The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods yesterday confirmed it had "paused" the expansion of its Carl's Jr hamburger franchise, after failing to yet generate the return on investment (ROI) it is targeting.

Gavin Watchorn, the BISX-listed food and franchise group's president and chief executive, told Tribune Business that the present expansion halt did not mean it would never resume.

Speaking to this newspaper briefly, Mr Watchorn said: "We've put it [Carl's Jr] on pause. It doesn't mean we're not going to do it; we've just put it on pause for now.

"The sales we have, the expenditures aren't there. You've got to get a return on your investment, and we're not getting the return we want. We're not going to invest any further until we get the return on investment we want."

Tribune Business contacted Mr Watchorn after sources who attended last week's AML Foods annual general meeting (AGM) confirmed that the expansion halt was disclosed to attending shareholders then.

When AML Foods acquired the rights to the Carl's Jr brand for the Bahamas in early 2012, the group had talked of investing $3-$4 million over a five-year period to grow Carl's Jr to a five-store chain with an annual $15 million top-line at full build-out.

That five-year deadline has been reached now, and Carl's Jr currently has just three locations in New Providence - the first one opposite the Mall at Marathon, and the others in the same Mall's 'food court' and on Carmichael Road.

The hamburger/fast food market in the Bahamas is highly competitive, with Wendy's; Burger King; McDonald's and other brands acting as its main rivals. AML Foods, which also has the Domino's Pizza franchise, is battling for franchise market share directly with Chris and Terry Tsavoussis, the Aetos Holdings principals (Wendy's, Marco's Pizza and Popeyes Chicken), plus George Myers and the Myers Group.

However, sources familiar with AML Foods yesterday suggested that Carl's Jr was the lone worry amid a consistently strong, profitable performance by the group.

"Carl's Jr isn't doing well, but their core business is doing very well because of the hurricane and all of the related demand," once contact, speaking on condition of anonymity, told this newspaper.

Mr Watchorn, meanwhile, declined to comment on AML Foods' AGM announcement that it plans to introduce a 50 per cent dividend payout ratio beginning in 2019.

This means 50 per cent of the group's profits will be paid out to shareholders, with sources who attended the AGM disclosing that the group is aiming to reduce debt by $3 million per annum and get total revenues to the $250 million mark within "the next few years".

AML Foods' balance sheet showed it was carrying some $24.643 million in long-term liabilities at end-July 2017, consisting of $13.761 million in preference shares and $10.882 million in the form of a Royal Bank of Canada (RBC) loan.

Its annual report for the year to-end April 2017 also showed that sales for the prior 12 months were $156.808 million on a like-for-like basis, indicating it has another $100 million to find on its top-line.

However, Tribune Business previously reported that AML Foods is preparing to embark on its next five-year growth phase, with new stores in southern (Charles W Saunders Highway) and south-western New Providence planned once the nearly-complete Solomon's Yamacraw opens next month.

"The next step from this is to open new stores in both the south-west and south of New Providence. We also have plans to relocate Cost Right Nassau to a better, more modern facility," Franklyn Butler II, AML Foods chairman, told shareholders.

The group also plans to relocate Cost Right from its current location at Town Centre Mall when its lease expires in early 2020. The Cost Right relocation will also involve finding a new home for its corporate head office, which is also located at the Town Centre Mall.

"Our existing location is far from ideal in many respects, and we are excited about being able to offer small business owners and consumers a true warehouse club experience," Mr Watchorn wrote in the annual report.

"We have targeted two more geographic areas for growth of our Solomon's brand, and hope to complete this phase of our expansion within five years. These acquisitions are key steps of our strategic plans for growth, but represent only the first of four areas that we have identified as critical to achieving our long-term vision and purpose."

One source familiar with AML's plans told Tribune Business: "The plan to increase the dividend payout is tied to a grander scheme intended to deliver improved shareholder value. There are a lot of things going on, and several things afoot."