SIOUX FALLS, S.D. & SHAKOPEE, Minn. -- In a deal worth nearly $30 million, branded food concept franchisor Hot Stuff Foods LLC has acquired ready-made food products company Lettieri's Inc.
The Lettieri's transaction solidifies Hot Stuff's leadership position within the on-the-go food category and establishes an even greater daypart dominance for our brand, said Des Hague, chairman, president and CEO of Hot Stuff Foods. The addition of Lettieri's significantly increases our market reach and presence within the c-store channel [image-nocss] by adding established menu items and broadening our distribution channels.
The addition of Lettieri's will extend Hot Stuff's reach to more than 40,000 additional locations that will now have access to the combined resources of both companies including more than 500 products and numerous food programs and formats.
Benefits to both Lettieri's and Hot Stuff customers will be immediate, the companies said. For the 40,000 retail outlets currently doing business with Lettieri's, and for new customers, it will mean a one-stop menu offering including pizza, gourmet sandwiches, cinnamon rolls and broader ethnic and bread products. For Hot Stuff franchisees and licensees, it will mean an expanded menu with established breakfast, lunch and roller grill solutions.
The deal provides us with one of the most comprehensive daypart-dominant product portfolios in the industry. We also gain an expanded reach in 40,000 new retail outlets and an established core of successful, dynamic distribution, said Hague.
The most exciting thing right out of the chute: there'll be a lot of products and customers we'll be able to bring Hot Stuff, and a lot of products from Hot Stuff and customers they'll be able to bring to us, Dornbach said. How we integrate over the next 100 days will be exciting. [Hague] has liked our products, but he's also liked our ability to work with customers. It will add initial volume out of the chute for us and make the Lettieri's plant and operation more efficient. We see integrating the Mac's pizza into our lineup, and also some of the sweet goods into our breakfast lineup. Their cinnamon roll, some of their sweet goods, a lot of their ethnic-type foods, we'll have the ability to sell within Lettieri's in our distributor network.
Hague said the time for the acquisition was right after a three-year period in which Hot Stuff doubled what he called its enterprise value. Hot Stuff offers a one-time fee of $3,999 for a 10-year, full-service Hot Stuff Foods On The Go or Smash Hits Deli franchise opportunity, with no royalty payments.
Over the last several years, we've been aggressive with building our brands, trying to make a turnkey operation even more turnkey, said Hague. We believe first and foremost a company has to be able to grow organically. Our obsession over the last three years has been getting the flagship brand, the products and the services, right. We [then] looked at companies that provided greater daypart dominancewe got to be more successful with lunch, breakfast, snacks and late, at different price points. The vision for the company is to provide flexible solutions for customers who want to engage in foodservice at the highest level. We want to provide solutions for the industry and not just the elite in the industry.
Three Lettieri's executives join the top ranks of Hot Stuff as vice presidents: Greg Dornbach will be head of the combined sales teams, while Gary Peterson will head operations and Dean Gerber will be controller. The new operation has two USDA manufacturing plants, with Lettieri's having opened a 60,000-sq.-ft. facility in 2004 that includes a research and development kitchen.
The management buyout acquisition is being funded by Hot Stuff management, Lettieri's management and Allied Capital Corp.
Meanwhile, Hot Stuff was recently recognized as one of America's top franchise systems. Franchise Times listed Hot Stuff Foods as No. 161 in its Top 200 ranking, which includes categories beyond foodservice.
And Hot Stuff's XXL Chinese Rollz Box and XXL Taquito Box won the top award for the Consumer Convenience-Food Packaging category in the QSR magazine-Foodservice & Packaging Institute 2006 Foodservice Packaging Awards competition.
Sioux Falls, S.D.-based Hot Stuff franchises or licenses its branded food concepts in approximately 1,600 locations throughout the United States, Canada, Europe and Asia. It manufactures and distributes a variety of branded food product solutions including Hot Stuff Food On the Go, SmashHits Deli, Summit Subs, Mac's Market, C-Street Bakery, StoneWilly Pizzahouse and Game Time Sports Grill.
Lettieri's, Shakopee, Minn., produces branded and private-label products, including breakfast sandwiches, enrobed hot dogs, stuffed baguettes, calzones, burgers and breadsticks, for convenience store customers. Products are shipped frozen and ready-made and require only microwave, oven cooking or radiant heat (roller grill) to serve.
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