Los Angeles Business Journal

Eatery Hungers For New Funds

Hospitality: Slump has Giggles N’ Hugs frowning. By Alfred Lee Monday, October 8, 2012

A year ago, Giggles N’ Hugs Inc. was getting ready to take on Chuck E. Cheese’s and other kid-friendly competitors. Despite only one location, the Century City restaurant operator had ambitious plans to go public and expand into malls nationwide.

But the maneuver to go public was a flop. The thinly traded stock saw a brief spike but has since plunged 80 percent. And the company only raised a fraction of the capital it needed.

Now, Giggles N’ Hugs has been forced to delay its expansion and is searching for new funding. And with corporate and legal costs far far above normal for an operation with just one outlet, it’s losing more money than it can make selling flaxseed chicken nuggets and hosting birthday parties.

“If I had to do it all over again, I probably would not have done the public listing at such an early stage,” acknowledged owner Joey Parsi. “We’re all wrong every once in a while.”

It’s something of a reality check from the lofty hype that surrounded Giggles N’ Hugs and its Westfield Century City mall location last year. A kind of upscale Chuck E. Cheese’s with organic food instead of junk food and play areas instead of video games, the restaurant was a hit with celebrities and Westside parents who dropped their kids off while shopping.

The buzz led to television appearances and an article in Bloomberg Businessweek. The restaurant was courted by mall operators eager to attract affluent families, and it was offered discounts on rent and money for construction costs.

Parsi said his ambitions haven’t changed. Despite pushing back the timetable on expansion, he is still moving to open a location in Westfield Topanga, another mall owned by Century City mall operator Westfield Group. He also is in talks with General Growth Properties Inc. to open one in the Glendale Galleria mall and with Macerich Co. to open a location in Montecito. In addition, the company recently added high-profile board members and announced a partnership to branch out into merchandising.

But Jerry Prendergast, principal of Culver City restaurant consultancy Prendergast & Associates, said the business got ahead of itself, and that it’s still an unproven concept.

“These guys, they opened one place and are now going to the public market saying, ‘We want your money because we’re gonna open 10’ – but they haven’t proven that the first one worked,” he said. “You’ve got to walk before you run.”

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