Silicon Valley entrepreneur Jonathan Kaplan caused some head-scratching in the tech world last year when the creator of Flip Video announced his next venture would be grilled cheese sandwiches.
Fifteen months and five San Francisco Bay Area stores later, Kaplan is even more bullish on the power of cheese and plans to put nine restaurants on wheels across the state by year end. Over the next five years, he expects to have 100 buses selling the same $8.75 sandwich-and-soup combos as his stationary stores.
His rationale is simple — different neighborhoods come alive at different hours, so why not go where the customers are? For example, The Melt restaurant that’s next door to its corporate headquarters in downtown San Francisco is open until 9 p.m. on weekdays and closed on Sundays, because nobody hangs out around there late at night or on weekends.
“If this restaurant were a bus, I could drive it somewhere like Golden Gate Park,” Kaplan said, in between bites of a sandwich called The Italian Job, which consists of fontina and provolone cheese on garlic bread. “We can deliver the same entire experience out of a 200-square-foot bus as we do out of a restaurant.”
While Kaplan isn’t divulging any company financials, he says the business is doing “very well,” with its top locations serving 500 customers a day and becoming profitable “very quickly.” The Melt, with funding from Sequoia Capital, has three stores in downtown San Francisco, one in Berkeley and one at Stanford Shopping Center in Palo Alto, California. Within five years, he plans to have 500 stores, including 100 buses, open nationwide. He wants to eventually be in all 50 states.
He can afford to be patient. Just three years ago, Kaplan sold Pure Digital Technologies, the maker of Flip Video, to Cisco Systems for $590 million (Flip was also backed by Sequoia). Cisco famously turned around and shuttered the division last year, despite having some of the most popular camcorders on the market.
This time Kaplan’s ambitions are bigger. He talks about being in the top echelon of fast casual restaurant chains, a category that includes Panera Bread and Chipotle Mexican Grill, which are worth a combined $13.7 billion on the stock market. Panera trades at 24 times earnings over the next year, while Chipotle trades at 29 times. That compares with 16 times for McDonald’s, 17 times for Domino’s Pizza and 18 times for Yum Brands.
“This is a business that Wall Street loves,” Kaplan said. “It can be very lucrative to shareholders.”