Don't show againuWink Signs Software Licensing Deal with Chili’s, Also Opens 3rd Restaurant
On Monday September 22, uWink (NASDAQ: UWKI.OB) announced their second software licensing deal to install 4 of their touch-screen terminals in a Chili’s Too Margarita Bar at the Fort Lauderdale Hollywood International Airport as a pilot program for possible expansion into many more locations.
The deal was made with the owner/operator of the Chili’s location, Delaware North Companies, a global hospitality, food service and retail provider, and with the approval of Brinker International Inc. (NYSE: EAT), which owns, develops, operates, and franchises 1,888 various restaurant brands under the Chili’s Grill & Bar, On The Border Mexican Grill & Cantina, Maggiano’s Little Italy, and Romano’s Macaroni Grill brand names.
So what does this deal mean for uWink, who is Delaware North, and more importantly, will this yield entrance of uWink’s terminals on a much larger scale to other Chili’s restaurants and other locations within the airport industry that are run by Delaware North?
New to the uWink story?
uWink is an entertainment and hospitality software development company that develops casual, interactive, social games, in addition to licensing the rights to those games and their proprietary touch-screen ordering and gaming interface to restaurants, entertainment venues and the hospitality industry.
uWink also owns and operates three restaurants under the uWink brand name that utilize this technology.
uWink’s CEO is Nolan Bushnell, who also founded Atari Inc. (OTC: ATAR.PK) and Chuck E. Cheese’s, now known as CEC Entertainment (NYSE: CEC).
Want More?
- Start: with my initial buy recommendation and company overview here,
- OR: read how uWink is NOT a restaurant company, but instead intends to license their software platform to other businesses here.
2nd Software Deal In-Line With uWink’s Future Plans
Pilot program designed to test possible expansion to other locations around the U.S.
Delaware North Companies is one of the world’s leading hospitality and food service providers, operating companies in the lodging, sporting, airport, gaming and entertainment industries.
Delaware North also owns and operates several world-renowned resorts and Boston’s TD Banknorth Garden and is one of the largest privately held companies in the United States with revenues exceeding $2 billion annually and 40,000 associates serving half a billion customers in the United States, Canada, the United Kingdom, Australia and New Zealand.
Specifically, Delaware North’s Travel Hospitality Services subsidiary is one of the nation’s leading airport food service and retail companies and is the exclusive food service and retail provider at the Fort Lauderdale airport and operates 300 restaurants and retail outlets in more than 25 airports worldwide, serving more than 350 million customers each year.
Chili’s Table Top Terminal
The terminals will contain the full Chili’s menu and ordering options, built on top of the uWink service and software platform that allows patrons to play games either by themselves or with the other tables at the restaurant, as well as check out and order food without waiting for a server to take their order.
This is a very important feature, especially with uWink’s ability to deliver the menu in up to 8 languages, as airport restaurants are located in places where there is a confluence of all kinds of demographics, cultures, languages and customers.
The simplicity with which a customer can tap the screen to start the ordering process, choose their native language, and complete the checkout process without having to talk to a server, shows just how deep and useful these terminals can be for not just restaurants, but all sorts of businesses within the hospitality industry.
In addition, busy travelers don’t have time to sit at a table and wait for a server to come and take their order.
On the flip side, if they do have lots of time because of an extended layover, uWink’s terminals provide ample distraction with their games allowing passengers to waste some time while they eat.
For the restaurants, the terminals easily integrate into the operations that are already running and require little training and maintenance.
The kitchen simply receives the uWink terminal’s order, and a runner, or server for that section, brings the food out.
This is one of the bigger draws for large companies, especially in this economic climate, that want to squeeze more profit out of their operations and streamline their service to save overhead costs.
The terminals at this location will serve as testing grounds for potential expansion to other airport restaurants, or stand-alone locations, that Delaware North and Brinker International operates.
Approved By Brinker International
This preliminary trial and installation was approved by Brinker International Inc. who was in negotiations with uWink and Delaware North throughout the whole process.
Because this is a franchised location, if falls under strict Brinker franchisee guidelines and therefore, this type of change to the corporate or classic restaurant structure had to be approved even though Brinker does not directly operate this specific Chili’s location.
However, the fact that Brinker approved this trial and was pleased with the value proposition that uWink’s terminals could provide this and especially other Chili’s locations, bodes extremely well for future expansion of uWink’s software and licensing business not only into more Chili’s locations within Delaware North’s properties, but, in a potentially huge business win for uWink, in more Chili’s locations all across the U.S.
So What Does This Mean for uWink?
As of now, this is a very small deal, with potentially large implications down the road.
Large corporations hate losing money and they are also slow to accept change and new additions to their businesses that could aid in their revenue and margins until they are thoroughly tested.
These terminals are already up and running, and it won’t be long before uWink deploys more terminals either within this current restaurant location, or across more of Delaware North’s other restaurant and hospitality properties.
As far as revenue is concerned, this specific deal will not move the needle much until uWink secures more software licensing contracts in more locations.
The way it sits now, uWink would get paid basically for the maintenance and upkeep of the terminals and software on a recurring basis.
In order for that revenue to impact the bottom line, uWink will need to reach a critical mass of installed software terminals.
That being said, this is a great start, and one that I have been anticipating for quite some time.
If uWink can prove the concept in a Chili’s location in an airport terminal, then the natural expansion opportunities will flow from there.
uWink Opens 3rd Location in Mountain View, CA
Rounding out uWink’s portfolio of company-owned restaurants, is their 3rd and most likely final location that oficially opened on September 15th.
I’ve written extensively, how uWink is not trying to be a restaurant company, but merely opened their three uWink locations as proving grounds for their technology and to test and perfect their business model.
As a result of that, the Mountain View location will most likely be their last company-owned location, and as it stands now, their portfolio of three locations (Woodland Hills, CA; Hollywood, CA; Mountain View, CA), are likely to be break even and cash flow positive to the point of being self-sustaining.
It is now incumbent upon uWink to further their software and licensing reach and make more deals like the one they just announced.
Bottom Line
uWink Is Executing
uWink’s recently announced deal with Delaware North/Brinker International, and their Chili’s location was exactly what I have been waiting to see.
Look for uWink to start gaining major traction now in their software and licensing business as they can take their focus off of opening and running restaurants, and direct it to making more and more deals with companies like Delaware North in the hospitality industry to continue to get their terminals in more resorts, stadiums, and other restaurant venues throughout the U.S.
It cannot be understated how large the potential deal with Delaware North, and potentially Brinker, could be.
Imagine uWink terminals in every Chili’s and Macaroni Grill you visit.
If you’ve been waiting for uWink to show promise and start to actually deliver on that promise before entertaining purchasing any shares, I think we are now starting to see things start to ramp up.
As I’ve said many a time, uWink is a risky stock to own, but you’ll rarely find a stock that is this cheap with a business model and continued execution far outweighing the risk of owning the company’s shares.
If you haven’t already, it’s time to take a look at uWink.
The current share price might not last too much longer, especially in light of ever-increasing software and licensing deals that could bring uWink’s terminals into more and more restaurants and hospitality venues across the U.S.
uWink has just gotten a wee bit tastier.
New to the uWink story?
- Start: with my initial buy recommendation and company overview here,
- OR: read how uWink is NOT a restaurant company, but instead intends to license their software platform to other businesses here.
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*Variables You Should Know About uWink, Inc. (NASDAQ: UWKI.OB) |
|
|---|---|
| Current Recommendation: |
STRONG BUY |
| The Company: | uWink, Inc. is an entertainment and hospitality software development company that develops casual, interactive, social games, in addition to licensing the rights to those games and their proprietary touch-screen ordering and gaming interface to restaurants, entertainment venues and the hospitality industry. uWink also owns and operates three restaurants under the uWink brand name that utilize this technology. |
| Why Buy Now: |
|
| Market Cap: | $7.36 |
| Revenue (TTM): | $2.51 |
| Cash/Debt: | $3.2/ $0 |
| Current Price: | $.60 |
| Risk Rating (?): | 10 (Highest Possible Risk) - Read Why In My Research Report |
| Position Size (?): | 1/4 (11-23-07), 1/4 (12-6-07), 1/4 (1-15-08), 1/4 (9-7-08) |
| Buy Around Price (?): | $1.80 (11-23-07), $1.85 (12-6-07), $1.25 (1-15-08), $0.55 (9-7-08) |
*As of 9-24-08. Except share price, all values in millions.
(4 votes, average: 5 out of 5)
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(13) comments to “uWink Signs Software Licensing Deal with Chili’s, Also Opens 3rd Restaurant”
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September 25th, 2008 at 9:30 am
Chris:
You come out and say this is a “licensing deal”. Where is the contract? What are the terms? I don’t believe there is a contract. This is a good thing, but only a pilot. The contract will follow likely next year… I think this is a bit misleading to people. Later in your story, you refer to an “initiative”.. and are using more accurate language. You say the terminals have been installed. Well, has money changed hands? Is there a contract?
Please be specific abotu what this is, and personally I think you should print a retraction.
September 25th, 2008 at 11:50 am
John,
The terms were not announced, but money did change hands.
The exact financial details of this deal will be laid out in the company’s next 10-Q.
uWink is not running a charity here, they would not have spent the labor and man hours to get this project going if it wasn’t going to lead to serious material revenue.
I’ll be detailing the exact breakdown (it isn’t much right now, but will be once the terminals are placed in other locations) in another future post.
Rest assured, this is a revenue generating deal.
Chris
September 25th, 2008 at 5:18 pm
OK, if you say so. It leaves alot open to imagination. I looks alot to me like a “piloting” stage of a sales cycle, where a prospective customer gives a potential system a real-life test before purchase. This is commonly done. The potential deal would be quite big, and I have to wonder whether or not this is Corporate, or simply for a few locations. I would think it would be at the Corporate level. If that is indeed the case, if uWink got a deal of that magnitude it would skyrocket, which it clearly hasn’t. So, be careful about how you couch this.
There are clearly ramifications for Chilis as well. For one thing, how would their employees react to something that seem to steal their jobs… there are organizational change issues. This is a complex undertaking for Chillis. But, I agree that there is a high probability of an imminent deal and perhaps these 4 terminals are permanent.
Anyway, good for uWink.
September 25th, 2008 at 5:58 pm
Hey John,
Just in case I didn’t make this clear in the post, this deal is with Delaware North, a franchisee of Brinker, BUT had to get the approval of Brinker.
In other words, although initially more deals might only come in restaurant locations owned and operated by Delaware, eventually the hope is that Brinker will also offer this to any of their other franchisees, or install it themselves in their company-owned restaurants.
Nothing has been finalized yet on that front though.
As for the employees, think of it this way: instead of taking orders, they are merely running food.
Since the terminals are not at all of the tables, they would still be doing what they are doing, just that some of the tables would only require them to bring the food out, not take orders.
They still interact with the customers and get tips, but in the grand scheme of things, the less man-hours that are spent serving customers, the more money the restaurant locations make.
Chris
September 25th, 2008 at 6:03 pm
JC: OF COURSE “money did change hands.”
From Q: “Over the past 18 months we have spent significant time and effort developing and refining our technology, a process aided greatly by real-time customer feedback and stress testing in our 200+ seat prototype uWink restaurants in Woodland Hills, California (which opened in October 2006) and Hollywood, California (which opened for business on June 17, 2008).”
“Based on this experience, we believe that our hospitality and entertainment technology:”
o is a differentiator, increasing customer traffic;
o provides unique revenue streams;
o increases transaction speed and order accuracy;
o increases customer loyalty;
o increases average check; and
o significantly reduces labor costs and enhances labor efficiency.
“We also believe that the technology we have developed, and are continuing to develop, can be deployed more broadly in the hospitality and public-space markets including in HOTELS, CASUAL / FAST FOOD RESTAURANTS, BARS, APARTMENTS, UNIVERSITIES, STADIUMS, THEME PARKS, CASINOS, AND GOLF AND SKI RESORTS.”
Technology & Restaurants - Multiple Diverse Services of uWink
Some May Never Grasp the technological / software aspects and full potential of uWink Solutions regarding Other Companies, THEIR places, and Interfacing with THEIR equipment. - However…Many Will!
uBuy until uSell - uWink, uWait, uWin! - Netman
I base my trading decisions on my own DD, research, evaluation, constant re-evaluation, insight and information. Everyone should do their own DD, and constantly evaluate their own conclusions IMO.
September 26th, 2008 at 6:33 pm
BTW: Good Research / Presentation Chris Fernandez.
October 8th, 2008 at 1:04 pm
I was wondering what you thought about the UWink stock reaching so low. I am about to buy mass volume. Do you think this is too risky? I am enjoying your research. I just learned about this site.
Jonathan
October 8th, 2008 at 1:17 pm
Hey Jonathan,
uWink is a micro cap stock, and as such, it doesn’t take much for it to get pushed around.
There have been various funds that have gone out of business lately, and some of them own uWink shares and needed to liquidate their assets for redemptions.
I think that now is a wonderful time to grab some more uWink as the company is trading near its cash value, and the CFO has been purchasing more shares of the company on the open market.
Chris
October 8th, 2008 at 5:57 pm
Chris:
I think you are being a bit naive in response to this poster. While uWink is definitely cheap, it is still in a downward slide and it would be best to wait it out. My main contention is that you are always quoting cash-on-hand numbers that are clearly bogus to some degree(same thing as “cash value”). That figure of 3.2M appears in their last financial statements. Well, that clearly cannot be the case at this point. Not only have they spent 60k on the MV restaurant, but they have about 1.2M in ST debt. Lastly, they still have a cash burn. the best they could hope for with 3 restaurants is a break-even situation. They won’t have that, likely will burn through another 1M at the current rate. I can’t see them having more than 500k - 1M left after this quarter. Their statement that they have 12 months of cash flow is simply not real. It will not stand up to any analysis.
While now is not a bad time, I say wait for an even better time if you believe in the company, and that time is prior to Xmas and after the next financials are released (mid-Nov). Let these issues resolve themselves. The good thing about uWink is that since they have no debt, going bankrupt is not possible. One outcome is that they could become a takeover target fairly quickly when things turn around. In any event, change is almost for certain, either cost-cutting or further financing. Those changes will impact the stock price. I say, wait for it and really low-ball it when those changes occur.
What I like about uWink is that they are one of a very few software vendors with revenue-generating restaurants that double as test centers. If they could live on those restaurants they would be a powerful entity.
The downward trend is still strong. When you compare uWink with what else is out there, the price is still too high. One could wait until it settles out to .10-20. After the next financials are released and we know how they are dealing with their financial needs will be the time to buy. What ever they do (further financing or cost-cutting) will depress the stock price.
Just my opinion for the poster.
October 8th, 2008 at 5:58 pm
I meant 600k on MV Chris.. lol. And what about “float”?
October 9th, 2008 at 12:50 am
Big Guy,
You are right that they will have substantially less cash on hand than the $3.2 million, but I have spoken to management and i am assured they will have enough cash on hand to last for 8-12 months.
We’ll see if that holds up.
Remember the restaurants are already running at net cash flow positive.
It isn’t enough to overcome their salaries and other corporate expenses, but it is enough to run the restaurants and break even on them.
We’ll see how long the downturn in the stock lasts, but I have a feeling that we are nearing a bottom.
Once these guys liquidate their positions and get out of the stock, we’ll see some strong stabilization, and a return for new money looking for bargains.
We’ll see what happens.
Chris
October 9th, 2008 at 8:51 am
Good response Chris.
October 9th, 2008 at 4:41 pm
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