TurboChef Technologies, Inc

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TurboChef Technologies, Inc.

Six Concourse Parkway, Suite 1900
Atlanta, Georgia 30328
U.S.A.
Telephone: (678) 987-1700
Toll Free: (866) 908-8726
Fax: (678) 987-1750
Web site: http://www.turbochef.com

Public Company
Incorporated: 1993 as TurboChef Inc.
Employees: 158
Sales: $52.2 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: OVEN
NAIC: 333294 Food Product Machinery Manufacturing; 335221 Household Cooking Appliance Manufacturing

TurboChef Technologies, Inc., produces high-speed ovens using a combination of cooking technologies. The company's products cook food in a fraction of the time taken by conventional ovens, with quality said to be suitable enough for the finest restaurants. The products have primarily been marketed to convenience stores, sports arenas, movie theaters, restaurants, and others seeking easy-to-use, compact, high performance cooking solutions. One of the company's most visible customers is the 22,000-unit Subway sandwich chain, which in 2004 signed TurboChef to be its exclusive provider of high-speed ovens. TurboChef has also aimed for the higher end of the home market. Once primarily a technology licensing company, in 2001 TurboChef transitioned into a manufacturing and marketing organization, securing a production partner in China.

ORIGINS

TurboChef Technologies, Inc. was formed in Dallas, Texas, around 1991 by Jeffrey Bogatin, a New York investor who would be the company's chairman. A Delaware corporation was established on July 9, 1993, and the company went public in 1994. It was originally called TurboChef, Inc.; "Technologies" was added to the name in 1998.

The company's first president, Philip McKee, is credited with spurring the invention of the technology when he dared engineer Earl Winkelmann to build an oven that could cook a pizza in a minute. Winkelmann then assembled a contraption from hair dryers and microwave ovens.

It has been said that speed is one factor that adds value in any industry and TurboChef first intended the ovens to help the foodservice business reduce turnaround times. Early versions of the oven, produced at the Custom Manufacturing operation of Texas Instruments Inc., sold for less than $15,000.

The company's ovens were based on an improved form of convection technology, which circulated air at up to 60 miles per hour to penetrate the thermal barrier that normally surrounded foods in an oven. Microwave energy sources cooked the food from within; infrared elements added radiant heat. With this combination, TurboChef's ovens could cook more than ten times faster than conventional ones, while retaining more moisture in the food. However, unlike microwave ovens, they did not leave food soggy and were capable of browning and searing.

Since the ovens used a catalytic converter to filter the air, they could be installed in places without vents. They were also very easy to use and were very energy efficient. Their speed—they could cook a steak in a few minutes—meant that restaurants could keep the orders flowing with a smaller number of ovens. The ovens' air circulation and cooking patterns were controlled electronically; hardly any training was required to operate the machines.

EARLY ORDERS

Early commercial success came from the United Kingdom. Whitbread PLC, a brewer which operated more than 6,500 pubs, ordered a few hundred ovens in mid-1995. Choice Hotels International, which operated a number of leading chains in 40 countries, was another important early customer. Revenues rose from about $250,000 in 1994 to $1.2 million in 1995, while the net loss was halved to $1.6 million.

The executive suite was rearranged in 1998. After CEO Philip McKee stepped down to be vice-chairman and chief technology officer for a while and Jeffrey Bogatin resigned the chairman post (he remained a director), former Welbilt head Marion Antonini was named as chairman and acting CEO. Foodservice industry consultant Rick Caron was named president and CEO in September 1998. Jeffrey Bogatin resumed the role of chairman in March 2000.

TurboChef collaborated with Maytag Corporation for about three years beginning in the fall of 1997. The company developed an "Internet Oven" for the home during this time. Conceived with the elusive goal of the connected home in mind, the idea was to facilitate downloading recipes from the web.

The company was involved in projects around the world. London's Factory Design was hired to help create a product for the home market in Europe. The commercial oven was also being tried in Australia. Turbo-Chef posted revenues of $7.9 million in 2000, when it had about three dozen employees. A net loss of $3.8 million was attributed to cost-cutting measures.

A TURNING POINT IN 2001

Chairman and CEO Jeffrey Bogatin called the year 2001 a turning point in TurboChef's history. The relationship with Maytag ended in early 2001, with the two companies going into arbitration in a dispute over royalties and intellectual property issues. After regaining the rights to its commercial C-3 Oven in May 2001, Turbo-Chef began to manufacture and sell its own products, rather than simply licensing its technology. It set up a low-cost manufacturing base in China through a partnership with the Shandong Xiaoya Group. The Chinese government gave the Xiaoya Group a $30 million grant to build a facility to handle the production of both commercial and residential ovens. The group was more than an appliance manufacturer; it had 200 of its own stores and more than 1,000 distributors in China. Xiaoya Group had sales of $400 million a year.

TurboChef's marketing efforts were showing results. In the United Kingdom, the company landed deals from British Petroleum and other convenience store operators. At the same time the hospitality design consultancy Cini-Little was specifying TurboChef ovens for a number of U.S. sports venues it was renovating, including luxury suites, thanks to its restaurant quality results and ability to be installed without the need for expensive vents and ductwork.

The transition was a bit painful at first. Royalties from Maytag and a shorter-lived partnership with the Gas Research Institute, worth $4.8 million in 2000, disappeared. As a result, revenues slipped from nearly $8 million to $3.2 million in 2001 while the company's net loss expanded to $3.8 million.

In 2001 Subway Restaurants began testing the C-3 oven as a means of adding pizza to its menu. The C-3 was compact, ventless, and preprogrammed. It could cook pizzas nearly 90 percent more quickly than conventional ovens, a key feature for the fast-food chain.

COMPANY PERSPECTIVES

Since our inception in 1991, we at TurboChef Technologies have always been pioneers in the rapidly emerging world of speed cooking. Utilizing our patented technologies, we design, manufacture and market a variety of speed cooking solutions. Our vision of being the world leader of speed cooking comes from the renewed commitment to delivering strong competitive advantages to our customers worldwide, everyday.

NEW MANAGEMENT, NEW
MARKETS

Company Chairman and founder Jeffrey Bogatin handed CEO duties to Vince Gennaro, formerly head of Pepsi-Co's fountain beverage division, in December 2002. A new management team led by Chairman Richard E. Perlman and CEO James K. Price took over in October 2003. A few months later, they announced that the 22,000-restaurant Subway chain signed up the company as its exclusive high-speed oven supplier. TurboChef's new Tornado model shipped throughout the Subway system in the fourth quarter of 2004, helping the company become profitable with net income of $9.7 million for the year. The Tornado was billed as "the world's fastest oven," capable of cooking up to 12 times as fast as a conventional oven. In December 2004 another giant chain, Starbucks, agreed to install the ovens for a trial run at 100 stores in the Washington, D.C., area.

After a few years on the American Stock Exchange, TurboChef's shares migrated back to the NASDAQ in June 2005 under the ticker symbol OVEN. In September 2005 TurboChef bought assets of Global Appliance Technologies, Inc. in a cash and stock deal. Global Appliance developed heat transfer technology.

INTO THE HOME

After making impressive gains in the commercial arena, the team then set its sights on the much larger home market. Since there was already competition from such consumer giants as General Electric, TurboChef hired San Francisco's frog design inc. to shape a product that would stand out.

The result was the 30-inch Double Wall Speedcook model, which was unveiled at trade shows in 2006. Its styling was "retro-modern," as an executive described it in BusinessWeek Online. Though designed to look reassuringly familiar, this model was electronically controlled, like its commercial counterparts, and combined different heating technologies. In addition, it came programmed with 450 recipes.

The oven, which reduced cooking times up to 75 percent, offered busy consumers more quality time with their friends and families while promising the comfort and satisfaction of high quality home-cooked meals. The price was about $7,500.

TurboChef introduced a new commercial product in early 2006, the High h Batch Oven. Aimed at baking applications, this relied on air impingement technology to cook up to five times as fast as a convection oven. Since the High h did not have a microwave component, bakers could use metal pans with it.

Frederick C. Ingram

PRINCIPAL COMPETITORS

Aga Foodservice Group; Enodis plc; The Middleby Corporation; Viking Range Corp.

KEY DATES

1991:: TurboChef is formed as a speed cooking specialist.
1993:: Company incorporates in Delaware.
1994:: TurboChef goes public.
1995:: Revenues exceed $1 million.
1997:: Company begins short partnership with Maytag Corporation to develop oven for the home market.
2001:: TurboChef transitions from technology development company to manufacturing and sales organization.
2004:: Subway restaurant chain signs TurboChef to supply ovens to 22,000 franchises.
2005:: The Tornado, "the world's fastest oven," enters the commercial market; after a few years on the American Stock Exchange, shares migrate back to the NASDAQ.
2006:: TurboChef enters the residential market with its Speedcook Oven.