Giggles N’ Hugs (GIGL) is a Fast Casual that Takes Food Safety Seriously

When it comes to fast casuals, Giggles N’ Hugs (OTCQB: GIGL) is the cream floating to the top. Its restaurants are located in the best locations in Los Angeles. There’s one at Westfield Mall in Century City on Santa Monica Boulevard; there’s another at Westfield Topanga Shopping Center in Woodland Hills, Canoga Park; and there’s a third at the Glendale Galleria. Its clientele reads like a list of who’s who. Victoria Beckham has been spotted at one restaurant with her 4-year-old daughter, Harper. Heidi Klum has dined at another with her 10-year-old, Henry. Halle Berry has taken Nahla, her 8-year-old daughter, with ex-boyfriend Gabriel Aubry to have fun at the third. And, according to the site BEYONCÉ TRIBE ITALIA ‘Beyoncé, Jay & Blue (were) spotted at Giggles N’ Hugs in LA’ (http://dtn.fm/oPQt1) last month.

This is not surprising. A fast casual restaurant like Giggles N’ Hugs has all of the upscale features associated with fine dining that would attract Hollywood royalty, except that its restaurants escape the formality of dressing up to go there. Also, Giggles N’ Hugs is unique in that its entire rationale revolves around allowing parents to dine while they enjoy the companionship of their kids without having the pressure of fussing over them. The design of the Giggles N’ Hugs restaurants is intended to create a fun, casual, family atmosphere where children can interact with parents and each other and where everyone enjoys freshly prepared, organic, nutritious and reasonably priced meals. Founder and present CEO, Joey Parsi, started the company in 2007 after he and his wife, Dorsa, realized there were no eating places that catered to the special needs of parents with young children. Consequently, the three family-friendly restaurants all have play areas for children 10 years and younger. The restaurants also feature daily live entertainment and shows.

Fast casuals are the fastest growing segment of the restaurant business. They embody a new concept that aims to combine elements of quick serve establishments, such as lower prices and faster service, with full-service restaurant features, such as quality service, better food and more sophisticated atmosphere and décor. The concept is thought to have been pioneered by Chipotle Mexican Grill (NYSE: CMG), which opened its first restaurant back in 1993. Now, Chipotle is a mammoth enterprise with close to 2,000 restaurants and, according to its latest 10-K filing for the year to December 31, 2015, $4.5 billion in revenues.

Compared to Chipotle, Giggles N’ Hugs is doing okay. For one, it hasn’t been, like Chipotle, plagued with food-safety disasters. Last year was a particularly trying year for Chipotle. It has had seven reported food-safety incidents over the past nine months. There was an outbreak of E. coli in July 2015, norovirus in August 2015, salmonella in August 2015, E. coli in October 2015, E. coli in November 2015, and norovirus in December 2015, as well as the more recent March 2016 norovirus outbreak. Joey Parsi is having none of that. He has said:

“We take food safety seriously, which is how we have maintained an “A” grade health inspection score since opening nine years ago. All food and equipment is inspected daily prior to opening, and continually throughout the shift, to ensure freshness and temperature levels are optimal.”

Giggles N’ Hugs also has better store averages than Chipotle, which has seen average restaurant sales rise from just over $400,000 at the end of 2007 to a high of $648,500 at the end of June 2015, as an analysis of its SEC filings reveals. That average has since declined, because of the food scares, to $496,300 at the end of 2015. In contrast, Giggles N’ Hugs’ average restaurant revenues are around $850,000, a level Chipotle has never reached. Essentially, Chipotle’s revenues are big, because their restaurant count is big. Giggles N’ Hugs’ last 10-Q filing shows revenues of $2,650,290 for the nine months ending September 27, 2015, which, annualized, translates into average restaurant revenues of close to $1.2M.

Giggles N’ Hugs is also planning expansion. According to the SmallCapNetwork (http://dtn.fm/6toAF), ‘the company aims to have 12 units up and running by the end of 2017.’ Recently, it engaged the investment bank Chardan Capital Markets and aims to raise $5 million through a 506(c) offering. Giggles N’ Hugs is in the enviable position of having an extensive choice of locations since it is such a magnet for mall foot traffic. The company is presently negotiating with the top four U.S. mall owners, who are ‘yearning’ to have Giggles N’ Hugs in their malls and are prepared to offer cash upfront to fund between 60 and 70 percent of opening costs. Looks like Giggles N’ Hugs could be the next Chipotle, without the bad food episodes.

Learn more by visiting www.gigglesnhugs.com

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