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There were comments about the viability of the Fountain Hills on this board when it opened, by people who knew the area. And as I recall it opened in June! Apparently there had been a failed coffee stand there before.
So, five stores closed in two years, not good site selection -- or not sufficiently attractive product. Don't know.
There are currently no franchises open (not sure if AZ and TX were franchises or company owned, in any event all four stores are now closed).
Concept of a franchise fee, together with the 7% or so of revenues, is to create a 'brand' and common expectations of menu and quality.
There is no exclusive on hamburgers, either, but there are lots of hamburger chains.
The company did file franchise papers in 26 states over a year ago, per their PR at the time, but have done no franchises yet (caveat: Florida is a joint venture with a third party -- but the third party has actually purchased land and building for at least one of the open two stores, not leased it, a larger financial commitment than the typical franchisee will need to make).
The current advertising campaign is totally focused on attracting franchisees, as the company has so far not obtained capital to finance owned store openings. Hopefully Coral Gables has been successful, and the books can be opened so that prospective franchisees can do pro-formas.
Fountain Hills, AZ store is closed, one of five closed in the last two years.
You are preaching to the choir.
Mr. Henthorn promised audited financials a year ago, as part of his drive for NASDAQ listing.
The Q2 2013 financials made reference to 'auditors' when shares provided for services over the years, and expensed at .001 per share, were properly re-priced at market price; but, instead of going against earnings, they were put on the balance sheet as 'Unidentified Assets,' about $7M or so.
Although the 2013 financial statements have no integrity (reference my earlier posts), I did notice that this account grew by over $500K in Q4, dwarfing reported sales.
Publication of year-end financials was a logical time to complete the audit; instead, the financials published were nonsensical -- Exhibit A being the fact that the Balance Sheet did not!! That is, Assets did NOT equal Liabilities Plus Shareholder Equity. In my 50 years of investing, I have never seen that in a publicly traded company. Other included statements had significant mathematical issues as well.
To get audited financials requires cash, which this company is short of (thus, payment for servies in shares). Auditors do not accept shares for their audit, it would be a conflict of interest.
Opening of the third SW Florida store would certainly validate the success of the first two stores. Failure to open the pre-announced third store would say something different (we all can agree on that, right??).
Hopefully, potential franchisees will be able to look at the financial records of the three stores and say, 'give me some of that.' Company has to sell franchises -- thus the current million dollar campaign focused on just that.
The company's website now shows 11 stores; 10 have pictures attached, with city names; the eleventh has 'Southwest Florida' with no picture, just the Baristas logo. To me this indicate the company is fully expecting an opening, even if later than originally anticipated in the January PR.
Not so sure.
BCCI problem is to open new stores, which takes capital.
They have no cash, so they are looking for franchisees -- like Coral Gables (not a franchisee, but accomplished the same purpose), someone willing to put up the money and credit for real estate and equipment.
Although people are buying stock on the open market for .10/share, none of that money goes to the company.
According to the company's financials, the company issued 20M shares of common stock for direct input of cash in 2013:
- 15M shares for 150,000 (Q1; .01/share, though financials say .001))
- 4.5M shares for $4.5K (Q2; ditto); and
- 650K shares for $45K; (Q3: .069 share)
I am sure that such shares had restrictions as to when they could be sold. But for those who believe in the BCCI business model, buying shares directly from the company could be an attractive entry point (most of the above stock was purchased well below then current market prices), and enable the company to open more stores.
Although virtually all authorized common shares have been issued, I expect that there will be additional shares authorized.
Caveat: The above prices are per the company's financial statements. I have previously pointed out errors and inconsistencies in said statements, so please do your own DD.
Scottsdale store was 'Barista Café,' not associated with BCCI.
Url: http://www.yelp.com/biz/barista-cafe-scottsdale
Sorry it took me so long to find.
The key store count statistic, from a business investor perspective, is that there are 10 stores open now, versus 8 at the beginning of 2012.
In that same period, 5 stores have been closed. So, hopefully coffee revenues are up by more that 25% as stronger stores replace weak ones.
It costs money -- whether paid in stock or cash -- to open and close stores; think equipment, lease obligations, etc.
The fact that the closed stores could not even cover variable costs (labor, materials, utilities) suggests that the company's site selection criteria (AZ, TX) and store purchase (MT) criteria need improvement.
I think the purpose of the current marketing campaign is to attract franchisees or potential investors in the company; you are right, a national campaign to attract consumers would not be cost-efficient at this point, although certainly work could be done locally (Seattle, Coral Gable) at much less cost.
Indeed, I believe there was a campaign surrounding the opening of the second Coral Gable store.
No lies about store closings.
Look on BCCI website for open stores.
Both San Antonio stores are closed.
Both (or three, per KittyKat) AZ stores are closed.
One of the two purchased MT stores have closed.
Or, are you contending they were never opened, therefore they could not be closed? If so, go back in IH; or, look at the Prime Equity Research report from early 2012.
KIerland is great.
Very high rent.
This would have been their only non drive-through location; maybe was a different company with same concept of scantily clad (or as BCCI would say,'theme') costumes.
Company only announced two AZ store openings, that I recall. Maybe they didn't announce it, but unlike Mr. Henthorn to miss a PR opportunity.
If they had done a PR for one there, I would have gone -- I am three miles from that location once a month.
In any event, there were stores open in Arizona, now there aren't. Company footprint dropped from 5 states to 3, as the two in TX also closed.
Baristas ice cream is not new.
2013 press releases announcing availability:
- 3/25 Gristedes (NY area)
- 4/30 C- Town (200 stores) and Bravo (NY + surrounding states)
- 6/13 Seattle area
While Q1 2014 was the first Q1 that the ice cream has been available, it is the nadir of the ice cream selling season for the announced market areas.
Worth noting that when Q3 2013 earnings were announced, there was no mention of the amount of ice cream sold. Ice cream development did not come cheaply -- $500,000 worth of shares were provided to the NY area distributor, Calip Diaries.
It was actually in Fountain Hills, near Scottsdale, but yes -- also shut down.
More DD on Tempe location, 1845 E University.
At the following yelp url, I found 12 reviews for Kona 13 Coffee and Tea located at 1845 E University, the old location for Barista's in Tempe:
http://www.yelp.com/biz/kona-13-coffee-and-tea-tempe
All reviews are since March 17, and at least some of the baristas are male.
Perhaps your most recent visits were more than two months ago??
BCCI has negative cash flow.
The Comparative Statement of Cash Flow in the company's recently issued 2013 financial statements show a net change of cash of -$36,438 for the year - and that was after selling common stock for $201K, otherwise negative cash flow would have been -$237K.
(Caveat; the -$36K came from the bottom of the Comparative Statement of Cash Flow; but, that statement didn't 'foot,' that is if you add and subtract the numbers in the columns, they don't add to the total shown.
If you go by the balance sheet, cash did increase by $3500 during the year -- but after taking dilution into effect, it was down by $198K; and, I would never argue that an increase of $3500 constitutes 'cash flow positive,' given the 43,000,000 total common shares (almost 20% dilution -- plus the 300% dilution of the preferred stock) issued during the year -- almost all of which were to pay for services which should have been paid for with cash)
Its great to have 'plans for expansion,' but 'where's the beef'? WhenPrime Equity Research published their report in January 2012, the company had 8 stores; they currently have 10 -- hardly the explosive growth expected in the PER report:
Called the number, went to a personal voicemail.
Inasmuch as business numbers are generally not reused for some time, suggests the store has been closed for a while.
The Tempe location is closed.
Go to the BCCI website, and click on 'all locations.' There are pictures of all ten -- but none are in Arizona.
A senior exchange listing update would be helpful.
Over a year ago, the company announced plans to have audited financials and uplist to a senior exchange. There was significant (IMO undeserved) 'hoopla' about reserving a symbol for said uplisting.
The Q2 financials made reference to 'auditors' as $8M was added to Capital, offset by $8M of Unidentified Tangible and Intangible Assets. This represented stock previously issued primarily for services which had been incorrectly expensed at par value ($.001) rather than pps when issued.
Tomorrow marks the seven month anniversary of the announcement naming 'M&A Powerhouse Robert J Seda' to the Board of Advisors and Oversight Committee with the explicit remit to 'give guidance and oversight for the purpose of moving to a senior exchange.'
A lot of time has gone by, IMO time for an update. A positive update, for example a due date for audited financials and a timeline for listing, would be a positive for pps.
There are only two stores which are not wholly owned.
Those are the two Cape Coral stores which are owned by a Joint Venture partner, Baristas Coffee Company Florida LLC.
Two of the three principals in this LLC are Barry Henthorn and Troy Steciw, both officers of BCCI. The third is Mark Davis Schaftlein of Delray Beach.
This LLC is 51% owned by BCCI, and 49% by South Florida Coffee Company, which is basically funded by Capital Consulting, CEO Mark Davis Schaftlein (who can be further googled, both personally and for corporate affiliation).
Hard to argue this as a 'franchise' if it is more than 50% owned by BCCI. Having said that, it is positive that an external investor has apparently put funding into the company.
The good news is, in January BCCI announced that this LLC would open a third store 'early in the second quarter,' so an opening is hopefully imminent. Failure to have an opening this quarter might signal disappointing results after the fall advertising campaign was ended in the Cape Coral area.
Note that the BCCI franchise structure per the Prime Equity Research report included a 1% fee for marketing, or about $1500/yr for marketing (using $12K/mo/store, about what they have been averaging), a sum that was significantly exceeded for the openings of these stores. Not an unreasonable decision for a new geography, but the question becomes whether the stores can maintain sales momentum without expensive marketing. The company has a history of closing stores. San Antonio (2) and Phoenix area (2) stores opened, then closed. One of the purchased MT stores was closed.
However, as the PR is still on the BCCI website (unlike the October 1 PR announcing the Media Funding advertising arrangement), investors should be able to assume that the store opening will occur.
Because all stores are company owned, in whole or in part.
Which store(s) do you think are franchises??
Nightline is not about BCCI, but rather about barista stands in Spokane, where the baristas sometimes go topless with pasties.
TBH, stands such as those hurt BCCI, causing backlash by association as BCCI does not have topless baristas. I would guess that is part of why there has not been a single franchisee to date -- concern about potential backlash, litigation, and/or a regulatory maze against high start-up costs and relatively low margins.
Also, publication of financial statements where the balance sheet doesn't, where addition of numbers in a column doesn't equal the total at the bottom, and where there are $7.5M of 'Unidentified tangible and intangible Assets -- more than four times annual sales, and this number increased by almost twice the level of sales in Q4 -- should be a huge flag in the DD process of assessing whether the company can be successful as a business.
Also, a year ago the company announced that franchise enabling paperwork had been filed in more than half the country, but there are no active franchises.
However, a review of the company's pps chart and press release history reveals that the company has a strong history of 'pumps' resulting from artfully worded press releases. Most recently, there was a PR about a pending 'article' in Forbes which turned out to be an advertisement.
So, if you are looking for a company that will be financially successful, I don't know if you are in the right place; but if you are looking for a stock which can be traded, you are. You have to decide if you know enough or are astute enough to trade it profitably.
BCCI announced the plan for audited financials a year ago, still hasn't happened.
IMO, since then the financial statements have gotten even worse, reference my recent post on the recently released Q4/2013 financial statements. When BCCI publishes a balance sheet which doesn't balance, feels like they are a long way from audited financials.
But I hope they prove me wrong as audited financial statements would be quite interesting, particularly to compare to the unaudited ones.
The stock has outperformed expectations, IMO that is thanks to Mr. Henthorn's promotional abilities.
The company, not so much. Consider recent financials: Net: company not growing, profits falling, dilution increasing, and accounting questionable. Data points:
- The balance sheet doesn't even balance!! That is, Assets ($8.3M) did not equal Liabilities plus Shareholder Equity ($8.0M). That is Accounting 101. Actually, Accounting 1 (grade school).
- Q4 sales down 5% from Q3, despite the reported successful opening of a new Florida store. So, the 'growth company' story having a problem.
- But, cost of goods went UP 30%!!! Bad accounting or bad management, don't know.
- Profits down from prior quarter, maybe -- profits on P&L ($52K) does not match profits on Cash Flow statement ($84K). Only reason Q4 profits not down disastrously, is that G&A dropped to $13K from prior three quarter average of $50K, suspicious IMO.
Maybe they couldn't figure out what was cost of goods, and what was G&A, not a good sign if you are running a business. And as previously pointed out, most of personnel costs should be in cost of goods (store level costs) -- management of BCCI not taking salaries.
- A significant number of new common and preferred shares were issued, likely for the media funding buy -- but the shareholders statement shows them at $0! And the balance sheet shows no increase in paid-in capital from Q3. WRONG!
- Balance sheet shows that the mysterious 'Unidentified tangible and intangible assets' account on the balance sheet went up by $700K! If that was for the stock paid for advertising, it is pretty identified -- and ought to be in expenses (some in Q4, some in Q1, some in Q2, etc.). But who knows, with balance sheet not balancing.
- Statement of cash flow shows cash flow from operations of $125K for the quarter, no further entries, but then 'net change in cash' of -$36K. Impossible arithmetic. How can $125K, then no further line items, add up to -$36K??
IMO, if you are investing in this company it is as a pinky with an interesting chart and stock promotional capabilities, not as a company with a robust business model. More specifically, store count has been constant for last couple of years, with openings and closings. Indeed, closings of entire states which had multiple stores (TX, AZ); with declining sales (at least in Q4, when it is getting colder and coffee should be more desirable -- indeed, company put out a PR a couple of years ago about great December sales) and profits, how is this growth? Other than in number of advertisements heard/seen nationally??
Urls from the past for new BCCI investors:
- Sponsored Prime Equity Research Report, January 11, 2012: http://primeequityresearch.com/wp-content/uploads/Prime-Equity-Research_Baristas-report-2012_01_11-1.pdf
Likely interesting to understand the 'per store' business model, owned and franchised. In addition to approximately 10x unachieved expansion of stores projected for 2012, key to analyst prediction of .44/share pps was increase in per store sales from $12K/mo to $20K/mo starting in 2014, to help cover the fixed costs of franchise fee, real estate, utilities, and equipment. Unfortunately, that hasn't happened -- and may well explain why company has been unable to attract franchisees or external capital to enable more company-owned stores.
- Announcement of reality TV show: Best looked at via YouTube:
The sponsored Prime Equity Research report published on January 11, 2012 gives the best picture of the company's business model at the store level, for both company owned and franchised stores, at least as it existed at that time.
The data within the report was provided by the company, I have no ability to say if it is still current.
Most if not all of current stores are company owned.
But, to set an example. Average store is $400/day, call it $150K/year. So, company would receive 6% of that, 9K/year. If all 11 stores were franchisees, that would be $99K/year.
Company also receives 1% of revenue for marketing. So that would be an additional $9.9K/year -- compare to current $1.7M advertising campaign, paid for with dilutive common and preferred stock.
But, per my last post, that advertising is basically to drive the stock and encourage franchise sales. You wouldn't do national advertising to drive coffee sales in three states who rank 4th, 14th, and 44th in state population. And I don't think you would do it in these venues (Forbes, CNBC, and Bloomberg -- basically for business people, not consumers).
Again sorry if already covered somewhere. Numerical corrections always welcomed.
Correcting myself.
Annual revenue is $150K/year per store, roughly, so 1% of that is actually $1500 of annual advertising, or $125/month. Still not a lot, but wanted to correct arithmetic
Forbes likely took cash for the ad, but not from BCCI.
BCCI 'bought' $1.7M worth of media buy when they issued common stock and preferred stock in Q4 to a media buy company on October 1, 2013 (announcing press release was recently posted on ihub. For some reason, it is no longer on BCCI's web site but can be seen in the company's recently issued financial statements, upon which I will comment next week after analysis).
Likely it was that company which paid Forbes, and that company which has recently had other media buys on CNBC, etc.
The objective of these 'national' promotions, when the company only has actual stores in three states (WA, MT, and FL) is to attract franchisees -- and stock buyers.
So far, they have been successful with the stock; time will tell on franchisees. From a 'filed paperwork' perspective, BCCI has been able to sell franchises in over half the country for over a year; the fact that they have not been successful in selling franchises, and need to resort to high profile advertising, creates questions about the business model faced by potential franchisees.
It would be helpful if a poster could point to other now successful franchisors who used this sort of advertising (national, retail, forbes/cnbc style; versus in franchising shows and magazines) to sell franchising when in their infancy.
I am expecting the company to announce a new franchise agreement within three months (no inside information, just a logical extension of what has been happening). Terms will likely NOT be announced, but I suspect it will be a 'sweetheart' deal, to prime the pump, with franchisee costs 'below list' of $25K/store plus 6% royalty plus 1% marketing fee plus $100K equipment plus real estate lease commit (see Prime Equity Research report) -- with a commit to do a disproportionate amount of local 'corporate' marketing(eg more than 1% of sales, which is $150/yr), as was done recently with the FL openings. All this for an expected sales model of about $150K/year.
Note five stores have been closed in last year or two, so unless used in FL some equipment is likely very available at a nominal price.
Apologies if this has been covered by someone else in the day plus since the initial post was made.
BCCI opened -- but also closed -- Tempe.
Company does not put out PRs for closed stores, of which there have been 5 in last two years: AZ (2), MT (1), TX (2).
BTW, I would not expect company to PR closing stores, investors have to do their own DD. But easy to do -- can start with the company's own website, which does not include the closed stores.
Company also puts out PRs for stores which never open. For example NJ a couple of years ago, 5 in AZ (2 eventually opened and closed); and double digits in San Antonio (2 opened and closed).
Company is clearly embarking on a campaign to attract more franchisees. Which is a smart thing to do -- enables expansion on someone else's capital, with pure margin flowing in. Question is how many folks will bite. Time will tell.
IMO this is not a quality piece of work:
TX ones have closed. So have AZ ones. A year ago company announced franchising papers filed for half of US, but only thing opened has been Coral Gables.
Those have been announced as 'profitable,' likely because advertising was all paid for on Corporate budget.
The company is great at PR -- but at operating a business, not so much. Note the $7M of 'unidentified ... assets' on the balance sheet. This results from stock issued for operating expenses, such as $500K for ice cream distribution. These will be inevitably written off, likely with a 'prior period adjustment' so that the expense will not pass through the P&L as it should have done when the shares were issued.
Actually, did pass through the P&L then, but at .001 per share, not the .03 - .10 that should have been used. When error pointed out, they put on the bs.
I fully expect a write off with upcoming 2013 annual report. Company likely hoping that current wave of publicity will dwarf concern over actual financial results.
Which is a pinkie thing. And have to give Mr. Henthorn credit for the publicity part of this. $40M valuation for a company with about $1.5M in annual revenues, no profits (see 7M issue above) with constant store count (actually, more closing than opening in last 12 months), is pretty incredible.
Within the financials, will also be interesting to see details on the $1.7M in advertising announced on October 1, and discussed on this board at that time.
Details in two respects:
- How many common and/or preferred shares were issued for the advertising? At the time, it was said that the shares were issued 'at a premium to market.'
- And, how is the $1.7M being treated on the financial statements? Note that although $1.7M was the announced amount, I think it is fair to expect that the actual amount purchased was/will be less, as likely the company arranged to buy at least some of the advertising at a discount based on last minute purchases of otherwise unsold 'spots.'
Advertising is supposed to be expensed when it happens, at the market price of the issued shares. Likely not all happened in Q4 (although at least some did to support the Cape Coral opening), so the value of some/most of the shares should be on the balance sheet on December 31, 2013, as a 'prepaid expense.'
Before making this post I attempted to re-read the precise PR issued at the time, but for some reason it is no longer on the BCCI website. Perhaps another board member saved a copy of it at the time, and can report what precisely it said about shares and value being purchased.
Correction -- $8M of 'unidentified assets' put on books in Q2.
10K not required for BCCI.
They do publish quarterly and annual reports, in the same general timeframe as 10-Qs (45 days after end of quarter) and 10-Ks (105 days) -- although frequently late, which is not uncommon among small companies filing 10-K/10-Q.
Speaking of which, the annual report is 'due' April 15. It will be interesting to see if the promise made a year ago to have audited financials is fulfilled; whether audited or not.
It will be equally interesting to see if they have made any progress in identifying the $7M or so of 'unidentified tangible and intangible assets' put on the balance sheet with the Q2 financials -- or if they are written off due to inability to identify. Would certainly seem like they have had sufficient time to determine the nature of these 'assets' which quite honestly appear to simply be the value of the stock given for professional fees, ice cream distribution, etc. which SHOULD be expensed (rather than left on the balance sheet as an asset) per Generally Accepted Accounting Principles (GAAP).
Indeed, they were originally expensed at .001 per share, but when that value was determined to be wrong (as had been suggested on this board), rather than expensing at the correct value (which would have dwarfed life to date REVENUES for the company) they were put on the balance sheet.
Agree with
True, stores in FL, MT, and FL.
Also two each opened and then closed in TX and AZ.
One announced in NJ a few years back, not opened.
I believe the number of open locations now is the same,+/- one, as a year ago. Number of states reduced by two. Not sure that is forward progress from a 'coming soon to a state near you' perspective.
Please apply -- CBS looking for Letterman replacement.
Locations are shown on the BCCI website, ten currently shown.
At least five locations opened or purchased in the last two years have closed: MT, TX (2), and AZ (2).
Company makes PRs for expected openings, but they tend to talk about more openings than actually happen. So u need to focus on the PRs for actual openings -- as well as checking yelp, etc., to see if existing locations have closed.