Tortilla Mexican Grill (LON:MEX)
Improving UK profitability:
- Drive in-store sales volumes and like-for-like growth
- Improve food quality and menu offerings
- Optimize delivery channel for better profitability
- Implement operational efficiencies and cost controls
Expanding through franchising:
- Grow with existing partners (SSP, Compass) in UK
- Use as capital-light model for expansion
International expansion, focus on Europe:
- Leverage Fresh Burritos acquisition in France
- Build large central production kitchen in Lille
- Convert Fresh Burritos stores to Tortilla brand
- Aim to be leading burrito chain across Europe
Investing in technology and brand awareness:
- Roll out self-ordering kiosks
- Implement new loyalty app
- Increase marketing and brand collaborations
Focus on food quality and innovation:
- Improve core menu items, especially proteins
- Introduce limited-time offers and collaborations
Balancing growth with profitability:
- Pause new UK company-owned store openings
- Continue growth through franchising and international expansion
Answers to questions at the end of meeting:
- Portsmouth site: Challenging location with poor visibility. Under review but given a chance with improved food offering.
- Underperformance vs industry (Jan-Jul): Due to food quality issues and lack of marketing. Recent improvements showing positive results.
- Franchise growth: Current commitments (e.g., 18 sites with SSP) considered good. Focus on improving existing operations before pursuing new partners.
- Delivery economics: Fewer delivery partners improved profitability by £0.5 million in six months despite lower revenue.
- Fresh Burritos turnaround: Improving food quality, operational efficiencies, and converting stores to Tortilla brand. Cost savings expected from central kitchen and better purchasing power.
- Maintenance CAPEX: £2 million annually normal, with potential additional investment in store refurbishments.
- Share price decline: Attributed to current business performance and market conditions. Management confident in ongoing initiatives.
- UK site profitability: Most sites profitable. About 10 sites not profitable, mainly due to being in maturity phase.
- New store openings: Ahead of IPO target due to acquisitions. Focus on improving existing operations rather than new corporate stores.
- France vs UK growth risk: Higher risk in France acknowledged, seen as strategic for European expansion. Mitigating risk with experienced local management.
- French central production kitchen: Costing £750k, financed through debt. Designed to support growth across Europe.
- Management share purchases: Opportunity exists, with management already having significant ownership.
- Cash position: Expected £8 million net debt by year-end. Investments planned within current cash flow expectations.
