Giggles N Hugs: A 21st Century Family Restaurant

Bob Krummert

Could upscale kid-friendly restaurant Giggles N Hugs really expand from a single location to a 150-unit national chain? If you think it’s got a shot, you can get on the ground floor by buying this fledgling company’s stock—or stealing its core idea.

The Giggle N Hugs (GNH) concept seems like genius: a kid-oriented restaurant that serves healthy food to both kids and adults, providing kids with a safe, hyperclean and inventive playspace while giving parents a snazzy spot where they might actually like to hang out.

Think of GNH as Chuck E. Cheese reinvented for free-spending consumers who frequent upscale lifestyle shopping malls and need a place to park their kids. If you were wondering what the gold standard of family friendly is in 2012, this may well be it.

The lone Giggle N Hugs unit to open so far is located at the Westfield Shopping Mall in Century City, CA, a stone’s throw from Beverly Hills and other affluent Los Angeles neighborhoods. Founders Dorsa and Joey Parisi told Business Week their 6,100 sq. ft restaurant serves 3,500 patrons each month and brings in $120,000 in revenue.

How promising is their idea? Investors have fallen in love with it. As we write, Giggles N Hugs’s thinly traded stock is priced at $4.60 a share, giving the concept a $105 million market capitalization. This one-store operation has traded for as much as $7.

What’s the angle for investors? “Giggles N Hugs is planning a national launch with multiple locations around the country opening in the next few years,” a company statement notes. The Parisis envision 150 units by 2020.
Several facets of GNH seem particularly well thought out.

The menu features plenty of choices for both parents and kids, and the Parisis weren’t naive about what kids will actually order and eat at a restaurant. That’s why they’ve come up with a number of stealthy healthy spins on standard kid items. That includes incorporating pureed spinach into the spaghetti sauce (for a $1 surcharge), mixing pureed butternut squash into the cheese sauce used to make mac–n-cheese (a $1.95 surcharge) and adding (for $2.50) flaxseed meal to the breading mixture used to make chicken nuggets. If you’re looking for just one idea to take away from this article, we suggest you pick this one.

Food offerings like these appeal to parents who pay close attention to what their kids eat. Many in the GNH demographic do. The menu provides plenty of relatively sophisticated choices for the parents, who can also kill time while the kids play by tapping into GNH’s wireless Internet or checking out what’s showing on the restaurant’s 12 plasma screens.

You have to like how the revenue streams line up here. Joey Parisi says that roughly half of gross revenue comes from children’s birthday parties.
Semi-private party packages are available at three levels:

• Duke & Duchess, offering a pizza/salad menu that costs $15 per adult, $20 per child.

• Prince & Princess, providing a choice of four entrees and two sides for $20 per adult, $25 per child.

• King & Queen, which offers two starters, three entrees and two sides chosen from the full menu, charging $25 per head for both adults and kids.

Parties are two hours long and there are plenty of add-ons for parents who wish to spend a little more. Beer and wine drink tickets for adults are $5.00 for a domestic beverage, $7.50 for imports.

Private birthday parties offer the same choices, but parents pay a flat fee to buy out the restaurant. A morning (10 a.m.-12 p.m.) party has a $1,000 rental fee; afternoon and evenings go for $1,500 for a similar two-hour slot. Parents who want to go big can add on extras and entertainment items such as a cotton candy machine ($180 and up) and puppy, bunny or kitten playtime ($225 and up). There’s an 18 percent gratuity, too, so you know the waitstaff will be eager to work these parties.

Special events with rates like these are big financial wins for any restaurant. If GNH can pull off multiple events like this every week, the overall concept can become a true moneymaker. For pure margins, nothing beats the restaurant’s “Drop Off” service. Parents who want to shop at Century City pay $14 per hour for the first child, $12 each for any additional children, to leave them at GNH, where kids can play while supervised by “CPR/First Aid-certified team members.”

We don’t know how will this concept will do long-term, nor can we guess at the merit of investing in its stock. (GIGL.OB). But if you’re interested in some fresh thinking about how to serve your kid customers better, this one’s a gold mine.