An Expert In Restaurant Acquisitions On What He Looks for In a Spicy Deal

If you want to work in restaurants, look at the business through Sonu Chandi's eyes. His life has been shaped by this business, but he also knows it's a game of cold numbers.

In 2000, at the age of 16, he moved to America from his small Indian village — then learned English while working at a restaurant his dad managed. In 2003, his dad and two partners opened a restaurant, and Chandi got involved with the front-of-house. "That's how I learned how the restaurant world works," he says. Then he got into the business himself. He bought an existing Mountain Mike's Pizza franchise in 2007. And now Chandi Hospitality Group, a company he founded with his brothers, runs 17 Mountain Mike's, is opening 10 units of Guy Fieri's Chicken Guy! and owns a few independent restaurants too.

You might think this makes him sentimental about restaurants, but in truth, it makes him an analytical number cruncher. What makes a good restaurant, in his eyes? "AUV," he says. Average unit volume. Here's how this restaurant man evaluates a tasty opportunity.

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How do you choose the brands you work with?

We're really strategic about looking at their AUV — the average unit volume. It's the average sales for each location. When you have a high AUV, that gives you the bandwidth to do more things. Our strategy is finding concepts with a high AUV and possibility of a good profit margin and a territory that we have experienced.

Guy Fieri's Chicken Guy! concept is newer; the brand launched in 2018. Is there a trick to evaluating AUV with a newer brand?

Chicken Guy! doesn't have enough units to give it actual volume from those units, but what we've seen is that the comparable competitors are doing really well in that segment. We know Guy has national brand awareness. We really think that's going to drive the traffic. But as a franchisee, you have to make sure you do your operations well. They have the brand awareness and the product, and we have the systems as a franchisee.

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Why do you think AUV is so critical?

Revenue is crucial. You can do everything right, and if your concept is limited to only $700,000 top-line revenue, you're going to have a hard time. If you have a potential unit that can do more than $2.5 million, like some of the competing chicken concept brands are doing—some of them are doing more than $3 million in average unit volume — that's important. If you're doing research as a franchisee, look at that top line.

Do you look only at the top line?

Franchisors will say, "The top 25% are doing $1.5 million." Well, what about the bottom 25%? What are they doing? I think it's important to know that, and then it comes down to whether you have systems to manage the daily labor, the daily food costs.

How do you keep those daily costs down?

In the past year, we invested in a back-office team in India. We're three brothers in the business, and my youngest brother moved to India to operate that back office of nearly 40 people. With that team, we are able to put way more into our customer experience. We can focus on every little detail without taking anything away from our local workforce, but we can enhance that workforce with things like handling phone calls and better practices on accounting.

It sounds like you have even bigger plans on the horizon.

We will definitely grow into being a franchisor in the future.

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