A Westwood private equity fund is betting on the high-calorie, high-carb cinnamon bun so much so that it has acquired 86 Cinnabon outlets in 22 states, including 14 in Los Angeles County.
In purchasing the company-owned stores for $2 million, St. Cloud Capital LLC, in partnership with Orange County investor David Kim, has formed CinnaWorkS LLC. Most of the stores are located in shopping malls throughout California, the Southeast, Northeast and in Michigan.
“Cinnabon was definitely an orphaned child,” said Cary Fitchey, senior managing director of St. Cloud Capital. “It had not been given the proper funding or proper management. It was definitely in need of fixing.”
About 70 percent of Cinnabon bakeries were losing money and a small portion were carrying the company, said Adrien Poirier, chief financial officer for CinnaWorkS.
CinnaWorkS plans to expand the franchise by opening between 20 and 30 stores in 2005. In some cases, CinnaWorkS is trying to sweeten the deal with mall operators by negotiating leases for both Cinnabon and candy store chain Sweet Factory, which Kim also owns.
While Krispy Kreme Doughnuts continues to struggle, St. Cloud officials say there is a key difference between the two companies. “You have to drive to a Krispy Kreme store,” said Marshall Geller, senior managing director of St. Cloud. “This is more of an impulse product.”
Besides, there are strong signs that the low-carb craze is on the wane a good thing for CinnaWorkS because Cinnabon is nearly all-carb. The classic roll, the chain’s most popular item, has 813 calories, 32 grams of fat, 117 grams of carbs and 55 grams of sugar per serving.
“The trend is obviously swinging back,” said Fitchey. “People are still buying on impulse and they don’t want to skimp. You either want the full monty or you don’t.”
St. Cloud and Kim had attempted to purchase the Cinnabon company and brand at auction from Atlanta-based AFC Enterprises Inc., which operates Popeyes Chicken & Biscuits. However, private equity firm Roark Capital Group in Atlanta bought the 800-store business last November and then sold the corporate-owned stores to CinnaWorkS.
Hotel Deals
The rebound in the hospitality industry is not limited to the high-end boutiques and trophy properties.
Los Angeles investor Mark Beccaria has purchased the Best Western Gateway Hotel Santa Monica from MOA Hospitality Group of Des Plaines, Ill. Terms were not disclosed.
The 123-room hotel, at Santa Monica Boulevard and 17th Street, features an IHOP restaurant, 2,000 square feet of meeting space and a fitness center and is expected to undergo a $2 million renovation to its restaurant and guest rooms. It will remain under the Best Western flag.
Atlas Hospitality Group in Costa Mesa represented both sides.
“We’ve owned it for a number of years and this was a good time to sell it,” said Kurt Mueller, president of MOA Hospitality. Mueller said the company, which owns 50 hotels, built and opened the Best Western Gateway in 1991.
Separately, the former Valley Radisson on Ventura Boulevard has reopened as the Courtyard by Marriott Los Angeles/San Fernando Valley.
An $11 million renovation of the 196-room, 17-suite hotel was wrapped up last month, based on designs by the Santa Monica office of Gensler.
“It was desperately in need of renovation,” said General Manager David Cornish. “It had not been done in quite some time and it was necessary to bring it up to today’s hotel standards. Our customers are looking for a high-end boutique-style hotel in the valley with a brand affiliation such as Marriott.”
Beverly Hills Results
A survey commissioned by the Beverly Hills Chamber of Commerce found that 70 percent of retailers in the city posted fourth quarter revenues equal to or better than the like year-earlier period. Of those, nearly half reported sales increases of 5 percent to 15 percent.
Sales were bolstered by a surge in holiday spending at the start of the season and by high demand for apparel, which resulted in two-thirds of the retailers reporting day-after Thanksgiving sales as the strongest in recent years.
Apparel retailers fared better than those in other categories, with 81 percent of those surveyed reporting better sales than the year earlier. High-demand items included leather jackets, fleece outerwear, velvet pants and rainwear.
Jewelry didn’t fare as well. Sixty-one percent of Beverly Hills jewelers surveyed said fourth quarter sales fell short of original estimates by an average of 7 percent to 10 percent.
Staff reporter Rebecca Flass can be reached at (323) 549-5225, ext. 230, or at
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