Imagine taking a popular community café that serves great food and being able to duplicate that in other small towns and cities throughout North America. That would be a unique and original recipe for success and that’s how SPoT Coffee (Canada) Ltd. (TSXV: SPP) plans to stand out among the other corporate coffee house crowd.
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“Our company doesn’t see Starbuck’s as our main competitor. We have a very different business model in that we offer high quality lighter meals, signature sandwiches, and freshly prepared home-made pizza to complement our award winning gourmet coffee and complete our customers’ dining experience.” said David Freeman, SPoT Coffee’s Vice President of Corporate Development, adding that companies such as Starbucks are coffee houses occupying smaller premises and relying on getting their customers in and out of their stores quickly, whereas SPoT Coffee is a community gathering full café modeled closely after the Parisian café model to provide the community and its neighbourhood customers a home familiar and warm environment for them to enjoy with their families and friends.
Mr. Freeman explained that, during the past few years, SPoT has been in the process of perfecting its business model, which involves achieving operational efficiencies, refining product menu, completing and testing its training manuals, operating and reporting systems, site selection and café design. Although the SPoT cafés have been operating profitably, on a corporate level SPoT Coffee has been focused on building its infrastructure and business model for it to become consistently and all-out profitable in the near future.
“It costs us $550,000 to $700,000, depending on the size and location of the cafe, to open up a new location. So no matter how well each café is doing, the capital required to develop new corporate cafés kept mounting while building the infrastructure needed for the proper development of the franchise business model.” Mr. Freeman added: “This has inevitably impacted the overall profitability of the company, however with the launch of the franchise model, we strongly believe that we will achieve the targeted results of growing and sustainable profits without share dilution or carrying larger debt burden.”
To that end, the company announced on February 5, 2014, that it is completing its platform of 12 cafés upon which it intends to build a franchise business model for its profitable cafés in the State of New York. SPoT believes it now has the necessary infrastructure upon which it can build its successful franchise program.
The franchise business model is expected to minimize share dilution and enhance shareholder value for the company so it will hopefully achieve a faster rate of growth with comparatively lower operating costs than those associated with the management of corporate-owned cafés. This should ultimately result in materializing the company’s objectives of increasing profitability and long term growth.
Mr. Freeman estimates that between 40% and 60% of a café revenue, depending on location, is from the higher-margin beverage products. Its customers will often order food with their coffee which translates into a higher sales individual ticket than from otherwise only coffee orders. SPoT Coffee targets communities in smaller urban centers, which results in lower occupancy costs and minimal labour transiency. This positively impacts the bottom line.
SPoT Coffee plans to expand its commercial sales, push forward with its previously-announced plans to distribute its wholesale coffee, and aggressively grow the revenue, profitability and value of the Company in 2014.
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About SPoT Coffee:
SPoT Coffee (Canada) Ltd. (TSXV: SPP) trades on the TSX Venture Exchange under the symbol SPP. SPoT designs, builds and operates community oriented cafés that provide its customers with the highest quality service, signature made-to-order meals and the world’s finest in-house roasted gourmet coffee. Each SPoT café is distinctively designed to suit their local neighbourhoods, creating warm and friendly gathering places for the community. SPoT’s commercial business focuses on retail stores, business accounts and third party resellers such as universities and hospitals.
Disclosure
SPoT Coffee is a featured sponsored company and has paid SmallCapPower.com a fee for coverage.
