Retail Food Group swallows The Coffee Guy Group for $4.36 million

Just months after adding pizza chain Crust to its menu Retail Food Group has acquired New Zealand company The Coffee Guy Group for NZ$5.5 million ($A4.36m).

TCGG was started by Richard Karam in 2005 out of a single van and is now the largest mobile and portable coffee franchise system in New Zealand, with 55 espresso vans along with drive-through espresso kiosks and “hole in the wall” espresso bars.

RFG paid a multiple of 5.5 times TCGG’s enterprise value to its earnings before interest and taxes and plans to bring the coffee chain to Australia.

RFG chief executive Tony Alford said RFG was attracted by the coffee chain’s concept with 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.

“These attributes characterise TCGG 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,” Alford said.

“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 TCGG system of roasted coffee and allied products by RFG owned Evolution Coffee Roasters.”

Completion of the transaction is anticipated in late November 2012 but remains subject to usual and ordinary conditions including satisfactory completion of RFG’s due diligence enquiries.

RFG will be hoping its due diligence does not result in having to pay almost double its offer price as was the case in its acquisition of Crust.

Karam will remain with the business following completion and ultimately lead the introduction of the concept into, initially, the Australian marketplace.

“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,” Karam said.

“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.”

TCGG now joins RFG’s other franchises Crust, Donut King, Michel’s Patisserie, Brumby’s Bakery, bb’s café, Pizza Capers Gourmet Kitchen, and Esquires Coffee Houses, bringing RFG up to 1350 outlets.

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