Green Mountain entrepreneur compiles 17-percent stake in struggling Noble Roman's

November 24, 2008
The 64-year-old founder of Vermont's Green Mountain Coffee Roasters apparently has a taste for Noble Roman's pizza.

Robert P. Stiller, a lifelong entrepreneur who built Green Mountain into a wholesale coffee giant with 7,000 customers and $500 million in revenue, began buying shares in the Indianapolis-based pizza chain in early 2007. He has continued to buy even as the shares have slid dramatically and now owns 3.4 million shares, or 17 percent of the company.

Stiller's stake was worth $1.5 million at the Nov. 9 closing price of 39 cents a share — far less than he paid, though exact figures aren't publicly available.

Stiller, who was named entrepreneur of the year by Forbes magazine in 2001, got his start in business with the creation of EZ-Wider rolling papers in the 1970s. Stiller and a partner sold the company in 1980, taking home $3 million each.

He could not be reached to discuss his investment in Noble Roman's.

Stiller's motivations are a mystery to Noble Roman's President A. Scott Mobley, who is leading an effort to shift the focus of Noble Roman's growth back toward nontraditional locations such as convenience stores, bowling alleys and hospitals.

The moves follow an unsuccessful effort to quickly franchise hundreds of new stand-alone Noble Roman's and Tuscano's Italian Style Subs locations across the country. Many of them failed to attract enough traffic and closed shortly after opening. A group of 10 former franchisees is suing Noble Roman's in Hamilton County, alleging the company misled them in the sales pitch.

"It's a challenging time," Mobley said. "Access to financing is just about impossible. Our nontraditional side is very light on investment; that allows existing business owners to add another business center at a low investment cost."

Noble Roman's has reinvented itself several times over the years since launching in the 1970s as a chain of dine-in restaurants. In 1997, after intense competition and rising costs made stand-alone pizza joints difficult to operate profitably, Noble Roman's turned to franchising nontraditional outlets like gas stations and bowling alleys — a strategy that has paid off handsomely.

Noble Roman's again is pinning its hopes on growth in nontraditional outlets. It has developed a new food-service system for those locations called Noble Roman's Bistro.

The system will feature SuperSlice pizza (one-fourth of a large), along with hot entrees like chicken parmesan and baked penne, the company said in a recent regulatory filing. An optional breakfast menu features scrambled eggs, bacon, biscuits and gravy, and French toast sticks.

In March, the company seized six franchised stores in Carmel, Fishers, Westfield and Noblesville after the locations struggled with what the company calls "management and supervision difficulties." The company now plans to either sell or close the restaurants by Dec. 31, in a bid to save on overhead and operating costs.

Noble Roman's will operate only two locations, including one on Market Street downtown, for training and demonstration purposes. In another money-saving move, the company said in a recent regulatory filing that it has reduced salaries this year.

The chain continues to work with Newport Beach, Calif.-based Roth Capital Partners, a specialist in small-cap companies, to evaluate "various strategies to enhance shareholder value."

The move, revealed in March, raises the possibility that the company could be sold, although observers say tight credit markets and a sputtering economy likely will make a sale difficult, if not impossible.

Mobley, who owns 1.1 million shares of the company, said he and his father, Paul, the company chairman, have never talked to Stiller. Paul Mobley owns 3.3 million shares.

Regulatory filings identify Stiller as a passive investor, not one interested in imposing his will on management.

Stiller's timing was pretty bad to begin building a stake in the company, but the shares no longer look overvalued at less than 40 cents, said Michael Goode, a St. Louis stock trader and financial blogger who writes GoodeValue.com.

Goode previously shorted shares of Noble Roman's, but no longer has a position in the company. He thinks the best move for the chain is to focus on its nontraditional locations; the brand just isn't strong enough as a stand-alone attraction, he said.

"I believe they should stick to what they do well," Goode said. "It's been a very profitable niche for them."

Stiller was revealed as a shareholder in Noble Roman's in February 2007, when he said in a regulatory filing he owned roughly 1 million shares, or about 6 percent of the company. At that time, shares were trading in the $4 range, about 10 times the price they now fetch.

But Stiller has continued to buy. By December 2007, he had amassed 2.2 million shares, regulatory filings show. And by May, he owned 3.4 million shares.

A Connecticut couple, Timothy M. Riley and Angela A. Riley, also has been buying shares in Noble Roman's. The Rileys said in an August filing that they have bought slightly more than 1 million shares, for control of 5.5 percent of the company.
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