Cara Operations Limited (TSX:CARA) (“Cara”) announces today that it has acquired a majority ownership interest in Original Joe’s Franchise Group Inc. (“Original Joe’s”) for $93 million. $90.0 million of Cara’s $93.0 million purchase price was used by Original Joe’s to re-acquire its trademarks and royalty rights from Diversified Royalty Corp (TSX:DIV) (“DIV”). Cara has funded its $93.0 million investment in Original Joe’s by drawing on its credit facility.
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Derek Doke, President and Chief Executive Officer of Original Joe’s, commented, “Our existing management team will continue to be located in Calgary, Alberta and remain in charge of Original Joe’s, however, we are excited about the opportunities our partnership with Cara will bring for our business, associates and franchise partners.”
Cara’s Chief Executive Officer, Bill Gregson, commented, “With the majority of Original Joe’s restaurants located in Western Canada, an area where Cara was previously under-represented, this acquisition complements Cara’s existing network of restaurants.” Mr. Gregson added, “We will now begin combining our scale and expertise in pursuit of synergies and will rely on Original Joe’s proven management team, headed by Derek, to continue running the business.”
Original Joe’s 100 restaurants generate approximately $250 million in annual System Sales and approximately $14.7 million in Normalized Operating EBITDA before synergies. Now after Cara’s successful acquisition of St-Hubert and Original Joe’s, Cara’s total annual System Sales are projected to increase from $1.9 billion to $2.7 billion. With the addition of 122 restaurants from the St-Hubert acquisition and 100 restaurants from the Original Joe’s acquisition, Cara will have 1,227 restaurants in its network.
About Original Joe’s
Founded in 2000, Original Joe’s is a multi-brand restaurant company based in Calgary, Alberta. As at September 25, 2016, Original Joe’s had 100 restaurants, comprised of 66 Original Joe’s, 24 State & Main and 10 Elephant & Castle locations. 1 State & Main and 6 Elephant & Castle locations are located in the United States – Original Joe’s remaining 93 locations are located in Canada and predominantly in Western Canada. Of the 93 Canadian locations, 19 are in British Columbia, 52 are in Alberta, 8 are in Saskatchewan, 5 are in Manitoba and 9 are in Ontario. Of Original Joe’s 100 total locations, 20% are franchised, 44% are corporately-owned and 36% are partially owned as a joint venture with owner-operators.
These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. The Company uses non IFRS measures including “System Sales” and “Normalized Operating EBITDA” to provide investors with supplemental measures of its operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that securities analysts, investors and other interested parties frequently use non IFRS measures in the evaluation of issuers. The Company’s management also uses non IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets, and to determine components of management compensation.
“System Sales” represents top‑line sales received from its food processing and distribution division, and sales from restaurant guests at both corporate and franchise restaurants including take‑out and delivery customer orders. System Sales includes sales from both established restaurants as well as new restaurants. Management believes System Sales provides meaningful information to investors regarding the size of Cara’s restaurant network, the total market share of the Company’s brands and the overall financial performance of its brands and restaurant owner base, which ultimately impacts Cara’s consolidated financial performance.
“Normalized Operating EBITDA” is defined as Original Joe’s Operating EBITDA adjusted for certain expenses that are not anticipated to recur post-closing and it also includes normalizing, run-rate adjustments for restaurants that were opened for a partial year (both closures as well as new openings).
Certain statements in this press release may constitute “forward-looking” statements within the meaning of applicable Canadian securities legislation which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or the industry in which they operate, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this press release, such statements use words such as “may”, “will”, “expect”, “believe”, “plan” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this new release. These forward-looking statements involve a number of risks and uncertainties, including those related to: (a) the Company’s ability to maintain profitability and manage its growth including SRS Growth, System Sales Growth, increases in net income, Operating EBITDA and Operating EBITDA Margin on System Sales (b) competition in the industry in which the Company operates; (c) the general state of the economy; (d) integration of acquisitions by the Company; (e) risk of future legal proceedings against the Company. These risk factors and others are discussed in detail under the heading “Risk Factors” in the Company’s Annual Information Form dated March 3, 2016. New risk factors may arise from time to time and it is not possible for management of the Company to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance or achievements of the Company to be materially different from those contained in forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward-looking statements contained in this press release are based upon what management believes to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this press release.
Founded in 1883, Cara is Canada’s oldest and largest full-service restaurant company. Cara franchises and/or operates some of the most recognized brands in the country including Swiss Chalet, Harvey’s, St-Hubert, Milestones, Montana’s, Kelsey’s, East Side Mario’s, Casey’s, New York Fries, Prime Pubs, Bier Markt and Landing restaurants. As at September 25, 2016, Cara had 1,127 restaurants, 1,080 of which were located in Canada and the remaining 47 locations were located internationally. 88% of Cara’s restaurants are operated by franchisees and 59% of Cara’s locations are based in Ontario. Cara’s shares trade on the Toronto Stock Exchange under the ticker symbol CARA. More information about the Company is available at www.cara.com.
SOURCE Cara Operations Limited