Fast-growing fresh food company Mad Group, which owns the Habitual Fix and Mad Mex (NZ) (Mexican food) brands is looking to set up international operations, with initial exploratory talks made with interested parties in Japan and the US.
The company is hoping to sell up to 13.3% in the company at $1 per share in a move that values the company at $11.3 million, if the upper limit of its equity crowdfunding is reached.
It plans to use monies raised to chase international franchise opportunities over the next 18 months.
The company built its following after introducing Kiwis to the concept of fresh salads on-the-go, through its chain of Habitual Fix stores. It hopes to tap equity funding from the crowd to raise a minimum of $750,000 (7.11%). Minimum investment is $1000. The fund raising was launched today at crowdfunding platform, Snowball Effect.
Group managing director James Tucker hopes to take the company on an international growth trajectory.
“Our current footprint is 15 franchised Habitual Fix stores and six wholly-owned Mad Mex stores, clustered in the main centres. The new capital raised will help fund the continued roll out of both brands around New Zealand and assist in the sales and marketing of international franchise licenses for Habitual Fix.”
Tucker says the company expects to almost double its $5m revenue over the coming year, and its long-term vision is to grow to 100-plus stores across three or four brands, both franchised and company-owned, over the next five years.
In its information document, the company says Habitual Fix has potential for growth given it only has 15 stores against Pita Pit’s 83, and Subway’s 267. Mad Mex has 6 stores versus Zambrero’s four, Mexicali Fresh’s 13 and Chilando four. Mad Mex has four more stores in the pipeline.
How the company's valuation compares with others
The Mad Group does not anticipate paying dividends in financial year (FY) 2015 or FY2016 but says it intends to pay dividends at an appropriate time.
The Mad Group lists some of its risks as: the Inability to obtain further bank funding to fund its growth; the market being saturated; significant interruptions to its stores; growth execution risks, and the fact that the shares in the company are illiquid and cannot be traded easily.
Tucker says what’s really exciting for the company is the company has already been approached by interested parties in Japan and US for franchise opportunities. “We plan to use $50,000 of the amount raised to target international franchise opportunities in other markets over the next 18 months.”
It also has plans to grow the number of Mad Mex stores in New Zealand to 19 by mid-2018. The company invests around $150,000 to open each new store, after allowing for bank finance and landlord contributions.
Tucker says Habitual Fix will continue to grow regardless of the success of the capital raising.
“Because of its franchise model, Habitual Fix is effectively self-funding and so we’ll continue to open on average four new stores per year in New Zealand, including our new smaller kiosk format.”
About 550 people have already pre-registered for the Mad Group offer on Snowball Effect, representing an early vote of confidence. The offer has 38 days to go and has raised $137,500 so far.
Up close: Financials
The Mad Group had revenues of $2.88m in FY2014. This is expected to reach $5.38m in FY2015, $9.55m in FY2016 $13.92m in FY2017 and $17.97m in 2018.
Net income after tax is projected at $112,000 in FY2015, $374,000 in FY2016, $878,000 in FY2017 and $1.34m in FY2018.
Shareholders and disclosures
Significant shareholders post offer are Tucker (53%), Tim Benest (4.6%), Jon Win (1.9%), Dominic Sutton (4.7%), Justin Lemmens (2.2%) and Dan Henderson (1.2%).
The company’s governing directors are Tucker, a 15-year veteran of the industry, and non-executive director Justin Lemmens.
Accountant and business consultant Dan Henderson and Entrepreneurs’ Organisation board member Dominic Sutton sit on a separate advisory board.
Other significant related party disclosures are:
- Significant shareholder Justin Lemmens controls majority shares in Rosa Foods which has been manufacturing slow cooked meats, salsas, and marinates for Mad Mex NZ since 2013. He has invested money in Mad Group and is paid a $15,000 directors’ fee.
- Founder Tucker is the sole personal guarantor to all bank and supplier debt for the group and receives a separate annual fee of $25,000 to provide the guarantee. As at March 31, 2015, these guarantees amount to about $1.5 million and the amount is seen growing.
- Dominic Sutton controls Pumpt Advertising which provides graphic design and management to both Habitual Fix and Mad Mex NZ from time to time.
- Dan Henderson is partner at accounting firm BHW which provides services to Mad Group.