Australian franchise group buys The Coffee Guy

November 2012 - Listed Australian franchisor Retail Food Group (RFG) has announced that it is to buy The Coffee Guy, New Zealand’s leading mobile coffee franchise.

Retail Food Group (RFG) has advised the Australian Stock Exchange that it has entered into a conditional agreement to acquire the business and intellectual property assets of The Coffee Guy Group.

The Coffee Guy was established by founder Richard Karam in 2005 and now represents the largest mobile and portable coffee franchise system in New Zealand with 55 espresso vans around New Zealand. Recently, the company launched new retail formats including drive-thru espresso kiosks and hole-in-the-wall espresso bars. It has recently finalised the design and construction of a ‘fixed container’ site model.

RFG is also the franchisor for Donut King, Michel’s Patisserie, Brumby’s Bakery, bb’s café, Pizza Capers Gourmet Kitchen, Crust Gourmet Pizza Bar and Esquires Coffee Houses brands, with a combined total of around 1,350 outlets.

In its press release, RFG CEO Tony Alford noted that, ‘The Coffee Guy concept incorporates proprietary mobile coffee van technology, conspicuous brand imagery, van and outlet livery, an uncomplicated operational and franchisee service structure, relatively inexpensive new franchisee entry costs and demonstrated capacity for organic growth.’

‘Importantly, these attributes characterise The Coffee Guy as a system that offers significant transportability and opportunity for international exploitation amongst an industry segment ripe for consolidation which has been a key driver of RFG’s long-term interest in this business model.’

‘The transaction not only increases RFG’s penetration outside of shopping centres; importantly it further fortifies RFG’s existing investment in coffee by facilitating entry into an allied sector (mobile) whilst assuring continued supply into The Coffee Guy system of roasted coffee and allied products by RFG-owned Evolution Coffee Roasters,’ he said.

The purchase is the third acquisition of New Zealand-run companies by RFG in recent years. In February 2011, RFG bought the Australian and New Zealand rights for Esquires Coffee Houses, while it bought Evolution Coffee Roasters in September 2011. The company opened the first branch of Esquires in Australia earlier this year.

According to the ASX advisory, the price for the business is circa NZ$5.5m which represents an EV/EBIT multiple of approximately 5.5X. Completion of the transaction is anticipated in late November 2012; however, it remains subject to usual and ordinary conditions including satisfactory completion of RFG’s due diligence enquiries.

In a move that will reassure existing franchisees, Richard Karam will remain with the business following completion and lead international expansion of the brand, including the introduction of the concept into the Australian marketplace.

He said, ‘During the past seven years we have focused on developing a world-class system and brand and this transaction will allow us to accelerate our growth plans. RFG’s future stewardship of The Coffee Guy will also provide management depth and international franchising expertise that will ensure our franchisees obtain enhanced operational and marketing support along with growing brand recognition as we expand our retail presence.’