PARTY DELIVERY PHILOSOPHY

77

Not Intended as Mass Delivery Strategy

Focused on Presence in 3rd Party Ecosphere Only

No Promotion of Service On-Site or in Marketing Materials

Segment is Skewed Towards Teens and Twenties

May Target Promote this Demographic

Currently Averages About 11% Higher Average Check

Achieve Profitable Additional Sales While Minimizing Margin Cannibalization

“CONTROLLING THE LAST MILE”

Main Issue with 3rd

Party Delivery Firms is Driver Reliability

CPP Uses Stickers on Every 3rd Party Order Differentiates CPP

Brand For Delivery Brand Links to a Survey to

Allow us Access to any Issues

78

ONLINE ORDERING

79

Online Ordering is Now Fully Functional

Not Heavily Promoted Yet Until New Website

and Menu Go Are Launched

Approximately July 10th

Even with No Promotion, Online Sales

Already Account for 2.3% of Sales

Online Ordering is Intended for Guests Who

Prefer Ordering on a Device Rather than by

Phone (or in Person)

Demographic Tends to Be Younger – Similar to

3rd Party Delivery

Substantially Higher Average Check: $31.92 Avg-to-Date – 41.6%

Higher than the General Average Check

FRANCHISE OPENING – LAFAYETTE, IN

Opened May 2, 2019

Franchisee is a Multi-Unit Dairy Queen Operator

Set a New Opening Week Sales Record – Over $55k

Signed for a 2nd Unit in West Lafayette, IN

West Lafayette Site Location in Process

80

EVANSVILLE FRANCHISE

Site Finalized & Construction Drawings Underway

81

Lloyd Expressway & South Red Bank RoadEvansville’s Prosperous West Side

2 Miles from University of Southern Indiana

POTENTIAL NEW COMPANY UNITS

Additional Corporate Units Add Credibility for Multi-Unit Franchise Prospects

Supervision Cost Would be Minimal

Multiple Market Areas Available

Sitework Completed in Brownsburg, IN

82

Commodity Review

83

EXTERNAL COMMODITY FACTORS

Sampling of Commodities Used by 5 CPP Units Annualized

84

Commodity Item Annualized for 5 Units

Pepperoni (beef & pork) 5,385,600 Units

Sausage 23,760 Lbs

Poultry 7,625 Lbs

Flour 253,575 Lbs

Cheese 111,150 Lbs

AGRICULTURAL COMMODITY PRICES

85

Last 12 Months Year-to-Date Last Month

Beef +7.7 % +11.0% -1.0%

Pork -5.0% +25.4% -15.1%

Chicken -21.1% 0.0% 0.0%

Wheat -3.3% -2.1% +3.6%

Source: www.indexmundi.com and www.imvesting.com/commodities

CHEESE MARKET PRICING

86

$1.30

$1.50

$1.70

$1.90

$2.10

2018 AVG 2019 YTD AVG 2019 CURRENT 52-Wk LOW 52-Wk HIGH 10 YR AVG

Current & Historical $ per # (cheddar)

$1.547

$1.670

$1.790

$1.354

$1.594

Source: www.cheesereporter.com on June 14, 2019

$1.790

IMPACT OF CHEESE PRICES

$1.75

$1.90

$2.05

$2.20

At 10 Yr Avg At $2.00/lb At $1.30/lb

Cost of 14" Pepperoni Pizza

$2.06

$2.23

$1.87

87CPP Venue Estimates Using Indianapolis-Based Distributed Costs as of June 21, 2019.

OIL PRICES

Last 12 Months Year to Date Last 30 Days

West Texas -25.8% +6.1% -14.6%

Brent Sea -18.4% +10.8% -11.3%

88Source: www.indexmundi.com on June 21, 2019; ; US Energy Information Administration.

Retail Gas Prices Move Approximately 2.5¢ Per $1 Move in Crude Oil Prices

CONVENIENCE STORE GAS MARGINS

Year Average Margin per

Gallon

Year Average Price per Gallon

2015 $.10 $2.46

2016 $.15 $2.06

2017 $.20 $2.23

2018 $.23 $2.85

2019 (current, June 28) $.23 $2.73

89

On average, it costs a retailer approximately $.12 to $.16 to sell a gallon of gas.Using the current gross margin of $.23, the typical retailer averages about $.09per gallon in profit. (Retailer costs include credit card fees, utilities, rent andequipment amortization.)

Sources: NACS Daily & National Association of Convenience Store Operators; AAA; US EIA Data; www.cspdailynews.com; Lundberg Survey.

SUMMARY

90

Refinements to Both Non-Traditional and Traditional Venues

• New Kiosk Design• Targeted New products• More Aggressive Sales Effort

Continued Non-Traditional Growth

• Numerous Refinements• Corporate Development• Franchising with Experienced Multi-Unit Operators

Staging Craft Pizza & Pub for Major Growth

END OF PRESENTATION

The statements contained in this presentation concerning the company's future revenues, profitability,financial resources, market demand and product development are forward-looking statements (as suchterm is defined in the Private Securities Litigation Reform Act of 1995) relating to the company that arebased on the beliefs of the management of the company, as well as assumptions and estimates made byand information currently available to the company's management. The company's actual results andability to implement business initiatives in the future may differ materially from those projected in theforward-looking statements due to risks and uncertainties that exist in the company’s operations andbusiness environment, including, but not limited to: staffing levels and availability, competitive factors,pricing pressures, non-renewal of franchise agreements, shifts in market demand, the success of newfranchise programs, including Noble Roman’s Craft Pizza & Pub venue, the company’s ability tosuccessfully operate an increased number of company-owned restaurants, general economic conditions,changes in purchases of or demand for the company's products, licenses or franchises, the success orfailure of individual franchisees and licensees, changes in prices or supplies of food ingredients andlabor, and dependence on continued involvement of current management. Should one or more of theserisks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actualresults may differ materially from those described herein as anticipated, believed, estimated, expectedor intended. The company undertakes no obligations to update the information in this presentation forsubsequent events.

91

business review · 2.07.2019 · undercover auditors aged 21-25 visit 1 -2x per month evaluate...

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