VAUGHAN, Ont. — Recipe Unlimited (formerly Cara Operations) recently reported results for the fourth quarter and full year ended Dec. 30, 2018.
The company achieved positive results — a five-per-cent dividend increase — due largely to four acquisitions made in 2018, which totaled hundreds of locations. Acquisitions completed during fiscal 2018 include Keg Restaurants Ltd. (KRL) and Marigold and Onions Ltd. — a Toronto-based catering company. The acquisition of Marigold and Onions Ltd., as well as retail sales from Swiss Chalet-branded products, also helped to boost sales.
At year end, Recipe Unlimited’s portfolio comprised 1,382 restaurant locations. As of Dec. 30, 2018, the company had 19 brands, 85 per cent of which are operated by franchisees and joint-venture partners.
“2018 was a successful year for Recipe as we continue to deliver strong and consecutive quarter-over-quarter growth in system sales, operating EBITDA and free cash flows,” noted Frank Hennessey, CEO of Recipe Unlimited.
Hennessey added that, in 2018, growth in Recipe’s core business, as well as the merger with KRL, helped achieve total system sales of $3.4 billion — a 22.9-per-cent increase over 2017. System sales grew $130.5 million to $905.4 million during the fourth quarter of 2018, compared to $774.9 million during the fourth quarter of 2017, representing an increase of 16.8 per cent.
The increase in system sales is primarily related to same-restaurant-sales increases for the year and the additions of Pickle Barrel in December 2017 and The Keg in February 2018. These positive results were somewhat tempered by The Keg merger, as higher net-central-overhead costs and royalty payments to The Keg Royalties Income Fund are expected to reduce Recipe’s operating-EBITDA margin on system sales below the target seven-to-eight per cent range. However, the company reported operating EBITDA was within the company’s target of seven-to-eight per cent in Q4, showing improvement from Q2 and Q3.
Corporate-restaurant profitability for Q4 and year-end 2018 was 10.7 per cent and 10.7 per cent, respectively, compared to 9.8 per cent and 9.7 per cent in 2017. The improvement was mostly due to addition of The Keg. Management says there’s significant opportunity for improved contribution in the future from its Original Joe’s and Pickle Barrel brands.
Heading into 2019, Hennessey says the company plans to build on its four-pillar strategy — quality of food, quality of service, value for experience and ambience — and has hired Julie Denton as its Chief People Officer to manage talent development, centralized training, cultural design and execution.
“With the company’s strong balance sheet and growing cash flows, management will continue to pursue strategic acquisitions and explore alternatives to return more capital to its shareholders,” says Hennessey.