MISSISSAUGA, ON, June 19, 2014 /CNW/ - Today, The Second Cup Ltd.
("Second Cup" or the "Company": TSX: SCU) President and CEO, Ms. Alix
Box, announced significant first steps in the Company's revitalization
strategy to improve its level of performance, and franchisee
satisfaction and profitability. As previously disclosed, Second Cup,
the Canadian specialty coffee retailer with more than 350 stores across
Canada, has embarked on a journey of transformation to restore the
Company to its place of prominence and greater profitability.
Initiatives announced today include streamlining the organization and
changing the Second Cup franchise economic model.
Coffee Central Re-engineered
After a complete organizational review, the Company has taken steps to
reduce its infrastructure. This right-sizing of the Company was
achieved by re-engineering its office, known as Coffee Central, in
Mississauga to a more focused team, streamlining roles and
responsibilities and creating new high-performing, multi-disciplinary
positions. The Coffee Central team is being reduced from 77 to 53
employees. As part of this initiative, the Company expects to record
one-time charges of approximately $1.5 million, mainly related to
severance expenses, during the second quarter of 2014 and yield savings
of approximately $2.3 million annualized.
"If we look back at the history of Second Cup, the Company had more
stores and operated more effectively with a smaller Coffee Central team
and lower overhead," says Ms. Box. "With this review we are correcting
the imbalance and getting back to our entrepreneurial roots with a more
efficient team who will make faster decisions and provide more
responsive and better service to our franchisees. Our new team is 100%
dedicated to delivering the best specialty coffee experience and
maximizing the long-term success of Second Cup."
Second Cup plans to redeploy the reduced expenses of approximately $2.3
million annualized to increase franchisee profitability. This profit
improvement is expected to result from a combination of royalty
reductions, co-op marketing fee reductions and procurement savings. A
typical store is expected to increase its annual profitability by
approximately $14,800. Management believes these changes to the
economic model will offset the expense savings and will have no impact
on Second Cup's operating income. Building franchisee trust and
improving store sales and profitability are two immediate priorities
for Second Cup and today's announcement is a positive first step in
"Second Cup is very fortunate to have passionate and dedicated
franchisees and our goal is to build on this passion," says Ms. Box.
"We believe that this change in fee structure will have a meaningful
impact on franchisees. We also believe it will go a long way toward
rebuilding trust with our franchisees, which will in turn spawn future
"This new fee structure shows that the organization is committed to
re-instilling a collaborative and transparent relationship with
franchisees. We were told this would be a year of change, and today is
a great new beginning for the future of Second Cup," says Terry Lee, a
Hamilton franchisee and co-chair of the Second Cup Advisory Council.
"Reducing fees to benefit franchisees clearly demonstrates that Coffee
Central is listening and is focused on returning Second Cup to greater
success," adds Ash Pescott, an Edmonton franchisee and co-chair of the
Second Cup Advisory Council.
A Revolution, Not an Evolution
"This is just the start of our transformation at Second Cup and it is
both exciting and necessary for long-term value creation," adds Ms.
Box. "The revitalization of the brand will be a revolution, not an
evolution. Our journey will take time and while our objectives are
aggressive, they are achievable. Today represents an important first
step towards our goals, and we will now focus on creating the new
Second Cup store of the future and developing our strategic plan to
build for future greatness."
About Second Cup
Founded in 1975, The Second Cup Ltd. is a Canadian specialty coffee
retailer operating more than 350 stores across the country. All of the
approximately 4,000 Second Cup baristas are trained coffee experts who
handcraft over 1 million coffee and tea beverages every week, and are
committed to ensuring excellence in every cup and the very best
customer experience possible. For more information, please visit www.secondcup.com or find us on Facebook and Twitter.
This news release contains forward-looking statements within the meaning
of Canadian securities laws, including statements regarding Second
Cup's intention to reduce its workforce, change its franchise economic
model, improve relations with franchisees and grow its business, as
well as the related financial impact of such initiatives. The terms
"expects", "plans", "will", "should", "believe", and similar terms and
phrases are intended to identify these forward-looking statements.
Forward-looking statements are based on estimates and assumptions made
by Second Cup in light of its experience and other factors that Second
Cup believes are appropriate in the circumstances, including its
expectations regarding the costs and benefits of the proposed
restructuring. Many factors could cause Second Cup's actual results,
performance or achievements to differ materially from those expressed
or implied by the forward-looking statements, including risks
associated with: Second Cup's ability to implement and realize the
anticipated benefits of the restructuring; Second Cup's ongoing
relationships with its franchisees; the potential impact on Second
Cup's ability to grow; and other risk factors relating to Second Cup's
business and environment referenced in the "Risk Factors" section of
Second Cup's Annual Information Form and MD&A (copies of which filings
may be obtained at www.sedar.com). These factors should be considered carefully, and readers should not
place undue reliance on Second Cup's forward-looking statements. Second
Cup has no intention and undertakes no obligation to update or revise
any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
SOURCE The Second Cup Ltd.