Inside Foodtastic’s plan to become a leading franchisor

From the C-Suite newsletter: The company believes the struggling Second Cup and Copper Branch brands can fuel future growth.

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In 2016, the owners of Quebec burger chain La Belle et La Boeuf (the “Beauty and the Beef”) set their sights on creating a multi-brand restaurant company. That year, they founded Foodtastic, a franchising business that operates close to 20 restaurant brands, including rotisserie Au Coq, ice cream bar Chocolato, and Big Rig kitchen and brewery.

Though well-known within its home province of Quebec, Foodtastic had remained under the radar in other parts of the country – that is, until it acquired national coffee chain Second Cup from Aegis Brands in February, part of a long-term strategy to accelerate its growth and expansion across various banners, according to co-founder and CEO Peter Mammas.

“If we want to grow and be one of the larger [foodservice] players in Canada, for sure we have to open outside of Quebec,” Mammas told strategy. “Second Cup gave us that platform. [It] opened a lot of people’s eyes and is allowing us to open some of our other brands outside of Quebec and the rest of Canada, as well as allowing us to purchase larger players out there.”

Last week, Foodtastic added yet another brand to its roster, acquiring Montreal-based Copper Branch, which claims to be “the largest plant-based restaurant chain in the world.” And the company plans to make a few more acquisitions this year, likely in the upper casual dining, sandwich and breakfast categories, as it hopes to operate across all major restaurant segments, according to Mammas. The brands being considered for acquisition have a national presence and would further solidify Foodtastic’s reputation as a national player, he says.

In addition to buying more brands, the company has set ambitious growth targets for the Second Cup and Copper Branch businesses. It plans to grow the Second Cup network from 170 stores to as many as 300 by the end of 2023. Meanwhile, it’s looking to grow Copper Branch from 41 locations to 80 over the same timeframe. With the additional stores, Mammas anticipates Foodtastic could have a run rate of $700 million, more than double its system-wide sales of $340 million.

However, rebuilding the Second Cup and Copper Branch brands will take time and require significant marketing investment, says Mamas. To that end, Foodtastic has earmarked nearly $2 million in marketing spend to help revamp the banners.

Foodtastic-Foodtastic Announces the acquisition of Copper BranchAccording to a report in La Presse, Copper Branch entered into creditor protection last July. As of November, only 44 stores remained open (including 22 across the province of Quebec, 17 in Ontario and 5 in Europe), down from 70 the year before. However, Mammas believes the store concept and brand positioning remains strong and that, while vegan options have proliferated at retail, competition is not as strong in vegan QSR.

The chain’s recent struggles can be attributed to “more of an operations and management issue,” he says. “We feel that with our structure here at Foodtastic we could take it to the next level and expand the concept not only Canada-wide, but actually globally.”

In the short term, Foodtastic is focused on stabilizing existing stores and finding new franchisees for those that have recently closed. A location on René Lévesque in Montreal has already found a new franchisee and will reopen next Friday, Mammas says. It will also invest in developing “more exciting menu items,” as well as marketing campaigns that are a “bit more refined” than the chain’s previous efforts, such as commercials featuring tennis star Bianca Andreescu.

Foodtastic is also interested in taking the Copper Branch concept to new international markets. It’s currently finalizing a master franchisee agreement with a group in Australia with plans to open 20 stores in the country over the next 36 months.

The company has similar ambitions for Second Cup, which has been challenged by rivals Tim Horton’s, McDonald’s and Starbucks – the three category leaders – in the highly competitive coffee business in recent years.

“Second Cup and Copper Branch are similar in the sense that we’ve got to stabilize the system, and then we’re gonna start expanding them,” Mammas says. “In order to do that, once the expansion phase kicks in, we’re going to have to inject more money than we’re receiving [from franchisees] to have the proper marketing that’s required to do all that.”

Foodtastic will start by serving Second Cup coffee across its entire roster of restaurants. It has also signed deals with Petro Canada and Metrolinx to bring Second Cup to gas stations in more suburban regions of the country, as well as Metrolinx stations throughout the GTA.

All restaurant formats are currently under consideration, including drive-thru only, drive-thru with limited in-store seating, as well as co-branded shops with Copper Branch, Chocolato and other banners in the portfolio. Foodtastic intends to leverage its scale to secure better locations and lease rates for franchisees and is looking at recently vacated Starbucks locations for potential openings, according to Mammas.

The privately owned Foodtastic has a major equity partner in Oaktree Capital Management, a global investment firm backed by Brookfield Asset Management, which has more than $600 billion in assets. With more than 70 employees, including an internal marketing team of 12, Mammas says Foodstastic has “the resources that are needed to achieve everything that we’re trying to do.”