SPoT Coffee (Canada) Ltd. on April 15, 2014, announced it would be opening two neighbourhood cafes in New York state, one in Glens Falls on April 17, 2014, and another in Orchard Park on April 28, 2014.
These would be the last corporate cafés to be opened by the company before the launch of its new franchise program.
“The opening of these two corporate locations marks the successful execution of SPoT Coffee’s final pre-franchise expansion phase,” said Mr. Anton Ayoub, President of SPoT Coffee.
“Our partnership with Mr. Keith Bernard, co-owner of SPoT Orchard Park, has given us the unique opportunity to develop a new SPoT Coffee café in a highly visible location of great historical significance.”
SPoT Coffee considers franchising an important step in its drive to corporate profitability, as the company expects the move will minimize share dilution while generating a faster rate of growth with comparatively lower operating costs.
Although the individual SPoT cafés have been operating profitably, on a corporate level the company 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,” said David Freeman, SPoT Coffee’s Vice President of Corporate Development, in a recent interview with SmallCapPower.com
“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.”
Mr. Freeman added that SPoT is set to hire a Head of Franchising and plans to have the franchise disclosure document from the state of New York during the second half of the year, with franchises being sold shortly thereafter. He says the company has had a lot of unsolicited interest in its franchises to date.
SPoT Coffee designs, builds, and operates community-oriented cafés mainly in smaller urban centers, which results in lower occupancy costs, minimal labour transiency, and thus positively impacts the bottom line. The company is also planning to wholesale its coffee to commercial outlets in 2014.
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Source: press release
