The owner of Ottawa’s Big Rig Kitchen & Brewery and a host of other food franchises announced a deal Monday to buy troubled coffee chain Second Cup Coffee Co. and has big plans for the brand, including opening more than 100 new locations.
Foodtastic CEO Peter Mammas said Monday the Quebec-based company is buying the Canadian coffee retailer and roaster from Aegis Brands Inc. in part for its national network of stores and employees.
Ottawa-based coffee retailer Bridgehead, which was acquired by Aegis in 2020, is not part of the transaction.
“Second Cup has operations teams across Canada and we want to take our other brands out of Quebec and Ontario and into other parts of Canada, so we're going to use that platform to do it,'' Mammas said in an interview with the Canadian Press. “It gives us more of a national footprint.”
Mississauga-based Aegis didn't disclose Second Cup's sale price but said it includes $14 million in cash, plus a post-closing earn-out.
In a statement, Aegis said it will now focus on “further development” of the Bridgehead brand as well as its Hemisphere Cannabis operation, “while seeking out exciting new growth and acquisition opportunities.”
Aegis acquired Bridgehead last January in a $9.5-million cash-and-share deal. The southern Ontario firm said it wanted to grow Bridgehead beyond its Ottawa base, but its plans to expand the coffee retailer into the Toronto market last year were put on hold due to the pandemic.
Foodtastic, whose multiple restaurant concepts include Big Rig, Chocolato, La Belle & La Boeuf, Rotisseries Benny and Souvlaki Bar, says it also has big plans to grow the Second Cup brand.
Foodtastic will begin selling Second Cup coffee in all of the company's 130 restaurant locations within six months of acquiring the chain, Mammas said.
The company also plans to expand the coffee chain to about 300 locations within 36 months, up from 190 locations currently, he said.
But the store count will likely drop before the expansion begins, Mammas said, as Second Cup first goes through a “stabilization period.”
Currently, the coffee shop's locations are concentrated in downtown cores, malls and transit locations, he said.
Those locations are struggling the most, Mammas said, while the chain's suburban counterparts are faring better.
Some unprofitable locations will likely close, though they could reopen as one of Foodtastic's other brands, he said.
Some Second Cup locations just need to be renovated, Mammas said.
“Some locations look great but others look like they're still in the ’80s,” he said. “They haven't been renovated and they look a little worn out.”
Foodtastic's equity partner is Oaktree Capital, an asset management firm majority owned by Brookfield Asset Management, which puts the Montreal-based company on strong financial footing, he said.
“Our balance sheet is very strong, and we're really well-financed,” Mammas said. “I think it's going to be easier for the franchisees to secure the capital required to renovate.”
“By mid to late next year we'll probably be reopening locations, and we definitely want to be coast to coast,” he added.
“Our main focus is to keep as many Second Cups open until mid-2022,” he said. “After that we're confident the brand itself will do well, and at that point we'll start expanding.”
– With files from OBJ staff