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Muscle Maker $20M mini-IPO moves forward

The chain plans to open 42 stores and break even next year.

Muscle Maker Grill plans to raise nearly $20 million with its mini initial public offering and reach breakeven on its bottom line by the end of next year.

The healthy fast-casual chain announced plans for a Regulation A+ IPO, also known as a mini IPO, in the fall and added further details about its offering and its plans for the future growth in a regulatory filing and investor presentation this week.

Mini-IPOs enable retail investors to buy the stock, relieving smaller companies of the need for institutional demand to go public. It also gives companies with a large customer footprint like restaurants to reach out to loyal customers for capital.

Muscle Maker Grill is looking to sell 4.2 million shares at $4.75 per share, raising $19.95 million. That’s just about at the $20 million the company estimated in its initial September filing

The stock will trade on the NYSE American exchange. The debut date has not yet been decided.

The chain is struggling financially. It lost nearly $5.8 million in the six months ended June 30, much wider than the $1.1 million it lost in the comparable period of 2016.

Muscle Maker grill attributed the loss to an increase in the amortization of debt to a “former related party,” higher costs due to the potential IPO and employee stock grants.

But 2018 is shaping up to be a “blast off” year that will see the company break even, CEO Bob Morgan said on an investor web presentation.

Fourth-quarter corporate store sales growth is predicted to be 22 percent, Morgan said. That’s just slightly lower than the average sales growth of 25 percent.

The holiday times of the fourth quarter are traditionally “our worst time” where people “kind of fall off the wagon a little bit” when it comes to healthy eating choices, Morgan said. So, the predicted sales are bode very well for next year, he added.

Muscle Maker intends to add 42 more locations next year to the 57 currently has. And a big focus will be on locations in military bases.

There are plans to open restaurants at the U.S. Military Academy at West Point, N.Y., Fort Bragg, N.C., Quantico, Va. and Offutt Air Force Base, Neb.

With 480 military bases in the U.S., the chain is “looking to get a big contract with the military” as there is “a lot of good things going on with the Department of Defense,” Morgan said.

In addition, Muscle Maker is looking to expand internationally.

It opened its first international store in Kuwait less than a month ago and is now negotiating a 40-store deal in India. It is also talking to potential partners and franchisees in Australia, Dubai and Canada.

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