EFTA01091908

EFTA01091908 F Rare Opportunity Mitchell Holdings LLC & Aurify Brands have signed a Letter of Intent to purchase one of New York's most sought after and iconic brands. Family-owned for generations, the company has worked with us for over two years to create a purchase scenario that will allow the brand to flourish. The brand is poised for significant value creation through development and licensing opportunities. I Few opportunities exist in the restaurant industry with similar brand equity and untapped growth potential. EFTA01091909 Carnegie Deli A History... ► 1937: Carnegie Deli opens across from Carnegie Hall at 854 7th Avenue. ► 1938-75: Known as a local eatery for midtown office & stage professionals. ► 1976: Purchased by Milton Parker and Leo Steiner. ► 1979: Modern day Carnegie craze sparked by famed NY Times critic Mimi Sheraton. ► 1980-2002: ► Parker's & Steiner's innovative efforts establish Carnegie as "the" NYC deli. ► Popularity flourishes, deli becomes a favorite of celebrities, dignitaries and tourists alike. ► 2002: Ownership transfers to Parker's daughter, Marian Levine, and her husband, Sandy. ► 2005: Termed "Most Famous Deli in the United States" by USA Today. ► 2010-2012: Continues to enjoy limelight, releasing "The Melo" and "The Jetbow" sandwiches to honor new NYC arrivals. ► Present day: Its iconic status solidified, Carnegie serves up to 15,000 lbs of corned beef and pastrami to customers each week. EFTA01091910 The Carnegie Brand We seek to utilize Carnegie's strong brand equity to expand and scale the business from a well-run "mom & pop" operation to a professionally- managed, global restaurant & food company. Key to the success of this expansion will be the ability to scale distinct, defining aspects of the Carnegie Deli brand, while maintaining its underlying integrity. A Distinguishing Brand Elements 1. NYC lineage and legacy 2. Signature Jewish deli food items 3. Interior decor: wood, photos, etc. 4. Brand ambassador as host in 5. Dining experience with waitstaff 6. The spectacle of the sandwich 7. Celebrity & notable sandwiches Unique to Carnegie EFTA01091911 Current Business Flagship Carnegie Restaurant ► Iconic NYC Location ► Long-term lease in place ► Experienced, dedicated staff ► Low estimated capex req'ts 2011 Revenue = $12.9MM 2011 EBITDA = $1.8MM Wholesale Food Products ► NJ Real Estate & Factory ► Excess production capacity ► Commissary for NYC, LV & PA ► Select existing distribution: MJ Comerford: Supermarkets United Pickle: Costco Thumann, Inc: Packaged proteins 2011 Revenue (Total) = $9.9MM 2011 EBITDA = $0.9MM viwirreto Licensed Restaurant Deals ► MGM Mirage (LV) ► Sands (PA) ► Madison Sq Garden ► US Open 2011 Revenue = $0.7MM 2011 EBITDA = $0.7MM Solid Existing Business, Exceptional Brand Equity & Myriad of Untapped Growth Opportunities EFTA01091912 Fetter of Intent The LOI with current Carnegie ownership includes: ► $27MM Purchase Price (Businesses) ► Purchase of NJ Manufacturing Facility and Real Estate, estimated at $2MM ► 3-Year Seller Note of $6MM ► 2-Year Employment Contract with Sandy Levine, the current owner/operator ► Purchase of all patents, trademarks and proprietary materials (e.g., recipes, etc.) ► Usage and/or reproduction of key assets (e.g., pictures, etc.) MAKE OUR MIN **TRIES. NEAT% PICKLES KOK DE t EFTA01091913 Growth Principles & Pillars Embrace the Brand Remain committed to the core principles of the Carnegie brand, built over the past 75 years Stay true to company culture, signature products and true differentiators of the Carnegie "experience" Immediate focus on nurturing NYC operations & customer experience - "The Flagship" Leverage Expertise from All Sides Research and digest vast knowledge base of existing ownership and management teams Integrate our seasoned central corporate team and infrastructure to enable intelligent scaling of operations Allocate combined pool of human capital efficiently and to areas of greatest impact Systematically Realize Potential ► Formalize the unique "DNA" of company and infuse it into growth scenarios ► Guide expansion plans with 15-year company vision ► Allocate capital to optimal "brand building" opportunities Guided by these principles, we intend to significantly expand the Carnegie business across four units... The 4 Pillars of Carnegie Growth 1. NYC Flagship Restaurant & Catering: Expand & systematize the existing business "behind the scenes" 2. Big Box Licensing: License mid- to full- scale Carnegie Deli restaurants in select markets through synergistic and strategic partnerships (e.g., hospitality groups, etc.) 3. Carnegie Express: Develop & operate and/ or franchise small-scale, fast casual Carnegie Deli boxes in select markets 4. Wholesale Product Lines: Develop and expand wholesale product partnerships with retailers EFTA01091914 New York City Flagship Restaurant Key Financials (2012 Pro-forma) ► $12.9MM Annual Net Sales ► 14.0% Operating Margin ► 10,000 Customers per Week Immediate Focus ► Accept credit cards ► Install networked POS system ► Migrate to payroll processing system ► Digitize and integrate inventory management ► Implement repair and maintenance procedures ► Cleaning and repair cosmetic needs ► Audit financials Growth Opportunities ► Exploit all day parts (breakfast, etc.) ► Focus on corporate sales & catering initiatives; develop catering menu; create house accounts ► Expand delivery radius & improve delivery operations ► Grow hotel & concierge outreach ► Build nostalgic event schedule Strategic Considerations ► Union labor & contracts ► Consistency of customer experience through transition EFTA01091915 Big Box Licensing Opportunity o License operating locations o Target tourist-rich, high-traffic and captive audience locations for licensing opportunities (e.g., casinos, hotels, large theme parks, etc.) ► Heighten regional U.S. awareness of brand; prep for follow-on introduction of Carnegie Express and/or wholesale product lines ► Expand footprint to international markets via trusted operating partners (discussions progressing with multi-site hoteliers) Target Unit Metrics ► $6.00MM Annual Revenue (Avg) ► License Fee = 6% of Revenue or $0.36MM of Royalty Income ► Incremental Wholesale Revenue of $900K & EBITDA of $100K Strategic Considerations ► Premier real estate & operating partners (past Carnegie "lessons learned") ► Market timing vis-a-vis other growth efforts (CD Express, wholesale lines) • Focus Markets 1. Los Angeles 2. Miami 3. Orlando 4. Washington, DC 5. Boston 1 EFTA01091916 Opportunity ► Develop authentic, small-scale "grab-and-go" style restaurants ► Limited menu offering of key products & favorites, more on-the- go sizing & packaging, and a lower price point ► Design would encapsulate key features of Carnegie Deli flagship, yet entail a more repeat visit, less "tourist-centric" layout & operating model ► Multiple boxes per market, expanding beyond tourist-rich centers targeted For Big Box Restaurants Target Unit Metrics ► $1.50MM Annual Revenue (Avg) ► $0.75MM Build-out Cost ► $0.27MM EBITDA (18%) Strategic Considerations ► Development of effective and efficient franchise operations ► Balance between operating locations vs. franchised locations ► Hub-and-spoke expansion, beginning in NYC Metro market ► Prime real estate and locations catering to quick-service migration patterns and population EFTA01091917 Wholesale Supply & Product Lines Opportunity ► Following (or in conjunction with) brick-and-mortar restaurant presence, establish wholesale relationships with regional retailers ► Expand & modernize current product distribution, while adding new products to the line (breads/bagels, condiments, etc.) via new subcontractor relationships. ► Establish wholesale supply chain for operating locations, as well as licensed and franchised locations. Target Metrics ► 10% YOY Revenue Growth ► 12% Operating Margin Strategic Considerations ► Prioritizing products with high-margin + high-volume potential ► In-house vs. 3rd party production of key, signature items ► Master license program for regions and/or cities EFTA01091918 Sources & Uses ► $30.4MM will be needed at closing with an approximate 60/40 split of debt/equity. ► Close to 90% of this capital will be used to purchase the businesses. Sources Acquisition Financing $6,000,000 19.7% Real Estate Mortgage 1,500,000 4.9% Seller Note 6,000,000 19.7% Mezzanine Financing 5,000,000 16.4% Equity Investment 12,000,000 39.3% Total Sources 30,500,000 100.0% Uses Purchase of The Businesses $27,000,000 88.5% Purchase of the NJ Real Estate 2,000,000 6.6% Closing Costs 500,000 1.6% Growth Capital 1,000,000 3.3% Total Uses 30,500,000 100.0% EFTA01091919 Development & ► Careful & deliberate development schedule with moderate ramp-up occurring in Year 2. Development Schedule Year 1 2 3 4 5 6 7 New License Deals 0 1 1 1 1 1 1 ► $1.2MM incremental revenue from New Business in Year 1, Total License Deals 0 1 2 3 4 5 6 increasing to $50MM by Year 7. New Express Boxes (Operate) 1 3 4 4 4 4 4 ► 2.0x current revenue by Year 4 and 3.0x by Year 7. New Express Boxes (Franchise) 0 0 0 0 0 0 0 Total Express Boxes 1 4 8 12 16 20 24 Wholesale Growth 10% 10% 10% 10% 10% 10% 10% Key Assumptions Revenues (In Thousands) Pro-forma 1 2 3 4 5 6 7 Existing • Open 1 significant license location per year. The Deli 512,961 $13,L50 513,221 $13,353 $13,487 513,622 513.758 $13,896 • Ramp up development & openings of CD Existing Licensing Fees 721 743 765 788 811 836 861 887 Express locations to 4 per year; own & Existing Wholesale 9,875 10,369 10,887 11,431 12,003 12,603 13,233 13,895 operate 100% of locations. Existing Revenue 23,557 24, 202 24,873 25,573 26,302 27,061 27,852 28,677 • Existing & new business grows at 3% / yr. New • License Deals entail 6% revenue license fee. license Deals 0 180 551 933 1,326 1,731 2,1=9 Ex press Boxes (Operae) 750 3,795 9,226 15,593 22,151 28,905 35,863 • All new locations (Big Box Licensing, Express Boxes) open on 1-July of each year. Ex press Boxes (Franchise) 0 0 0 0 0 0 0 olemle c Lso 1,640 3,515 5,511 7,555 9,649 11,793 • Annual Revenue: Big Box Licensing = New Revenue 1.230 5,615 13,292 22,037 31,032 44286 49,804 $6MM; Express = $1.5MM. • New Wholesale includes (1) commissary for Total Revenue 23,557 25,432 30,488 38,865 48,339 58,093 68,138 78,482 Big Box Licensing & Express Boxes and (2) 10% growth of distribution business per year ($4.1MM of $9.9MM total pro-forma). EFTA01091920 Express Boxes as primary contributor by Year 4, surpassing NYC Deli location; attractive unit-level economics & ability to develop. License Deal cash flow entails minimal overhead & minimal finance/development capital outflows. EBITDA (In Thousands) Pro-forma 1 2 3 4 5 6 7 Exi sting The Deli $1.816 $1,834 $1,853 $1,871 $1,890 $1,909 $1,928 $1,947 Existing Licensing Fees 7Oi 743 715 738 761 786 811 837 Existing Wholesale 980 1,037 1,082 1,143 1 2)0 1,260 1,323 1,390 Existing EBITDA 5500 3,614 5655 3,752 3,852 3,955 4,062 4,173 New License Deals 0 0 120 551 933 1.326 1,731 2,149 Express Boxes (Ope rate ) 0 135 633 1,661 2,807 3.987 5,203 6,455 Express Boxes (French se i 0 0 0 0 0 0 0 0 Wholesale C 58 197 422 661 907 1,158 1,415 New EBITDA 0 193 1,060 2,633 4,401 6,220 8,092 1Q019 Total Ea ITDA 3.50C 3.806 A 7:6 6,385 8,252 10,175 12,154 14192 SG&A 0 (509) ( 610) (967) (1,162) (1,363) ( t 370) (777) De preciat ion & Amortiza ion 0 (1,700) (1,925) (2,225) (2,525) (2,825) (3,125) ( 3,425) Interest Expense 0 (1,138) (1,210) ( 1, 300 (1,376) (1,417) (1,427) ( 1,404) Income Taxes 0 (161) ( 340) (727) (1,185) (1,67Q (2,184) (2,728) Net Income 0 299 631 1,350 2,200 3,101 4,056 5,066 Key Assumptions • Existing Business Operating Margins: Deli = 14%; Wholesale = 10% • New Business Operating Margins: Big Box Licensing = 100%; Express = 18%; Wholesale = 12% • Corporate SG&A = 4% • All Depreciation uses 10-year, straight line method • Income Taxes = 35% EFTA01091921 Balance Sheet Balance Sheet (In Thousands) Pro-forma 1 2 3 4 5 6 7 Assets Cash $1,000 ($669) ($1,872) ($2,546) ($428) $2,490 $5,731 % 318 Accounts Receivable 0 966 1,123 1,357 1,605 1,860 2,123 2,394 bci sting Business Assets 29,000 28,050 26,8)0 25,150 23,700 22,250 21,300 19,850 New Express Boxes 0 675 2,625 5,025 7,125 8,925 10,425 11,625 Other Assets 0 75 150 225 300 375 450 525 Total ,:,.:,:sts 30.000 29,097 28.E5 29.211 32.302 35.900 40,029 39.712 Liabs & Equity Accounts Payable 0 991 1,139 1,372 1,631 1,898 2,173 2,456 Senior Bank Financing 6.0)0 5,307 4,565 3,771 2,922 2,013 1,040 0 Real Estate Mortgage 1,500 1,469 1,436 1,401 1,365 1,326 1,286 1,244 Mezzanine Financing 5,030 5,000 5,000 5,000 5,000 5,000 5,000 0 Seller Note 6.000 4,000 2,000 0 0 0 0 0 CC/Express Financing 0 532 2,056 3,888 5,404 6,581 7,392 7,808 Total Liabilities 18.500 17,298 16,195 15,431 16,321 16,818 16,892 11,509 Preferred Stock 12,000 12,000 12,000 12.000 12,000 12.000 12,000 12,000 Retained Earnings (500) (2011 430 1,780 3,980 7,082 11,137 A203 Total Equity 11,500 11,799 12,430 13,780 15,980 19.082 23,137 28203 Total Liabs & Equity 30,030 29,097 28,E5 29,211 32,302 35,900 40,029 39.712 EFTA01091922 Cash Flow Year 1 2 3 4 5 6 7 Cash Flow (In Thousands) Net I ncorre $299 $631 $1,350 $2,200 $3,101 $4,056 $5,066 Depreciation & Amortization 1,700 1,925 2,225 2,525 2,825 3,125 3,425 Changes i n Operating Activities 25 (9) (2) 12 12 12 12 Changes i n Financing Activiti es (2,792) (3,051) (3,397) (1,769) (2,170) (2,602) (4066) Changes in Investment Activities (900) ( X0) (850) (850) (850) (1,350) (850) Beginning Cash Balance 1,000 (669) (1,872) (2,546) (428) 2,490 5,731 Total Change in Cash (1,669) (1,204) (674) 2,117 2,918 3,241 (413) Ending Cash Balance (669) (1,872) (2,546) (428) 2,490 5,731 5,318 EFTA01091923 Our Team David Mitchell John Rigos / Andy Stern Entrepreneurs • Over 30 years of finance, = and real estate investment experience. • 10+ companies founded. • President of Mitchell Holdings LLC, completing over $3.7B in transactions since 1991. • 40 combined years investment and operations experience. Owner / Operators • 16 combined years in the restaurant / hospitality industry. • Managing Partner of Las Vegas Land Partners LLC, developing the new Las Vegas Civic Center. Investors • 48 stores owned, developed and operated across 6 brands. • Experienced owner & operator of multiple businesses in the hospitality & gaming industries. • 4 Board of Director seats across 3 non-profit organizations. • Operators of Acquired, Franchised & Original Concept Businesses • Broad Experience with Development & Growth Capital • Robust Real Estate Investment Record • Extensive Network of Industry Advisors & Experts • Operational Focus on Human Capital • NYC Market Expertise (site selection, labor pool, unit-level = EFTA01091924