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Jubilant Foodworks Buy
New franchise no immediate financial impact
An exclusive franchise agreement with Dunkin Donuts for Indian operations
with negative working capital and 3 year payback is Jubilant's next growth
driver. Dunkin Donuts is an international QSR operator that sells coffee,
donuts and muffins. Key highlights of the agreement: -
The terms of the agreement are similar to the one with Dominos in terms
of revenue royalty and per store, store opening fee and a one time country
fee. Currently for each new Dominos store, Jubilant pays USD 5000 as store
opening fee and 3% of sales as royalty charges.
The company aims to open 80-100 stores in the next 5 years. The first store
would open in 4QFY12.
The agreement gives Jubilant flexibility to decide and retail items outside
the current portfolio of Dunkin Donuts portfolio which gives Jubilant a leeway to add products eg: sandwiches, Indian snacks etc which might not
have been available with a bigger player eg starbucks. This flexibility would
be a big advantage in case the sale of donuts and muffins are lower than
expected.
Franchise agreement with Starbucks is off the table as the agreement with
dunkins restricts them to enter into franchise agreement with a coffee retailer.
The store size would be much smaller in size as compared to a dominos
store, the capex requirement per store would also be much smaller as the
operational area would be small for dunkin donuts.
There would be some synergies in the backend operations and administrative costs but the front end stores have to be different as per the franchise
agreement. We maintain earnings and target price of INR 810/ shr
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jubilant Foodworks Buy
New franchise no immediate financial impact
An exclusive franchise agreement with Dunkin Donuts for Indian operations
with negative working capital and 3 year payback is Jubilant's next growth
driver. Dunkin Donuts is an international QSR operator that sells coffee,
donuts and muffins. Key highlights of the agreement: -
The terms of the agreement are similar to the one with Dominos in terms
of revenue royalty and per store, store opening fee and a one time country
fee. Currently for each new Dominos store, Jubilant pays USD 5000 as store
opening fee and 3% of sales as royalty charges.
The company aims to open 80-100 stores in the next 5 years. The first store
would open in 4QFY12.
The agreement gives Jubilant flexibility to decide and retail items outside
the current portfolio of Dunkin Donuts portfolio which gives Jubilant a leeway to add products eg: sandwiches, Indian snacks etc which might not
have been available with a bigger player eg starbucks. This flexibility would
be a big advantage in case the sale of donuts and muffins are lower than
expected.
Franchise agreement with Starbucks is off the table as the agreement with
dunkins restricts them to enter into franchise agreement with a coffee retailer.
The store size would be much smaller in size as compared to a dominos
store, the capex requirement per store would also be much smaller as the
operational area would be small for dunkin donuts.
There would be some synergies in the backend operations and administrative costs but the front end stores have to be different as per the franchise
agreement. We maintain earnings and target price of INR 810/ shr
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