Freshii, a 343-unit health-focused concept, will be sold for $54.5 million to Foodtastic, a multi-brand restaurant group based in Canada.
The acquisition is expected to close during the first quarter. Foodtastic will spend CA$2.30 per share to purchase Freshii, which represents a 142 percent premium to the closing price on December 16.
CEO Daniel Haroun, who was promoted to CEO earlier this year, said "this transaction recognizes the tremendous value of the Freshii brand."
"For almost 20 years, our incredibly passionate franchisee and other business partners and team members have been delivering on the mission of making healthy food accessible and building a leading Canadian health food brand," he said in a statement. "We believe that Freshii’s brand, franchise network and talent will benefit from Foodtastic’s greater scale—in particular, we believe that this combination will improve Freshii’s potential for growth, enhance franchisee profitability, and generate additional opportunities for our CPG business.”
Freshii's transaction comes amid financial struggles. The chain's North American Franchised Restaurant Segment saw system sales decrease 7 percent to $36.6 million in Q3 year-over-year. Same-store sales dropped 11 percent compared to 2021.
The company attributed this slip to two major factors, the first being that lessening pandemic restrictions earlier in 2022 allowed customers to have more choices. Freshii found this to be especially true in its dinner daypart, which saw declines in Q3 as guests shifted toward full-service dining. Freshii also blamed lower sales on high inflation impacting consumers' discretionary spending. As a brand that focuses on healthier options with higher prices, the chain said it performs better in environments with low inflation and robust office traffic—both of which are lacking. In fact, office traffic is still down 60 percent versus 2019 levels.
However, the company said same-store sales have improved in Q4, fueled by better office traffic in the middle of the week (Tuesday through Thursday) for both breakfast and lunch.
In the third quarter, Freshii opened five new restaurants, but closed nine. The brand has a pipeline of more than 125 locations, including a recent multi-unit agreement with existing franchisees to build six stores in New Jersey. It also has a conditional agreement for the development of its first ground-up drive-thru in Western Canada. All but one of Freshii's shops are franchised.
In addition to brick-and-mortar restaurants, the company is also involved in CPG, nutritional supplements, and ecommerce and retail. Last year, it bought a majority interest in Natura Market, a Canadian online health and wellness retailer. In Q3, Natura Market's revenue declined 21 percent after lapping major growth in 2021.
Freshii will soon join a Foodtastic portfolio that includes Canadian concepts Second Cup, Pita Pit, Milestones, Fionn MacCool's, Shoeless Joe's, Au Coq, La Belle et La Boeuf, and Monza. The franchisor also recently acquired Quesada Burritos & Tacos, a brand operating more than 175 locations. The company has more than 1,200 restaurants in its system and earns more than $950 million in sales. Of that systemwide count, over 150 are outside of Canada.
“We have been watching Freshii for some time—it is a great fit for us, and helps Foodtastic expand into a new category," Foodtastic CEO Peter Mammas said in a statement. "I echo Dan’s excitement about continuing to expand and enhance the great brand that he, Matthew, and the rest of the Freshii team have built. We look forward to welcoming the Freshii franchisees into the Foodtastic family.”