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CINNABON PLANS TO ROLL OUT TO SMALLER CENTERS

By Howard Riell

Some say shoppers are ‘absolutely driven’ to buy Cinnabon’s treats.

Cinnabon Inc. is looking to spread the aroma.

The operator/franchisor of the nation’s premier cinnamon roll concept has become a mall mainstay, but it also is looking to expand into smaller shopping centers and other venues.

The 15-year-old chain, which is in the process of going public, prefers malls that are 1 million square feet or larger with at least four anchors and sales per square foot of $325. But more recently it has been broadening its location criteria.

“Certainly we have some malls that have three anchors,” said Holland Burton, Cinnabon’s director of real estate. “We may even have some that have only two anchors at this point in time due to the fact that certain anchor tenants have had some issues in the last year,” like J.C. Penney’s recent closure of some stores and Montgomery Ward’s shutdown.

But Cinnabon also has been going outside shopping centers altogether, opening in roadside rest areas, airports and even a hospital.

Corporate parent AFC Enterprises, which bought Cinnabon in 1998, is the second-largest operator of fast-food chicken restaurants, behind Tricon’s KFC. Atlanta-based AFC owns or franchises about 3,000 Church’s Chicken, Popeye’s Chicken & Biscuits, Cajun Kitchen and Cajun Cafe restaurants worldwide.

Other AFC properties include Seattle Coffee (whose Seattle’s Best Coffee and Torrefazione Italia subsidiaries operate a coffee roasting and wholesale business), 125 Seattle’s Best Coffee cafes and Torrefazione Italia cafes.

At press time there were 427 Cinnabons in the United States and nine other countries. In the United States it can be found in 42 states (none yet in Rhode Island, Vermont, Louisiana, Mississippi, Arkansas, North Dakota, Wyoming or Idaho). Of its 379 U.S. stores, roughly half are company owned, the rest are franchises, and some 243 are in malls.

The 33 franchise-owned units outside the United States are in Canada, Mexico, Saudi Arabia, the Philippines, United Kingdom, Venezuela, Japan, Thailand and Bahrain.

The chain opened 38 units in 2000, as of Sept. 30, after opening 46 during all of 1999. In October 1999, Cinnabon signed its largest franchise agreement ever with Manila-based Southwest Maritime Corp., calling for 70 bakeries in the Philippines. Cinnabon also signed an agreement with Sugakico Systems to build 60 units in central Japan.

At press time, the company was in the midst of a court-imposed quiet period beginning after Sept. 30, 2000, due to its S-1 filing with the Securities and Exchange Commission (SEC) as it seeks to become a public company. Its most recent reported results were as of Sept. 30, 2000. The company is not allowed to discuss anything related to finances beyond the Sept. 30 date.

Cinnabon has no direct, national competitor, but there are scattered regional chains around the country that also sell cinnamon roll products.

Dominating the market
“We mostly compete in the snack category,” said Mallard Holiday, the company’s communications director. “There’s not really a cinnamon roll company that has our size and dominance in the market.”

According to the company, Cinnabon notched $150 million in sales in 1999, the last full year for which results are available. Same-store sales increased 2.6% in 1999, and 3.5% through Sept. 30, 2000.

Simply put, the concept works.

Cinnabon is a “very sensuous concept,” said Arlene Spiegel, a consultant on hospitality, food and beverages for PricewaterhouseCoopers in New York City. “It really appeals to all of the senses, especially from a visual standpoint, because you actually watch the process, which reinforces the freshness.”

Shoppers, she said, find themselves “absolutely driven” to Cinnabon by the aromas it generates throughout the food court and beyond. “I love the concept because it also is affordable, and is coupled with great gourmet hot coffees and beverages.”

Consumers around the world apparently agree. When, in the winter of 2000, Cinnabon opened its second bakery in Japan, the line on opening day was reportedly 100 deep, and guests waited up to two hours for a cinnamon roll.

The concept, originally designed for malls, is clearly impulse driven.

“The mall is typically an area that people come to for numerous purchases, and we can be part of that experience,” said Burton.

The original Cinnabon design featured lots of blue-and-white tile with blue awnings, which Burton said was “a little more direct in terms of brightness.” A newer “Heritage Design” concept offers a warmer contemporary ambience, with maple panels and wall coverings bearing a cinnamon swirl pattern.

Cinnabon’s new ‘Heritage Design’ features a warmer contemporary ambience than its original design, which featured lots of blue-and-white tile.

Units range in size from 300 to 400 square feet up to 1,300 or 1,400 square feet. The Heritage design prototype, introduced in late 1999, is 850 square feet.

The chain has 5,000 employees company-wide, plus an additional 5,000 during the months of November and December to handle the holiday traffic. Depending upon the time of year, anything from six to 16 employees staff each unit.

Inside a mall, the highest traffic locations are preferred. Typically, Burton said, that means the center court area on the ground floor.

“There are some exceptions depending on the parking situation and things of that nature,” she said. “If the ground floor is more like a basement, then I might prefer to be on an upper level.”

The chain had a number of marketing programs that were executed quite successfully in 2000. One of the best was the introduction of Cinnabon Sticks, a highly portable product that frees customers “in a grab-and-go mood” from the need to sit while they eat, said Burton.

“Shoppers don’t just come to buy a pair of shoes but to have this overall experience, and in those malls food service will still play a prominent role,” she said.

But mall-based concepts like Cinnabon often face stiff challenges when they venture into different venues, she said.

The company plans to do more “proximity marketing” in the future, with advertisements inside the mall.

But Cinnabon store managers say they would like mall operators to do more to help their business, Burton added.

“They ask what the malls themselves are doing to drive traffic into the mall,” he said. “Certainly, we and a lot of other retailers pay into marketing funds and ad funds. I think in general there is a feeling that we’re not always sure where those dollars are going and how that’s benefiting our business.”

Holiday said he likes malls with imaginative marketing programs.

“We love malls that take innovative approaches to marketing and have event-based things throughout the year that drive traffic,” he said. Cinnabon management is “really looking for malls to come up with innovative programs that are going to keep people in the malls throughout the year, making them a real destination place for fun and shopping.”

 

 

 

 

 

 

 

 

 

 

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