Quebec's MTY to acquire Country Style
The Globe & Mail, Monday, April 13, 2009
David Friend
TORONTO — Country Style's 490 coffee and doughnut outlets are being taken over byMTY Food Group Inc., which franchises and operates Sukiyaki, Cultures, Yogen Fruz and other restaurants.
The deal will fulfill MTY's publicly stated objective to enter the coffee service business and pit the Montreal-based company against Tim Hortons Inc. of Oakville, Ont., and Seattle-based Starbucks Corp.
While Country Style has been around since the early 1960s, it has been overshadowed for many years by Tim Hortons, which had nearly 3,000 outlets in Canada at the end of last year.
Country Style has rejigged its logo and revamped operations over the past 15 years to reposition itself in the highly competitive market for coffee and doughnuts in Canada.
MTY Food Group
MTY didn't disclose the value of the proposed cash deal, though it said the Country Style chain had $94-million of system-wide sales in the past year.
Under the deal, MTY will have 114 Country Style traditional shops selling coffee, doughnut and sandwiches, 360 Country Style kiosks and 16 BunsMaster outlets. All but four of these locations are franchised.
However, Country Style doesn't currently have a presence in MTY's home province of Quebec.
Jean-François Dube, head of MTY Food's investor relations, said it's too early to tell whether MTY will expand the Country Style brand into the province, but noted the challenge of marketing an English-branded name in the primarily French-language region.
MTY has two dozen franchise brands such as Cultures, Thai Express, Veggirama, and Mrs. Vanelli's, and said it will be aiming for annual sales of $435-million after the takeover of Country Style.
Last year it purchased Tutti Frutti and Taco Time, which helped round out its multicultural line of quick-serve restaurants.
“The only thing that was missing from their arsenal was a coffee chain,” said analyst Leon Aghazarian of Industrial Alliance Securities in Montreal.
“High margins in the coffee business are very attractive to franchisees. They're a top-line business.”
With the proposed acquisition of Country Style, expected to close May 1, MTY said it will “strengthen its position and foothold in the Ontario quick-service franchise industry and launches itself as a major player in the coffee and sandwich segment.”