COFFEE REPUBLIC - about to boil in 2006?

Well I can't really take the question seriously when you call me Ron!

Why are they queuing up to sign franchises?

Francisees as with all franchised businesses often want the cuddly feeling of being part of a larger group, an arm around the shoulder. If that wasn't the case why would anybody franchise a business and not just do it themselves? There's the corporate feel and the fact that the company has demonstrated around £600K per annum sales per store on average.

I'm sure plenty are going to sit and doubt the story but I'd put it this way. CFE made an operating loss of 324K in H2 last year. Now they have signed 4 franchises in H2 that will have brought in 4 x £17K sign on fees, 4 x £100K (say as an average) fees for taking an existing store and royalties of 4 x £30K

£588K pure profit coming in in H2 above that of last year's H2 without signing any more franchises. That's more than enough to wipe out the losses made in H2 last year and see CFE make a profit in H2. A few more signings and they could make a decent profit in H2.

Need to wait and see but however you look at it they have the potential to turn this business around in H2 and have some pretty horny earnings expectations in 2007 imo

CR