The inaugural Canadian Restaurant Investment Conference, held at the Toronto Hilton on May 26, builds on the success of the Canadian Hotel Investment Conference, also organized by Big Picture, which took place the day before.
The question of the day was whether there’s money available to fund expansion and, if so, what the financial community is looking for when forking over funds to restaurateurs? Not surprisingly, the economy continues to be the leading concern of most business owners, but, according to Garth Whyte, president of the CRFA, who opened the conference, “investors who start up in difficult times do better than those who start in good times.”
While 2010 is a year of economic recovery, most of the operators participating in the first panel agreed that 2009 was among the worst years they’d ever experienced. According to Laurids Skaarup, president of Vancouver-based Moxie’s Classic Grill, 2009 “sucked.” But despite the turmoil, he said his company didn’t conscientiously change anything. “We stuck to our knitting and continued to be who we are. We didn’t discount, and we didn’t cut back on advertising.”
For Ron Magruder, president and CEO of Imvescor, last year was particularly challenging as his company changed from an income trust to a corporation. “It was a distraction for our company,” admitted Magruder, who stressed the importance of being available to franchisees that need help and direction. With 70 per cent of his company’s business coming from Quebec and the Maritimes, the CEO said the company was lucky it didn’t have as many units in Ontario, which was harder hit than those regions. Though all of the company’s four brands (Pizza Delight, Scores, Mikes and Bâton Rouge) are now showing positive growth, Magruder doesn’t think the recession is over. He stressed the importance of sticking to fundamentals. “Now is not the time to lower your service standards,” he said.
Despite the economic turmoil, some companies, like A&W, managed to have one of its best years. “We’ve had 28 quarters of positive same store sales,” boasted Don Leslie, CFO of A&W Food Services. According to Leslie, the company posted same store sales of five per cent and continued an expansion program into Ontario, with a total of 150 units now operating.
The situation wasn’t as positive at SIR Corp., where its downtown Toronto stores experienced declining sales. As the economy plummeted in 2008, Peter Fowler, CEO, SIR Corp., said he saw “big wines, big dinners and expense accounts starting to decline. We saw the effect in Canyon Creek, Alice Fazooli’s and then Jack Astors,” said Fowler. To combat the declines, he admitted to price drops so that “customers would trade inside rather than outside.” According to Fowler, sales started to climb back up last fall, and Jacks and Canyon Creek are now showing a five per cent increases.
While a less-than-stellar operating environment may not be what the financial community is looking to hear before it makes decisions to lend money, the economic situation in Canada is much better than it is south of the border, says Robert Beiter, chief risk officer, GE Capital. “In the U.S., there has been a lot of volatility that hasn’t been here.” Beiter admits the company is not focused as much on new concepts or start-ups. “We like multi-unit chains, those with two, three or four units. We also like to lend on cash flow not as focused on equipment lending.” According to Leiter, the ideal size for investment is $1 million or up, but he says “We’re not afraid of $10 to $15 million.” Ultimately, Beiter believes operators looking for money should come to the table prepared — “be sure you have a strong plan in place and ensure you have a solid franchise relationship.”