Turning Up the Heat at TurboChef

• Email
• Share
• Print

You'll need more than oven mitts to handle TurboChef (Nasdaq: OVEN).

The company behind the speedy convection ovens that are revolutionizing the quick-service restaurant industry delivered piping-hot fourth-quarter numbers last night. Revenue soared 125% higher to hit $34.3 million. TurboChef's top-line has been on a tear in recent quarters. The net loss for the period widened to $0.14 a share -- after posting a deficit of $0.10 a share year earlier -- but it warms the heart to see the company expect to finally turn a profit for all of 2008.

That outcome was in doubt after Starbucks (Nasdaq: SBUX) announced it would abandon its plans to expand the rollout of TurboChef ovens throughout its java havens. Starbucks was testing the ovens in key markets, but found that the tests were diluting the brand -- the aroma of baked breakfast sandwiches overpowered the signature aromatic tang of premium brewed beans.

Starbucks could have rivaled Subway as TurboChef's prized customer, but TurboChef will now have to turn elsewhere to grow its commercial oven base from its current 50,000 installations.

Yes, that's a TurboChef oven toasting up your foot-long BMT hero at Subway. It is the oven's flexibility that allowed Subway to expand into pizzas seamlessly last year.

Flexibility is the key. If fast-food locations with installed ovens can turn out baked products faster and have a wider easel for innovation, the industry may become a case of the TurboChef Haves versus the TurboChef Have-Nots.

TurboChef is doing its part to make it as easy as possible to grow the ranks among the TurboChef Haves. It is rolling out small ovens that make sense in low-volume places like convenience stores, casual dining chains, and mom-and-pop eateries.

TurboChef also recently launched residential ovens, but it's not blind to the housing-market reality of homeowner apprehension of big-ticket kitchen appliances. It will slash its marketing budget for the ovens this year and prepare to strike hard when the economy bounces back.

Can things improve for TurboChef? Of course. TurboChef's client list is sorely underrepresented in the fast-food world. It's doing well on the hospitality front, with hoteliers such as Hyatt, Hilton, and Starwood (NYSE: HOT) on board, but it's surprisingly skimpy in the fast-food space.

If a burger giant such as Wendy's (NYSE: WEN) or Burger King (NYSE: BKC) would install TurboChef ovens -- and use them to redefine quick-service expectations with items like freshly baked pizzas and desserts -- wouldn't rivals have to follow? That's the kind of stampede that could double TurboChef's oven base in a hurry.

But we must crack one egg at a time, of course. TurboChef doesn't own this market, but companies such as Middleby (Nasdaq: MIDD) and United Technologies (NYSE: UTX) aren't pure plays in the same way that TurboChef is emphasizing the high-speed turf.

There's a world of potential out there, now TurboChef simply needs to give us a reason to keep the oven mitts on.