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Bildner and Sons
1986-1988
Industry: Premium Sandwiches
Category: Franchise

Context
Founder, Jim Bildner, wanted to expand his premium sandwich concept to other cities outside of Boston, raised money via IPO to do so.

Why the Company is Mispriced
Relatively unknown restaurant, early in it's potential success.

Alternative View
Lynch believed the company had the best bread and the best sandwiches in Boston.
Lynch frequented this restaurant/deli often, since it was right across the street from his office.
He noted that operations were clean, efficient, full of satisified customers, highly profitable.
The company had a niche, people who didn't want shitty sandwiches but refused to cook.
Jim Bildner was bright, hard working, dedicated.
He could see this concept being expanded across the nation.

Result
Lynch bought the IPO at $13 in 1986.
Bildner's did 2 more stores in Boston, both flopped.
Did 3 more stores in Manhattan, killed by the delis.
Bildner's had overextended itself by expanding too fast, was not prepared for multiple simultaneous failures.

Just because it is a hot product, expanding, does not make it a sound idea.
Stock bottomed out at 0.125, lost 50-95% from 1986 to 1988.

Notably
Lynch said he didn't ask the most important question, does the concept scale to other cities? Claims this was his fundamental mistake, acting too early.

In my view, it's hard to believe a good food concept can't scale. Good food is good food, no matter the town.
The way I see it, it wasn't a matter of the concept/product, management went too fast, too furious.
This is a very hard mistake to avoid, especially when you consider product quality.
The only recommendation I can make is to be extra considerate of position sizing in lieu of a margin of safety.