Mugg & Bean to Move Into Rural Areas After Famous Brands
FAMOUS Brands would look at placing the latest Mugg & Bean franchise restaurants in rural areas as part of its growth strategy for its newly acquired brand, Kevin Hedderwick, the chief operating officer at the quick-service restaurant franchisor, said.
Hedderwick said the coffee-themed restaurants were generally located in major shopping centres but had recently started to move into areas that were not necessarily urban, with smaller models.
Famous Brands will pay R104 million for the South African and African operations of Mugg & Bean.
At present, there are 96 Mugg & Bean restaurants across the continent and the plan is to increase this number to 120 within five years, a feat Hedderwick said would be easily achieved. To set up a store like this will cost about R10 000 per square metre excluding VAT, depending on the size.
The transaction is subject to Famous Brands concluding a satisfactory due diligence within 20 business days, approval by the board of directors and the procurement within 30 days of the conclusion of a due diligence of the necessary funding.
The effective date of the transaction is September 1. Mugg & Bean’s Ben Filmalter and Michael Maree would remain part of the management team for three months to ensure a smooth handover.
“Firstly, we are trying to unlock value for our shareholders. This is also designed to improve our position in the coffee-themed space,” said Hedderwick.
Famous Brands already owns House of Coffees, which is fairly similar to its latest buy. But Hedderwick said House of Coffees was a smaller brand of 29 restaurants, which was different from Mugg & Bean and the two brands had co-existed alongside each other.
One analyst who did not want to be named said she was surprised by Famous Brands’ choice because she thought it had prioritised searching for a chicken brand.
Said the analyst: “I thought the R104m was a bit low because when you look at the way the brand has been positioned, the decor inside, it looked like Mugg & Bean was worth a lot more. We don’t know their financials so it is probably not making as much as we thought.”
Filmalter said sales at Mugg & Bean were just over R500m a year. Impact on earnings in the first year would be neutral because of the interest that has to be paid on the debt.
Filmalter said they decided to sell to open up growth opportunities for their franchisees because they were limited to one brand.
He and Maree would continue to own and run the Mugg & Bean brand internationally. Already, they have 12 restaurants in the Middle East and they are looking at setting up in North America.
Source: BusinessReport, By SLINDILE KHANYILE