Skip navigation
Freshii takes another shot at Subway Freshii

Freshii same-store sales rise 5.1% despite challenging quarter

Health-focused chain feels impact of slowing development projections

Freshii Inc. said this week that its same-store sales increased 5.1 percent in the quarter ended Sept. 24, the chain’s 18th straight quarter of growth.

Executives with the Toronto-based company believe the results testify to their brand’s strength, despite what they admit was a “challenging” quarter thanks to a dramatic reset of its development projections in September.

“Despite a challenging quarter for the company,” CEO Matthew Corrin said, “I remain extremely energized about the momentum of our brand.”

The 345-unit, health-focused, fast-casual chain raised its expectations for same-store sales in 2017, to “approximately 5 percent” from its previous projection of 3 percent to 4 percent.

In September, Freshii closed 18 restaurants inside Target stores and also dramatically cut its projections for development, saying it now expects to have 730 to 760 locations by the end of 2019. That’s considerably slower than its previous projection of between 810 and 840.

The new projections sent the company’s stock tumbling. Freshii had gone public earlier this year in part based on its rapid expansion of a limited-service franchise that sells healthy options.

The stock was trading at more than C$14 per share at one point but is now trading around C$6.

On their earnings call, Freshii executives sought to assuage concerns among investors that its unit growth is now substandard. The company noted that it expects to finish the year with 30 percent more locations than it had at this time last year. “That’s industry leading unit growth,” Corrin said.

And executives said that the company has a strong pipeline of new franchisees, while the number of existing franchisees building new units continues to grow. The number of applications from franchisees increased 47 percent in the quarter, Corrin said. And the company has 130 locations under development for 2018 and a total of 375 under contract.

Freshii is hiring more workers to help manage unit growth in the coming years.

“We’ve learned a lot this year about managing a greater number of openings in new markets and the strain it puts on the company’s development team,” Corrin said.

Meanwhile, the company recently announced a deal to serve food aboard Air Canada flights. Corrin believes the partnership with the airline proves that its non-traditional deals continue to work — despite the failure of the Target deal. 

Such new deals could include airports, high schools and college campuses.

“The recent termination of our partnership with Target notwithstanding, I remain extremely excited about the prospects for other nontraditional partnerships in the future,” Corrin said. 

“We learned a lot from the Target pilot,” he added. “We’re applying that to other nontraditional retail partnerships.”

Revenue at the company was $4.5 million, up 8 percent over the same period a year ago. The company reported a net loss of $988,000, down from a profit of $601,000 a year ago.

Corrin believes his chain’s ability to consistently grow same-store sales show the brand has legs for the long-term. The company’s same-store sales in the quarter were up more than 10 percent on a two-year basis.

Jefferies Analyst Andrew Charles called the same-store sales strength “a step in the right direction” following the September revision.

Said Corrin: “I think we are the beneficiary of the accelerating health and wellness trend. As we innovate around different dayparts, we see benefit around that.”

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish