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West meeting


OracleofCarolina
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Actually, I think I said in an earlier post that Robyn Mabe was on his left-hand side.  I believe that is actually Sardar's wife.  Only a husband and wife would match their tie and jacket!  ;D  Robyn is on the left-hand side closer to the end of the photograph.  Cheers!

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I will have notes up on Sunday night... for sure.

 

For the record, the west meeting was great- as always. I am convinced as ever that we are sitting on the next luk (at worst) or the next brk (at best)!

 

 

 

Thanks for taking notes during the meeting. Looking foward to reading them.

 

 

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I will have notes up on Sunday night... for sure.

 

For the record, the west meeting was great- as always. I am convinced as ever that we are sitting on the next luk (at worst) or the next brk (at best)!

 

 

 

Thanks for taking notes during the meeting. Looking foward to reading them.

 

 

 

Agreed.  Thanks to everybody on the board who takes the time to take notes at the AGM's.

 

 

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The meet was very nice and it was very telling that Sardar let all of us join him up on stage to ring the closing bell.  He is truly a very nice person. 

 

I told him we had a bunch of "corner of brk" board members there as well as WEST shareholders and he smiled and enjoyed the comment.

 

I have some notes, but just arrived home today and haven't had time to type them up.  I will post them soon and I'm sure with others comments we will have a good recap.

 

It was great meeting the other members of this board at the Nasdaq.

 

By the way I'm standing just over Sardar's left shoulder next to Keith in the Fairfax hat.

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Thanks David!  Looking forward to your notes.  You probably met Zach Kiefer, one of the very young fellows there.  Zach and his entire family are partners in our fund.  Great family!  He also has some notes which he'll share with us.  I believe Ragnar has some notes that he will put up on his board and link onto here as well.  So I think everyone will almost feel like we were there...except for all the fun you guys had for the photographs and the closing!  Cheers!

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thnx for the meeting notes, nfi. very well done.

 

there's alot worth highlighting, but to pick just a couple of nuggets:

 

<<Eliminated cap-ex at SNS to the extent we can. Maintenance cap-ex between $5-6 million (rough).>>

 

guess this answers wabuffo's doubts in response to an earlier post made by pof4520 re his recollection of capex going forward

 

<<SB: No longer spending 17 hours at SNS. Starting to spend time on reallocating capital because that will be important to the future value of the company.>>

 

this suggests they have moved sns comfortably beyond 'crisis' mode. and it means sardar can now take more time to smell the roses.

 

 

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Thanks David!  Looking forward to your notes.  You probably met Zach Kiefer, one of the very young fellows there.  Zach and his entire family are partners in our fund.  Great family!  He also has some notes which he'll share with us.  I believe Ragnar has some notes that he will put up on his board and link onto here as well.  So I think everyone will almost feel like we were there...except for all the fun you guys had for the photographs and the closing!  Cheers!

 

What a wonderful experience and special delight I was able to take part in. There is something enlightening about ringing the closing bell with other dedicated shareholders in the middle of times square with a company that has so much opportunity. I have a feeling such a small meeting for this company won't come again.

 

Here are my version of the notes. Feel free to redistribute/compile as deemed necessary :)

 

Timeline

-----

Summer 2005 - Purchased Western size stock

March 2006 - Control Western Holding Company

Summer 2007 - Purchased SNS...waged proxy fight

March 2008 - Won 2 board seats

Summer 2008 - Biglari CEO

Summer 2009 - SNS + West announce their intent to merge

 

Q: Big changes now that your the controllingshare holder?

S: The strength of the brand is powerful, 75 years and counting for SNS. "I just love the cash flows."

P: How many chains have been around for 50 years? Not many

 

Q: Franchisee operations in regards to partnerships, success and failure?

S: Selecting the right business partners is the key to success. As with anything, there was much skepticism towards change, but he is gunning for a long term repositioning of brand. With old system, increasing the average check was focused upon (over time this has decreased) and so was menu expansion, adding unnecessary complexity. This had huge expenditures. "We're working on converging towards one brand."

 

Part of problem - WEST difference of services. 2% level of royalty, getting alot back. Many things to consider in success, right partner, right contract, many things to worry about in the franchise business.

 

P: SNS can be equated easily to WEST, constant franchise battle to get on the same page of standardization.

 

Q: WEST active in a number of different things, whats the nature of the business going forward?

S: SNS is now a holding company. Can't speculate on the letter of intent or what we'll do with it or if it will occur. There are enormous cost ineffeciencies of two separate restaurant functions. WEST goal is to get it running independently, productivity is key in this assessment.

In SNS there were a lot of extraneous jobs such as a market success analyst, which was actually provided in their outsourced company! Sardar saw no value and eliminated many of these elements to the business.

Capital allocation will go with a value investing philosophy.

 

P: General sense, cannot talk about current deal.

 

Refranchising company stores?

S: Always a possibility, all depends upon the situation at hand. Definitely no massive refranchising project.

 

Q: What are the most important lessons you've taken away from this year?

S: This year reinforced some of his beliefs, with the basic idea that you need a strong balance sheet to weather storms, cash is king.

 

P: Though that they moved in such a timely matter in regards to the financial crisis, was stunned competitors were slow to address the changing market.

 

Q: Value of Real Estate?

S: SNS isn't in the real estate business. Overtime will increase our real estate position, as it  gives a good "floor under the value of the company." Sell lease back at 5%, double digit returns, creates value over time.

 

Franchise owning real estate?

S: Probably

 

Economy Effect Real Estate?

S: San Antonio wasn't as bad as some parts of the country. The more acreage the better, potential of higher purchase prices due to investment.

 

Q: Increase free cash flows - cap ex necessary?

S: Maintenance cap ex around 5 mil. "Rather be vaguely right than entirely wrong," when it comes to this number. Over last 10 years cap ex way too much, stock price reflected this. Goal is to increase FCF.

 

Q: How do you develop advantage over competitors?

S: We've done OK so far, brutality in business with all the factors of price/product/promotion. SNS sees 1/4 mil visitors per day, their experience dictates whether they come back or not. Operating cashflows are quite good in the industry. Commitment kills, pre-Biglari SNS was trying to meet goals no matter the cost, even if it didn't make any economical sense.

 

Q: Wood Grill joint venture?

S: Looking to expand...this is a long term strategy that has growth potential

P: Great concept...5mil/year sales, but takes an excellent operator

 

Q: Express venture?

S: Because the express venture was on the interstate and the miles driven in US has declined, did not do well (missed some reasoning on this) Far more potential in Wood Grill concept.

 

Q: Shareholder letter?

S: "We owe shareholders a letter every year" and at least one meeting like this

Q: New funds?

S: We've been raising some money (mentioned a board member doing this whose name I did not get)

 

Q: Merger question, you have three options, debt/cash/stock, wouldn't these shares be better at the company itself?

S: Stock can be good or bad (missed)

 

Q: SNS Brand history - Windsteaks(?) same type, more upscale, should SNS follow?

S: *We* have the best burgers in country, (laughter from audience) but I will consider what you said.

 

Q: How has your day to day operations from SNS changed?

S: No longer working 17 hour days, we have a strong leadership team, CEO position important towards capital allocation.  

 

Q: What sort of smallcaps can you speak of in the aquisition?

S: Landscape much better, environment good. There are a number of small companies we could acquire...poor uses of money in many small companies...if we could acquire them in whole we would consider opportunities.

P: Question shows the excitement we all have

 

Q: Cap ex still 5m?

I missed writing most of this, no numbers were given. Phil talked about how he enjoys looking at the individual numbers of % cap ex and % number of sales related to per store numbers, and market cap per store.

 

Q: Insurance companies, do you want to be in the business?

S: We will be in the business, hard to find good acquisition target

 

Q: Activist takeovers?

S: If we have a higher return because of inefficiences then we will go for it, no matter if we have to get hostile or not.

 

Q: Franchise Model, are you going to have single franchisee system or multiple?

S: No forced dichotomys, a single unit/multiple unit system depends on franchisee. One store or multiple stores, as long as their good they will continue to operate.

 

Q: US egocentricity, have you thought about opening in the international market?

S: Too many opportunities in US right now to be thinking outside US market

 

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Q: Wood Grill joint venture?

S: Looking to expand...this is a long term strategy that has growth potential

P: Great concept...5mil/year sales, but takes an excellent operator

 

Q: Express venture?

S: Because the express venture was on the interstate and the miles driven in US has declined, did not do well (missed some reasoning on this) Far more potential in Wood Grill concept.

 

many thx, zach. i was particularly curious why the wood grill buffet concept wasnt growing faster given the excellent results shown by 50-50 joint venture in harrison, va & the 2 newer CA ones. it would appear the concept is even more dependent on finding excellent operators than the other brands. must be due to the complexities involved with large buffets in general, & their typically large, varied menus?

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This has been my 3rd West meeting and each one gets better. Just a few quick bullet points on the meeting and the merger:

 

Free Cash Flow top priority

Must keep Capex under control

Sadar likes owning real estate under the restaurants--stabilizes balance sheet

Sadar's prime function is allocation of capital

Sadar said investment environment is excellent--many low valuations today

Sadar prefers control positions rather than passive

Unrelated investments is an important goal--no allegiance to any industry

Many investments opportunities in the US--overseas not necessary

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The notes posted so far have really done a nice job of catching a lot of the questions/answers during the meeting.  In general, Sardar's comments proved to me that he has spent a tremendous amount of time thinking about SNS and the restaurant business.  I have added a few bullet points below to highlight what I felt were interesting:

 

Company stores have done better than franchisees

--SNS has to regain the trust of the franchisees

--very hard work (culturally) for the company and franchisee to get along

 

SNS brand is stronger than Sardar expected

 

Investing capital going forward: Not committed to any one industry, will be in the insurance business at some point in the future (just not sure when)

 

Plans to be quite active in the near-term on the investment front

--environment for allocating capital is quite good

--once again not thematic on investments

--interested in unrelated business lines

--not committed to activism; when it allows them to get the highest return

--will not give up CEO post for capital allocation reasons

 

SNS maintenance capex will come in @ $5mm

--FCF will continue to be king

 

Strength of balance sheet is critical

 

SNS has been "sensational" so far, but "lots of work to do"

 

 

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To the board members who attended the WEST shareholder meeting/festivities:

 

Were there any questions regarding the huge increase in Sardar's compensation at SNS? I realize it was a WEST meeting, but after all WEST shareholders own a chuck of SNS stock and it is important question. Moreover, if the proposed merger goes thru' WEST shareholders will become SNS shareholders. I would love to know Sardar's answer to the question.

 

From all the meeting notes posted so far, Sardar "sounds" like he has shareholder interests at heart, but words are cheap and actions are what I judge a CEO by.

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Compensation was not discussed, we kind of

ran out of time as the meeting started at 2 and

we had to go downstairs for the nasdaq closing

at around 3:30

 

to add a little color to the meeting Sardar and Cooley stated a couple of

times that they could not talk about the

merger other than what was in the press

release, also Sardar mentioned that he had

nothing to do with the merger terms, the terms

were constructed by independent committees from

each company and Jonathan Dash seemed

to be part of this

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