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Freshii stock plunges after company posts loss

Chain puts hope in “enhanced openings” to drive future sales

Freshii Inc. stock fell almost 20 percent on Thursday, after the company reported a net loss despite a 4.2 percent same-store sales increase in the second quarter ended June 25.

The Toronto-based chain of fast-casual health-food restaurants hit a low of just over $8 per share, in Canadian dollars — its lowest point since the company’s January initial public offering. It’s also well below the C$11.50 offering price.  

Freshii reported a net loss of $227,000 in U.S. dollar for the period, down from a profit of just more than $1 million in the same period a year ago. Revenue in the quarter was flat at $4.7 million

The chain’s same-store sales increased more than 11 percent on a two-year basis, and its quarterly increase was the 17th straight for the company. “These results are particularly impressive in light of the results posted by some of our peers,” company founder and CEO Matthew Corrin said on the company’s earnings call.

Freshii said on Thursday that it has acquired its Chicago Master Franchise Agreement for $4.15 million — lower than the $5.1 million price the company initially said it would pay for the market.

The acquisition will give Freshii full royalties paid by operators in the Chicago market.

“We believe we acquired a royalty stream at a highly attractive price for shareholders,” Corrin said.

Company executives believe they will finish the year having opened 150 to 160 new locations, which would give the company well over 400 locations. It expects to have more than 800 by the end of 2019.

Executives believe that they have a strategy in place to drive more sales at these new locations with an opening strategy called “enhanced openings,” or e-openings.

Essentially, store operators will start selling catering orders as well as some meal boxes and juice cleanses before the stores open their doors to customers. Eleven of the 31 locations opened in the quarter were opened this way.

The openings are only for existing operators who are opening additional locations.

The idea, said Corrin, is to drive interest in the locations before they are officially open.

“The existing partner can build customer excitement, loyalty and sales at the new stores before they officially open their doors,” Corrin said. “It allows our franchise partners to earn revenue prior to opening.”

Executives believe that the enhanced openings strategy could enable the locations to build more sales over the long term.

“As new guests start to taste food and enjoy our energized offerings, our store generates guest buzz, loyalty and repeat usage more quickly, and enhances sales once the front doors do open,” Corrin said.

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

TAGS: Finance
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