Whirly lollipop on orange background.

Zoe’s Kitchen (ZOES) priced at the high end of the range at $15/share and immediately jumped up to $25 when it opened for trading. Their “fast casual Mediterranean concept” actually sounds pretty tasty. Their strategy fits into increasing demand for more healthy and flavorful menu options, especially when on the go.Screenshot 2014-04-18 11.00.15

We added the full IPO roadshow transcript to our archive along with the IPO roadshow slides because we expect this story and stock to have legs. They current market capitalization of just over $500M is about 5x sales but still seems fairly reasonable for a high growth company with solid and expanding margins.

A few excerpts from the transcript help to illustrate their positioning and potential:

  • Historically we’ve run Zoës on a hub-and-spoke system. We’ve gone from two core markets — Birmingham and Dallas — and worked our way out. I think that’s important, because what I want you to know is we’re going to be methodical on how we grow this company. We only have about 2,750 [square feet] for an average square footage. Even more important is we bring 2,500 affluent, educated individuals to their center each week — a very desirable customer base. We know exactly where we can put 1,600 Zoës locations in the U.S. going forward.
  • Our AUVs continue to grow from $1.1 million in 2009 to again just short of $1.5 million in 2013. What’s also unique is compared to our fast casuals, you can see the two leaders in the industry of fast casual — Panera and Chipotle — and where we rank against them. And then to the farthest right, you’ll see the two yellow bars, where Panera and Chipotle started when they were [a] similar size to us and how we believe, as we continue our footprint, we have lots of room to grow and lots of room to continue growing our AUVs.
  • We cook [in] the Mediterranean tradition of grilling and baking. This was a photo that we took for our Live Mediterranean campaign and you’ll see [in the shots all] the great vibrant colors, all the fresh produce and proteins. At the top [far right] here, the kabobs [are] fresh chicken. Never frozen. We cut it in our restaurants. We hand wash the produce. We assemble the kabobs. We make those to order and cook those to order when you walk in our restaurants. This dish also comes with two sides. My favorite is Greek salad and a side of rosemary white beans. It’s also served on a real plate with real silverware for an incredible value of $8.99. No tipping. Just $8.99.
  • We have 111 restaurants in 15 states in 36 DMAs from our beginnings in Birmingham, Alabama — where we have restaurants that do now north of $2 million and still continue to grow year-over-year — to new stores like Alexandria, Virginia; Bryn Mawr, PA and Marlton, New Jersey. Something that’s [also] unique is 20 of our top 20 restaurants are in seven different states in all the states that we’re in. Last year we added 27 restaurants and we’re on track to do 28 to 30 in 2014.

This is an attractive concept, probably closer to a Panera than a Chipotle. There is much more competition at the local level than what is covered in the roadshow presentation. For example a small chain called Sweetgreen is growing like a weed in Boston (sorry!) with lines out the door and snaking down the street a routine sight. Of course it also illustrates that the demand for healthy food that tastes good and is quick (if you ignore the line) is high.

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