'I'm ready to make deals': Foodtastic CEO gears up for more acquisitions
Freshii is the Montreal-based company's latest acquisition
If you operate a chain of restaurants in Canada, Peter Mammas wants to hear from you.
The chief executive officer of Foodtastic Inc. says the company is in the midst of expanding, and looking for new restaurants to add to its growing list of acquisitions. The Montreal-based company's latest press release, announcing a $175 million debt facility to fund even more acquisitions, included Mammas' cell phone number at the end with a note saying "North American brands interested in exploring a transaction with Foodtastic are encouraged to contact Peter Mammas directly."
"It's simple. If people don't call me, I can't make deals," Mammas said in an interview with Yahoo Finance Canada.
"I'm ready to make deals."
Foodtastic has come a long way from being a mostly Quebec-focused restaurant franchisor with a few brands under its belt, to a major restaurant owner with sales topping $1 billion. Last month, the company acquired Freshii in an all-cash transaction deal valued at $74.4 million, the latest in a string of acquisitions that have significantly grown its restaurant business.
The company started in 2016, operating five Quebec restaurants, including Souvlaki Bar, La Belle et La Boeuf, Carlos and Pepe's, and Nickels, the deli first opened in the 1990s by Celine Dion. In 2018, Foodtastic received a $47 million investment from an investment firm with the aim of finding restaurant concepts to acquire.
But it wasn't until the pandemic struck that the company's expansion plans were thrown into overdrive. With the help of an equity investment from Restaurant Royalty Partners, a joint venture between Brookfield Asset Management-backed Oaktree Capital and JHR Capital LLC, Foodtastic started buying up struggling companies. In March 2020, the company's restaurant sales were at about $120 million. With its most recent acquisitions, Mammas says Foodtastic's sales will now top more than $1 billion in sales in Canada.
"We knew we wanted to be a major player in Canada and hopefully one day in North America. The COVID-19 pandemic accelerated our plans," Mammas said.
"A lot of restaurants were having problems, be it financial or with staffing. And we have a platform, we have a lot of money behind us, so we just started buying what made sense."
The first significant purchase of the acquisition spree was Second Cup Coffee in early 2021. A few months later, Foodtastic acquired vegan restaurant brand Copper Branch. It then purchased the Milestones restaurant chain from Recipe Unlimited Corp, followed by Pita Pit. In 2022, it acquired a majority interest in Shoeless Joe's Sports Grill, Quesada Restaurants and now Freshii.
Mammas says when it comes to acquisitions, it looks for companies that are either undervalued and have plenty of opportunity to grow, or ones that are struggling and in need of fixing.
Freshii fits into both categories.
"It's both a brand we're going to fix, and then one we are going to grow as well," Mammas said.
Mammas says its research showed that consumers and franchise owners love the brand, but Freshii was hurting after the COVID-19 pandemic. With many of Freshii's locations in downtown cores and highly dependent on lunchtime crowds, sales fell dramatically when the pandemic struck and employees started working from home. Mammas also says the company was spending just a fraction of its marketing budget, an area he sees as a major opportunity going forward.
"We're already starting with a brand that's loved by both the customers and the franchisees," Mammas said.
"We're going to increase the ad spend, get our word out there, and the other thing that we're really going to focus on is culinary. We want to make it more relevant, more trendy and more tasty. It's going to be a winning combination when we put it all together."
Mammas says the first step in acquiring a company is meeting with employees to learn the ins and outs of the business. It then integrates the acquired business into the Foodtastic system, which includes shared services across procurement, finance, legal, and real estate.
Mammas, who worked in the industry from a young age and first sold his restaurant business in 2007, isn't worried about expanding too quickly. He says the company's shared services allow integrations to happen easily and quickly, and that the operations teams across each business "allow us to keep adding more brands without making it more difficult overall."
Foodtastic has set its sights on reaching $1.5 billion in sales within 30 months, and $2 billion in sales within five years. Mammas, who stepped out of retirement in 2016 to start Foodtastic, says he plans on doing that through further acquisitions.
"We're going to continue to grow through opportunities in the spaces that we're not in," Mammas said.
"We're interested in pizza, breakfast and Asian restaurant chains in Canada. And then we're going to start looking south of the border. There's lots to come."
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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