Capriotti’s acquires 3 franchising veterans as investors

A trio of investors hopes Capriotti’s Sandwich Shop’s size can one day match its reputation.

David Barr, a Yum! Brands Inc. franchisee and board member at Del Frisco’s Restaurant Group Inc., along with JD and Shelly Sun, founders of the home health agency BrightStar Care, have invested in 103-unit Capriotti’s.

Barr and JD Sun have taken positions on Capriotti’s board. Ashley Morris, Capriotti’s CEO, said the three franchising experts can help further the chain’s nationwide expansion.

“We set out to become a national sandwich franchise company,” Morris said in an interview. “Not only did we need growth capital. We needed strategic advice. We now have two great, new board members and substantial capital. We can focus our energy into growing the brand across the country.”

Capriotti’s is a unique company in a highly competitive business. The chain was founded in Wilmington, Del., in 1976, but is currently headquartered in Las Vegas. Morris fell in love with the concept as a college student before he and business partner Jason Smylie became franchisees.

The two acquired Capriotti’s in 2008. While Morris raved about the chain’s sandwiches — it is known for The Bobbie, which has turkey, cranberry sauce, stuffing and mayonnaise — he said its infrastructure at the time was lacking.

“It had an incredible name and an incredible recipe book from its 32-year history,” Morris said. “It had zero infrastructure. Franchise agreements were signed on the founder’s living room table. Training involved, ‘Here’s a hat and an apron, come work in one of the restaurants.’ They gathered no data. Cash register systems were not united or online.”

Morris said the company spent most of its time for five years building the infrastructure rather than grow the 41-unit company.

Capriotti’s had those recipes, however. The chain has won dozens and dozens of local awards over the years for the quality of its sandwiches, and a few national ones. In 2009, AOL.com named The Bobbie America’s greatest sandwich.

“We felt we had a regional diamond that just needs to be polished,” Morris said. “So when we bought the chain we raised several million dollars more to invest in infrastructure.”

After five years, the chain worked to ramp up growth, but Morris said the company also needed investors to help in that stage of development. He said it took him more than three years to find the right investors.

“We did not just want to go out to private equity and get money,” Morris said. “We wanted to find somebody who could be a strategic partner, who could sit on the board, add value, bring contacts and connection.”

It wasn’t easy. “I thought it would be easier,” Morris said. “For the first two years, we met with a lot of investment banks, private equity and individual people, but never found the right person.”

The company found the investor in Barr, whom Capriotti’s had once hoped would become a franchisee. Barr’s PMTD Restaurants operate 23 KFC and Taco Bell restaurants. He is also on the boards of other companies, including BrightStar, The Spice & Tea Exchange and The Bistro Group, a large TGI Fridays franchisee. He has also been on the boards of other companies over the years, and was the CEO of Great American Cookies from 1994 through 1998.

JD and Shelly Sun, meanwhile, founded home health care company BrightStar in 2002, and have since grown the company through franchising to more than 250 locations. Shelly Sun is particularly active with the International Franchise Association, where she will be chairwoman in 2017-2018.

The three should provide Capriotti’s with plenty of advice in the franchising business. Franchisees operate most of the chain’s locations, and the company plans to grow that way in the coming years. The company is targeting the Southwest, Mid-Atlantic and Midwest.

“We’ll have a higher emphasis on franchise development and sales,” Morris said. “We’ll be franchising throughout the country.”

The company has dual strongholds, in Nevada and the Mid-Atlantic. While operating a small concept with units spread so far apart can be challenging, Morris said that it’s less of a concern because the company has its distribution figured out. And, he said, it is also an advantage.

“It eliminates most of the challenge to growing a brand across the country,” Morris said. “We already had concentration on one coast and on another. We bought into the brand with an already proven model on both coasts.

“That’s an important thing. A lot of products will work in some areas but not in others. The founder figured out that the food translates from the East Coast to the West Coast.”