Pizza Inn Buffet (RAVE)
Smallest stock covered to date - a true "left for dead" micro cap - Right now, one of my favorite ideas - Massive potential, but plenty of wood to chop
Note: This update is about a company that is well below my usual market cap parameters - a true, “left for dead” micro cap. As such, I wanted to add additional context. First, this is not a time sensitive idea. If the bull case works, it will take place over a period of years. There is no reason for potentially interested investors to rush their own review process or trading decisions. Second, be aware of potential market volatility. Given liquidity constraints, the idea is better suited to individuals/small funds. I/we are RAVE shareholders. Please read the full disclaimer found on the website (bottom of page) and at the end of each article.
The next article will be out by 1pm ET tomorrow and will feature a misunderstood “GARP” small cap with a long growth runway and a discounted valuation.
My first article on Rave Restaurant Group (RAVE) can be found here. If you have not read it yet, I encourage you to do so before continuing.
Brief recap: RAVE is a 100% franchised chain of pizza restaurants with two concepts:
Pizza Inn, a pizza buffet style restaurant that focuses on rural markets in the Southeastern United States - the first franchise location opened in 1963
Pie Five Pizza Co. a fast casual concept - the first location opened in 2011
My analysis focuses exclusively on the Pizza Inn Buffet concept.
CEO Brandon Solano is a former marketing executive at Domino’s Pizza, where he helped to orchestrate Domino’s famous turn around, years ago (even appearing in one of their famously contrarian television ads). I detail the story in my original article.
Pizza Inn Buffet is the economic driver of the company and in my view will be the company’s future. My findings indicate that a well run Pizza Inn Buffet is a gem business with outstanding franchisee economics. The company’s go-forward strategy is to improve existing Pie Five locations as best they can while focusing on improving/growing the core Pizza Inn Buffet concept.
CEO Solano believes that the Pizza Inn Buffet brand has latent or untapped brand equity across the southwest, where the company used to have stores.
The CEO notes that Pizza Inn once had hundreds of buffets. Although it’s a long road ahead to recoup that footprint, Solano prefers to start in communities where the chain once had high-volume stores and a lot of space is available, like Asheboro. He believes Pizza Inn can grow 10x from where it’s at today without entering a new market. Solano says the company has “latent equity.” For example, when he’s traveling and wearing his Pizza Inn gear, people often stop him and ask when Pizza Inn is coming back. He also sees the desire across social media.
Whether it’s five years or 20 years, customers remember their Pizza Inn experience, Solano says. He recalls a recent reopening in Blytheville, Arkansas, a store that was temporarily closed for four months. The restaurant features some of the new brand elements, and is operated by a 23-year-old local steel mill worker who didn’t quit his day job. Sales are increasing, to the point that Solano had to park in a different lot just to make it inside for lunch on a Thursday. The CEO has seen similar results in reopenings in Waycross, Georgia, and Elizabethton, Tennessee.