Bob Evans Farms Inc. has opened its first Bob Evans Express onsite prototype, and its first licensee could use it to take the brand into new markets, the company said Monday during a first-quarter earnings call.

The Columbus, Ohio-based company developed the concept with AVI Food Systems Inc., which will open licensed locations of Bob Evans Express in hospitals, universities, airports, malls, and business and industry accounts. The Express units will serve some of Bob Evans’ menu items and packaged foods to on-the-go consumers.

The first unit of Bob Evans Express recently opened in Spartanburg, S.C., at the BMW USA manufacturing plant. A second location will open at Bob Evans’ new corporate headquarters campus in New Albany, Ohio, where the brand will move in October.

Bob Evans partnership with AVI Food Systems is key to expanding the Express variant, said chief executive Steven Davis, who remarked during the earnings call that he gained a lot of experience with nontraditional locations during his time with Yum! Brands Inc. Then as now, Davis said, the point of developing an onsite unit is to “get it scale-able, get it profitable and find partners to help you expand it.”

“The thing about nontraditional venues is having these relationships, because it would be tough for us to pursue universities, malls and the like on our own,” he said. “They have these relationships and have contracts with these venues over time. We’re bringing the strength of our brand to the party.”

The real benefit of the “one-two punch” of opening Express units in nontraditional locations while building more company-owned restaurants would be growing Bob Evans’ geographic footprint, Davis added. The company’s 560 namesake family-dining restaurants operate in 19 states, primarily in the Midwest, Mid-Atlantic and Southeast.

“We have a great brand, especially here in Ohio, where we have more than 190 restaurants, but we still have opportunities to open restaurants in the state of Ohio,” he said, noting that Warren, Ohio-based AVI is also strong in the Buckeye State. “[AVI’s] geographic footprint overlaps ours and extends it by a few states. Their penetration in nontraditional venues got us into Spartanburg.”

In shared territories, Bob Evans could further penetrate its markets by getting its menu items and food products onto campuses or in hospitals and corporate cafeterias, Davis said, while AVI could take the brand to new states in an onsite unit for a lower capital expenditure than the cost of opening a full-service restaurant.

“It’s a way to dip our toe into licensing and franchising,” he added. “For us, speed to market is critical, as is learning and putting together an economic model we can scale.”

Management did not provide any near-term growth targets or speculate on the potential size of the market for Bob Evans Express, but one securities analyst on the call wrote in a research note that the concept likely would provide the company a lot of value in future years.

“In the longer run, we think there could be appreciable earnings upside related to the new Bob Evans Express concept, whose licensing income would represent a break from Bob Evans Farms’ traditional company-owned model for restaurant operations. However, we do not think any earnings-per-share upside related to this venture is likely before fiscal 2016 at the earliest,” wrote Stephen Anderson of Miller Tabak + Co.

For the first quarter of fiscal 2014 ended July 26, 2013, Bob Evans Farms Inc. recorded net income of $9.1 million, or 33 cents per share, on revenue of $329.4 million and a 0.6-percent decrease in same-store sales at its Bob Evans restaurants.

Contact Mark Brandau at mark.brandau@penton.com.
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