Retail Food Group has acquired mobile coffee franchise Cafe2U and Italian restaurant chain La Porchetta for a combined $31 million in its latest buying spree, off the back of reporting another strong financial year.
It is not the first time the company has splurged on acquisitions, picking up coffee-vending chain The Coffee Guy last year and pizza chains Crust Pizza and Pizza Capers in 2012.
The company, which also owns popular food chains Donut King, Brumby’s and Michel’s Patisserie, yesterday posted a net profit of $36.9m for the 2013-14 financial year and a 10.1% jump in revenue to $128.8m.
Chairman Colin Archer credited the succuss to the acquisitions of Pizza Capers and Crust, which he said had proven “a masterstroke” for the company.
Given the success of the purchases, it is no surprise Retail Food Group announced its new acquisitions alongside its earnings.
The company said it will acquire 236 Cafe2U mobile coffee franchises and 70
La Porchetta restaurants through funding from its cash reserves and existing debt facility.
Chief executive Tony Alford said the transactions represented the culmination of significant and wide-ranging acquisitive opportunity investigation and due diligence activity undertaken over the course of the past 18 months.
“[The acquisitions] demonstrate RFG’s commitment to supplementing organic growth via acquisition of quality complementary Brand Systems capable of generating enhanced earnings and increased scale,” said Alford.
A spokesperson for La Porchetta told SmartCompany this morning the chain is excited about the takeover and believes it will move the pizza brand forward.
La Porchetta chief executive Sara Pantaleo will stay on with the company.
But Andrew Simpkin, chairman of Café2U, told SmartCompany the takeover is bittersweet.
“Honestly, I have mixed feelings. I’m delighted because Retail Food Group are very big and they have lots of resources,” says Simpkin.
“But it is exactly like losing your baby.”
Simpkin says Cafe2U, which is the largest mobile coffee company in the world, will definitely benefit from the resources Retail Food Group can provide.
“There comes a time with any business when you need to invest more energy and muscle,” he says.
Simpkin says the situation is also a win for franchisees.
“This is good news for franchisees. They will be able to get benefits of scale. Such things as cups, coffee, consumables – all of the things big companies can do better than smaller ones,” he says.
Simpkin will leave the company to work on his other business Belaroma Coffee, but says managing director Derek Black will stay on with the company.
Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany Retail Food Group’s acquisition model was an excellent strategy for growth.
“It’s good economics,” says Walker.
He says there are many benefits of acquiring franchises, particularly for the franchisor, including recurring income streams and no overheads. Franchisees benefits from shared services, such as human resources and IT systems, as well as brand and operational clout.
Walker says the purchase of Cafe2U will also bring the group into a new market.
“It makes good sense to break into mobile business franchises,” he says.
“Consumers increasingly want business to reach them in different ways – online, through physical visits and through traditional bricks-and-mortar stores,” say Walker.
“It’s very clever… They have built a very strong integrated business.”
Image credit: Flickr/mujitra
Kirsten Robb is a former journalist at SmartCompany. Previously, she worked at News Corp as a property reporter for Leader Newspapers and the Herald Sun, and holds a Masters of Journalism at Melbourne University.
