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SPoT Coffee (Canada) President and CEO Anton Ayoub explains how its community-centric cafes offer an early-stage investment opportunity as his company is set to franchise its successful business model. SPoT, though, is more than just coffee and it plans to launch other high-margin, income streams in the months ahead.
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Video Transcription:
Announcer: The Small Cap Power CEO Interview.
Mark Thorburn: Can you tell us about SPoT Coffee and your role there?
Anton Ayoub: My name is Anton Ayoub. I am the President and CEO of SPoT Coffee. SPoT Coffee trades on the Toronto Venture Exchange under the symbol SPP-V. SPoT Coffee owns and operates an upscale chain of cafes as well as selling its own brand of specialty coffee.
Mark Thorburn: Can you explain the SPoT Coffee cafe concept?
Anton Ayoub: SPoT Coffee operates truly neighborhood cafes. The cafes are designed and built to suit the community they are in. What’s taken into the design, for example, how old is the neighborhood, the culture in that particular neighbourhood, and aspects like that. We include in our cafes a mural that actually depicts the neighborhood, its history, the main landmarks in it, things like this. Given the size of our cafes, which is a fair size of about 3,000 square feet, the cafe itself becomes a meeting place.
Mark Thorburn: What differentiates SPoT’s coffee from other gourmet coffees?
Anton Ayoub: We start with green beans that are of the highest grade Arabica. It’s artisan roasted. We roast in small batches to maintain the high quality.
We have been moving more and more into the single origin coffee, and sometimes we take it one step further and we go into beans from one single farm. So the end product that you get is one of the highest quality. You can have not only great coffee, but a full light meal, including all kinds of Panini sandwiches, wraps, and pizza.
Mark Thorburn: What are the general operating economics of a SPoT cafe?
Anton Ayoub: A SPoT cafe falls into the casual quick serve. On average, our revenue exceeds $1 million, although some cafes, of course, go much more than that. As for the net income, it’s about 15% of sales. We are very careful about the ratios under which the cafes operate. The food costs, for example, we would like to keep it at around 33%. We are very careful about labor cost, which falls in a range of between 25% to 28%, depending on the cafe,and the bottom line is what I mentioned before of about 15%. We have been planning to go into the franchise model, and there we believe there are some new economics that fall in with even more efficiencies that will make this model work very well.
Mark Thorburn: So do you have plans to add more stores?
Anton Ayoub: Absolutely, and this is going to be done through the franchising model. We are very busy right now on structuring the complete system of the franchise. We have, over the last few years, put very solid foundations and built the infrastructure to be able to launch a franchise. All of these systems that are now in place are going to be adapted to franchising, and soon we’ll be signing up franchisees. I think this is a great way to grow the company at minimal dilution to the shareholder while achieving growth for the company and its revenue.
Mark Thorburn: So aside from your cafes, what are your other revenue lines?
Anton Ayoub: The cafes offer catering, and that’s a fairly important revenue line. At the level of the roasting facility, we are promoting more and more our coffee namesake to retailers and other businesses.
Mark Thorburn: Are there any other pending revenue lines?
Anton Ayoub: The way we see that, it’s mainly in the wholesale production, packaging, and sale of foods. We have on the drawing board a major program in that category. Another income stream and increase in revenue could come from our expansion outside our current geographical area and opening new markets in the Middle East, in the Gulf, in Saudi Arabia where we have already some really good and strong existing relationships.
Mark Thorburn: Can you summarize why investors should look at SPoT Coffee?
Anton Ayoub: SPoT, in 2014, is entering into its most exciting and dynamic phase of operations. SPoT has the infrastructure and the strong foundation to implement the franchising model successfully. Also SPoT, as we mentioned, is planning to launch other high margin, additional income streams that would increase its revenue, and, as such, I think 2014 would be a very healthy and good year for SPoT in terms of moving into profitability. As we reach new goals and implement the new programs we have, we will be regularly reporting to our shareholders on our progress.
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