Thursday 05 October 2023

CANADA – Second Cup announces major restructuring to enhance franchisee profitability

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MISSISSAUGA, ON – The Second Cup Ltd. President and CEO, Ms. Alix Box, announced yesterday significant first steps in the Company’s revitalization strategy to improve its level of performance, and franchisee satisfaction and profitability.

As previously disclosed, Second Cup, the Canadian specialty coffee retailer with more than 350 stores across Canada, has embarked on a journey of transformation to restore the Company to its place of prominence and greater profitability.

Initiatives announced today include streamlining the organization and changing the Second Cup franchise economic model.

Coffee Central Re-engineered

After a complete organizational review, the Company has taken steps to reduce its infrastructure.

This right-sizing of the Company was achieved by re-engineering its office, known as Coffee Central, in Mississauga to a more focused team, streamlining roles and responsibilities and creating new high-performing, multi-disciplinary positions.

The Coffee Central team is being reduced from 77 to 53 employees. As part of this initiative, the Company expects to record one-time charges of approximately $1.5 million, mainly related to severance expenses, during the second quarter of 2014 and yield savings of approximately $2.3 million annualized.

“If we look back at the history of Second Cup, the Company had more stores and operated more effectively with a smaller Coffee Central team and lower overhead,” says Ms. Box.

“With this review we are correcting the imbalance and getting back to our entrepreneurial roots with a more efficient team who will make faster decisions and provide more responsive and better service to our franchisees.  Our new team is 100% dedicated to delivering the best specialty coffee experience and maximizing the long-term success of Second Cup.”

Benefiting Franchisees

Second Cup plans to redeploy the reduced expenses of approximately $2.3 million annualized to increase franchisee profitability.

This profit improvement is expected to result from a combination of royalty reductions, co-op marketing fee reductions and procurement savings. A typical store is expected to increase its annual profitability by approximately $14,800.

Management believes these changes to the economic model will offset the expense savings and will have no impact on Second Cup’s operating income. Building franchisee trust and improving store sales and profitability are two immediate priorities for Second Cup and today’s announcement is a positive first step in this direction.

“Second Cup is very fortunate to have passionate and dedicated franchisees and our goal is to build on this passion,” says Ms. Box.  “We believe that this change in fee structure will have a meaningful impact on franchisees.  We also believe it will go a long way toward rebuilding trust with our franchisees, which will in turn spawn future growth.”

“This new fee structure shows that the organization is committed to re-instilling a collaborative and transparent relationship with franchisees.  We were told this would be a year of change, and today is a great new beginning for the future of Second Cup,” says Terry Lee, a Hamilton franchisee and co-chair of the Second Cup Advisory Council.

“Reducing fees to benefit franchisees clearly demonstrates that Coffee Central is listening and is focused on returning Second Cup to greater success,” adds Ash Pescott, an Edmonton franchisee and co-chair of the Second Cup Advisory Council.

A Revolution, Not an Evolution

“This is just the start of our transformation at Second Cup and it is both exciting and necessary for long-term value creation,” adds Ms. Box.

“The revitalization of the brand will be a revolution, not an evolution.  Our journey will take time and while our objectives are aggressive, they are achievable.  Today represents an important first step towards our goals, and we will now focus on creating the new Second Cup store of the future and developing our strategic plan to build for future greatness.”

Founded in 1975, The Second Cup Ltd. is a Canadian specialty coffee retailer operating more than 350 stores across the country.

Source: press release

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