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Thanks, Alvie.
I can usually find patents, but I don't claim to be an expert. I'm not sure why, but I can't find anything using the numbers you provided. That's not to say these don't exist - I just can't find them.
I generally find patents using the name(s) of the assignee(s). For example, you can find Generation Next Franchise Brands being assigned rights by RoboFusion.
As to the printing kiosks, I don't find anything by running a search on Generation Next Franchise Brands or on Print Mates or either Frank or Nick Yates.
Anyway, there are probably patents (or, more likely, patent applications), and it makes sense that some are design patents, so I'll leave it at that.
And Print Mates intellectual property? What?
I'm also scratching my head over the claim that the acquisition of the assets of Print Mates included 5 patent applications.
Why doesn't the U.S. patent web site show anything under the names of Print Mates and/or Generation Next?
What the heck about this idea is patentable? I think I have been able to find almost the exact same functionality at a machine in my local CVS store for years now. And I can email photos to Costco and other places to be printed and either picked up or mailed. So what is so unique that you'd see the potential for FIVE patents?
Perhaps these and other Print Mates mysteries will be cleared up somewhat through the next 10-Q? We can only hope so. The questions are piling up in my mind:
- What's the business model?
- What's the IP?
- How many have been sold?
- How many are in operation, and what are their revenues?
- How many are held in inventory?
- What was the gross amount of liabilities assumed in the acquisition?
I look forward to the renowned VEND transparency.
Ah, the mystery of Print Mates.
What exactly is the business model here?
I thought it was going to be another franchise business like Reis & Irvy's, Fresh Healthy Vending, YoNaturals, etc. with a few corporate-owned machines in the mix. Makes sense, right? But it looks as though this is not a franchise business model, at least not yet:
- The printmates.com web site makes no mention of franchising.
- The company has not filed any franchise disclosure documents with the California regulators (or anyone else as far as I can tell).
- Instead, it just talks about purchasing a machine and getting support.
- What constitutes a "franchise" under franchise law anyway? Is VEND side-stepping those nasty franchise regulations?
It looks as though there are currently just a handful of kiosks out and running, and they are all corporate-owned. So, what's the plan, Stan?
OK, I'll bite!
I thought the press release was one of those situations where beauty is in the eye of the beholder. If you're a cynic/skeptic like me, you see more doom and gloom. If you're optimistic like Alvie and some others (and no offense intended by that, unless your name starts with RoBo), you see good news (I suppose).
Things are definitely getting better, aren't they? The question is - Have things been down so long (and so bad) that this looks like up to us?
It sounds bad that only 19 machines out of almost 200 made it through 28 days without a hitch, and good that the number increased to 48, but is that good enough? I don't know. More granular statistics would be more telling. Like actual uptime percentages for the whole fleet, for example.
Is it good that they acknowledge that some of their location choices could be better, or bad that it took these experienced vending machine guys this long to figure that out? Some of the locations are only open 5 days a week? Well, duh. I guess there are some of those that could still be good, but the fact that you're saying it suggests that it's an excuse for poor performance.
Looking at the numbers, it's another case of perspective. If you like increasing revenues, then it's a very good thing. If you look at the best figures in absolute terms, it's not too impressive.
If you look at the 48 locations that managed to stay up and running, the $2,960/28-day month works out to $38,480/year in revenues. That's not enough to make the return on a $58,000 investment in a machine that probably wears out in 4-5 years attractive. Your payback period is about the same length of time as the expected life of your machine. But the numbers are increasing, so there's that!
If you look at the top 25 kiosks in March, there's a more substantial $62,339 in annual revenues, but is that all that good when you consider that these are the BEST performing machines? Assuming they are only paying 15% in rent (these are presumably the best locations, and the rent can go as high as 20% or higher), you get a net of around $28,000 / year, and that's before your non-zero income tax liability. That's only about a 2-year payback period, but these are the top 25 out of over 200 machines. Your mileage may vary.
So, all this is to say that the jury is still out. The optimists among us have plenty to be happy about, and the pessimists do too. And I wish everyone could be happy with the ultimate outcome, but I guess that's not likely.
As to you, dear Sonata, I sincerely hope that the stock gets back up high enough for you to cash out. I wouldn't bet on it, but I do hope for it for you.
Yes, there are lots of Nick Yates out there.
What's interesting is that this one had a web site - www.nicholasyates.com - from which the bio is copied, and if you take a gander at the web site now, you'll see VEND's Nick Yates greeting you. So, you suppose that the Nick Yates who owns the web site today is someone other than the "Nick Yates" who controlled it in 2012?
The other interesting thing is that the "Nick Yates" who had that web site in 2012 decided it would be a good idea to post a bio that seemed to take credit for much of the career of Mitch Lowe and professed a love for the vending industry.
Quite the coincidences among the Nick Yates of the world!
A curious Nick Yates bio - Is this someone else?
Having some fun with the Internet Wayback Machine, I ran across the strange bio for one Nick Yates that I have copied and pasted at the bottom of this post. While it bears some similarities to VEND's Nick Yates (Australia and California mentions), in other ways it is seemingly inconsistent with our NY's bio. Curiously, though, this comes from a previous version of the web page at www.nicholasyates.com, and the current version of that very same page is quite clearly our boy, right down to that familiar smiling self-confident visage.
The really strange thing about this, as you'll note, is that this Nick Yates, whoever he is, claims to have co-founded Netflix (?!?! - Somebody tell Wikipedia!) and became president of Redbox (?!?!). The internet doesn't seem to have recorded these affiliations! Somebody has some work to do updating the Internet via Wikipedia and other sites!
Or maybe Mitch Lowe posted his bio on an earlier version of this page and someone mistakenly changed the name from "Mitch Lowe" to "Nick Yates"? But he has his own web page at www.mitchlowe.net. Or did Mitch Lowe decide to adopt the pseudonym of "Nicholas Yates" for some reason?
I am so confused! Is this a previous fantasy bio of VEND's Nick Yates? Is there another Nick Yates who had previously controlled the url for nicholasyates.com? And, if so, why did that guy post such outrageous claims about his supposed tenures with Netflix and Redbox? Did Mitch Lowe moonlight as Nick Yates for a while? Or is this the work of some random fool who cleverly created an archived web page just to drive me crazy?
In any event, for your amusement (well, I found it amusing, anyway), here is the bio that I copied from the "Contact" tab of the April 4, 2012, version of www.nicholasyates.com. If you have any explanation for this confusion I'm suffering, I'm all ears. And, as you may be interested in knowing, there's lots more from that old web site, although it gets a bit repetitive. Whoever, it is, he claims to really really like vending machines, though.
________________________________________________________________________
Yates was born and raised in Sydney Australia, and attended the University of Arizona where he received a Bachelor’s degree in Business Administration. After graduation he and his wife, whom he met while attending college, moved to California.
Nick Yates started his first successful business, Video Droid there and managed over five hundred employees. In 1986, Nick Yates sold Video Droid to a Japanese firm, but, continued with the company CEO. The company expanded over the next ten years especially in the Northern California area.
In 1998, he co-founded Netflix, and started the online video rental business. In 2002, Nicholas Yates, and his family moved to the Washington D.C. area so he could accept a position with McDonald’s Redbox Corporation.
In 2009, Nick Yates and his family moved to a Chicago suburb in Indiana, where he continues to work as President of Redbox.
Nick Yates is an avid golfer and plays year round. He enjoys golfing not only with his wife and family, but, business associates as well. He is a member of the local country club where he plays golf.
Nicholas Yates served as the President, as well as on the Board of Directors of Video Software Dealers Association, in the 1990’s and he is still an active member.
Nick Yates enjoys time with not only his immediate family, but, holidays with his parents, siblings, and various cousins, nieces and nephews. He and his family take vacations together and own a home in the Florida Keys, where they vacation frequently.
It is not unusual for Nick Yates and his family to spend the winters at their Florida home, leaving behind the frigid temperatures of the Windy City.
Nick Yates, is physically fit, attractive, and looks much younger than his actual age. He is friendly, and outgoing, and loves meeting new people, and making friends everywhere he goes.
Even though he is relaxing in the Keys, he has his finger on the pulse of the Redbox business and is ready to react or proact quickly to any situation that may arise. His quick mind can usually resolve an issue with an innovative solution. Nick Yates always has an action plan and can work from anywhere successfully.
Nick Yates’ children will soon be leaving for the colleges and universities of their choice. Nick Yates and his wife are looking forward to their empty nest years that will be arriving soon.
So much for transparency. The disappearing count clock.
Hey, I checked in to see the current count for cups of yogurt sold, and it's no longer on the reisandirvys.com web page! Has it been moved somewhere else, or am I right in my impression that the transparency has dramatically decreased?
Now how will we know how many cups were sold and what the cups/kiosk/day figure is? Maybe it should be added to the monthly report if the "real-time" count wasn't quite real-time?
I suppose you should be awarded that most precious of commodities, credibility.
YankeeLover wins the prize! Franklyn Yates is the brother of Nick Yates.
And, yes, the acquisition of Print Mates was a related-party transaction. It's a little curious that the company's 8-K filing failed to mention that fact. Not too kosher. Perhaps an amendment is in order?
Also curious is that the transaction was approved by "the Board" as opposed to a committee of disinterested directors. Not very kosher, either.
Also curious that about a month ago, Nick was describing Print Mates as a VEND company when making an investor presentation even though it was still owned by brother Franklyn at that time.
And it remains quite curious that the consideration is described as the assumption of $300,000 in liabilities "net of kiosk inventory value." So, the actual amount of assumed liabilities is substantially in excess of $300,000, eh? But we don't get to see how much that is, or how the kiosk inventory value was determined?
Forgive me my skepticism, but this strikes me as a "heads I win, tails you lose" sort of deal. If Print Mates had taken off like a rocket, do you think we would have seen brother Frank so kindly bestow the fruits of his efforts on VEND? On the other hand, if dear old Franklyn has run up a tab and finds himself a little short while his unsold print kiosk inventory sits in a warehouse, maybe VEND should be interested in an acquisition, no?
Brotherly love, it's a beautiful thing.
Please pass the popcorn.
Meanwhile, RoBoBuddy, are you going to let the good folks at VEND know that they are wrong about the $38,000 price per kiosk that they insist on wrongly reporting?
Do is all a favor and enlighten Nick Yates, and please let us know when we can expect press release announcing the higher prices.
Love ya , dude, you are so amusing.
Oh, RoBoBoy, how we've missed you.
I'll take the company's word for it, thank you very much, and the word from VEND is that they are realizing $38,000 per machine (and, no, that's not for the sales to the big buyers, if any).
If you think I'm wrong, you might want to tell the company so that you can straighten them out.
A couple of curious things about that Print Mates deal:
1. It's very difficult to tell exactly what the consideration was for the acquisition, other than that it did not include any cash. Here's what VEND said about the matter -
"...the Buyer agreed to assume approximately $300,000 of liabilities net of finished goods inventory"
That statement does not make sense because you don't net finished goods inventory against liabilities. I suppose that it MIGHT mean that there were a total amount of liabilities that were assumed in the transaction that was equal to $300,000 plus the value of finished goods inventory. That might be what they mean, but then who put the value on the finished goods inventory and was it reasonable?
2. This seems as though it was likely a related party transaction, so I would expect that to be disclosed as well. The guy who controlled Print Mates was Frank Yates. Nick Yates' father is named Frank Yates (and Frank was involved in that phone card scam that Nick ran in Australia).
In a related party transaction, the Board would have been required to appoint a committee comprised of independent directors to consider whether to approve the transaction. Let's see what comes out in the 10-Q.
They acquired Print Mates! And this very transparent company didn’t dislose what was paid.
No cash, thank god (because there isn’t any), but no mention of stock (so is it a bunch)? And the assumption of $300,000 in liabilities that they don’t have cash to pay.
Yup, if they hit the magic 10 million by 12-31, things could be very different.
Let’s see how that goes.
Fair enough, Johnny Tarr.
So, let's say they achieve the high end for installs through December 31, 2019.
And, let's assume that they pull off the 40 cups/day average that they did with the first 3 kiosks (that included the Houston Space Center and a couple of other darn good locations).
And let's assume that the average price per cup gets up to $5.
That means that the royalty run rate as of January 1, 2020 will be a not shabby at all $10.3 million / year. Add a few hundred thousand for the rebates on all the consumables, and you're up to $10.6 million/year.
On the other hand, if the average rate per kiosk remains at a lousy 7.2 cups/day, then the installation of even 1180 machines won't save the day. That only gets you to an annual royalty rate of $1.9 million plus rebates on consumables, which won't be much.
So, you're right - if they get the installs in at no profit and manage to survive long enough to see the day, things will be OK, provided that the average rate of sales per kiosk is more like 40 and less like 7.2. And if it comes in somewhere in the middle? Well, that's not gonna cover operating expenses, I'm afraid. So, it seems that it really is a matter of matching the performance of the first 3 machines they put out there.
As they say in real estate, it's all about location, location, location?
Hi, DDR. Here's what our old boy Nick Yates had to say just a few weeks ago about that subject in a presentation he gave on March 14. He said that the profit margin on a sale at $58,500 was 33%. Here are the costs he outlined for the machine making up the total cost:
Robot $32,000
Installation $3,000
Location Fees $2,300
Customer Acquisition $1,700
TOTAL COST: $39,000
He did go on to say that "$4,000 in reductions identified", but that's a far cry from saying that realizing those reductions was going to be right around the corner.
Here's a link to the presentation if you'd like to see for yourself:
http://www.gennextbrands.com/wp-content/uploads/2019/03/GenNext-Presentation-to-High-Hurdles-03-14-19.pdf
Even with a $4,000 reduction in costs, the profit margin on a $58,500 sale would be 40%, so you're not likely to see the 50% margin that you seem to have heard about.
Of course, on a $38,000 sale, the profit margin would be negative, or with a $4,000 cost reduction, only 10.5%.
I don't understand why they would ever had sold these things at $38,000 per kiosk unless they didn't really have a handle on the cost of manufacture at the time they signed up the franchisee. There wasn't enough in it for VEND to cover their operating costs, even if really scaled down. I'm surprised that they haven't been making moves to leapfrog the $58,000 buyers to the front of the line.
Replying to my own post! Bad form?
After writing that post, I reconsidered the royalty income that VEND might expect to earn over the balance of 2019, and I realized that those numbers might be quite a bit more than I had assumed.
Using an average of 7.2 cups a day at an average price of $4.65 and a 12% royalty, it looks as though the royalty income for the six months ending December 31, 2019, could run up to almost $600,000. So, let's add another $400,000 in revenues for that period, bringing gross margin up to $2.8 million.
Unfortunately, since I had rounded the $7.4 million loss down to $7 million, that still leaves you with a loss of about what I had originally estimated - $7 million.
And, of course, if they ever manage to boost those sales to more than the 7.2 average, who knows, they might actually have a decent royalty stream (but still large losses).
Well, I said that I would give you the details, so here goes.
First, as we've discussed, VEND's March 26, 2019 press release gave a range of 600 to 800 installs for the last six months of 2019, with revenues at $38,000 per machine. From the looks of things, they have a long way to go to complete the early lower-value sales before they get to the sweet $58,000 sales they've been booking lately, so I think that number is correct - A max of $30.4 million for the six months if they hit the top end of their estimate.
Now, here's the problem. Their margins suck. In the December 31, 2018 10-Q, they managed less than a 7% gross profit margin on their kiosk sales, and that's under the most generous of assumptions.
So, if you apply a 7% gross margin to the $30.4 million in projected sales, that brings you to a gross profit of $2,128,000 exclusive of royalties and other miscellaneous revenues. I bumped it up to $2.4 million in gross margins. Maybe it will be a bit higher than that, but it hardly matters. Those royalties and other income are not going to make the difference.
Now, here's an unknown that I made an assumption for - I assumed that the sales that were reported in the December 31, 2018 quarter were made at $38,000. If the average sales price were less than that, then maybe their gross profit margin on a $38,000 sale is better than 7%. But, I went back and looked at their reports for franchises signed during earlier periods and, if anything, they were closing deals at prices a bit higher than $38,000 on average. So, you could challenge the assumption underlying the gross profit margin and show me that those sales were at price points significantly below $38,000 in the quarter ended December 31, 2018, but I don't think that's the case.
Operating expenses for the December 31, 2018 quarter amounted to $4.9 million, so for the six-month period, assuming no cost reductions, there's $9.8 million in costs against a $2.4 million gross profit for a loss of $7.4 million. I rounded that to $7 million as I recall.
There are certainly cost reductions that could conceivably be achieved - stock compensation, professional fees, R&D and "other" all seem high - but the company hasn't given any indication that there will be any such savings. Furthermore, there may very well be increases in some costs to accommodate the new growth, so who knows?
There might also be some improvement in the gross margin by reducing the cost of goods sold, but in Yates' presentation in mid-March, he only indicated that there might be a potential savings of $4,000 per machine in the future. Didn't sound like something that will happen soon, and in light of the manufacturing follies, it's clearly more important to ramp up production than it is to negotiate cost savings.
So, the bottom line is that even if VEND hits the very top end of its estimate for the six months ending December 31, 2019, they are looking at a not-so-great gross profit and a pretty sizable loss.
You and DDR are most welcome to challenge my figures, calculations, assumptions, etc. I tried to give VEND the benefit of the doubt on most calculations, but I didn't go out on any limbs and predict cost savings that haven't been projected or sales above what the company says we might expect.
The bottom line to me is that they need to do all those things I mentioned, and the most difficult one is probably raising sufficient capital to continue operations.
Hey, Alvie, I just typed a really long response to provide you the details, but I lost it before I could post it.
I will follow up with more detail, but for now, I will just say that you can't assume a price point of $50,000 per kiosk. The company's projections are based on a price of $38,000 per kiosk, and I think that they are right or had better be right about that, or they will have a whole bunch of pissed franchisees.
I don't have time at the moment, but I will follow up with a detailed explanation of how I come to my figures, and I will admit that there is at least one critical assumption I have made that I would welcome you to fact-check (but I think the assumption is reasonable and correct).
See you later!
If they meet that target, it looks as though they will make the high end of their estimate for the balance of the current fiscal year, generating somewhere between $1 million and $1.4 million in gross profit for the fiscal year.
The size of the loss for the current fiscal year will depend on any cost-control measures adopted. Absent any savings, it looks like the reported loss for the year will run at about $18 - $19 million.
Turning to the first six months of the next fiscal year, their projected revenues look as though they would produce gross profit of maybe $2.4 million at the high end, and a projected loss for the six-month period of at least $7 million.
So, it looks as though they will need to:
1. Reduce costs dramatically;
2. Start selling those $58,000 kiosks they are signing up instead of the multitude of $38,000 sales they have in their pipeline;
and
3. Raise a whole lot of capital, something like $15 - $25 million in a worst case scenario.
I was going to say that they need to do one or more of these things, but I think they need to do all 3.
7.2 cups per kiosk per day????
OK, so I thought I would wait a week and check back at the reisandirvys.com counter for the number of cups of froyo sold to date. I just checked. It only comes to an average of 7.2 cups of froyo per day per kiosk, at an average price of $4.65/cup.
Not so good. Nothing short of bad, in fact.
Now, I know from what Alvie told me that these numbers may not be actual and that they are based on the company's estimates and occasionally adjusted to reality, but (a) I waited a week to see, and (b) if the company is using an average of 7.2 cups to run its counter, that must be because they know that that is not an unrealistic estimate. The company is telling us that that's the average (and you don't see them crowing about it in a press release). Even if the number is higher than 7.2, it would have to be a lot higher to be acceptable, wouldn't it? Like double or triple that number?
Now, I also know from what FroYoMan told me that some of the kiosks do much better than that, and I know that the numbers for the Houston Space Center and some other locations are darn good. But that just tells me that for the remaining hapless (majority?) of the franchisees, the numbers aren't even as good as a lousy 7.2 cups. So, for the guys like FroYoMan who are lucky enough to have snagged a great location, no problemo. But, for the more typical franchisee with a kiosk in the basement or something, the numbers suck.
I guess that once a franchisee has shelled out his dough for his froyobot, he's unlikely to throw in the towel even if he's just scraping by. Things will rock along for a while, I suppose. But for the prospective franchisee, the numbers just don't add up to a "buy" decision ... Unless, of course, the prospective franchisees aren't seeing these numbers. I don't know how frequently VEND is required to update the disclosures in its franchise offering memos, but I suspect that they are slow slow slow to do so.
Which brings me back to my thesis. Franchise sales are slowing down, and unless VEND pulls a hat trick and (a) solves its manufacturing and delivery issues, (b) finds locations other than the proverbial basement, and (c) manages to get average sales per kiosk up to a number high enough to have most franchisees singing its praises, those franchise sales are just going to keep going down.
It's not so bad if you are replacing $38,000 sales with $58,000 sales, but if your rate of defections rises substantially higher than your rate of new sales, the cash flow situation will get interesting.
Well said, Alvie.
Might I add that most (nearly all) market makers make most of their money on the bid/ask spread. They are motivated by that profit objective to set the spread around the number that they believe it will trade, because the greater the volume of trading, the greater their profit. With rare exceptions, they are not nearly as motivated to walk the price up or down, and they generally don't care how high or low the price is. The one motivation related to their primary profit objective to move the price around would be to increase volatility so that the volume of trading increases, thereby increasing their opportunity to profit off the bid/ask spread, but that's a bit of a risky move, and most market makers would rather find another stock to profit from than try to make one in move more.
That said, I can't deny that stock prices in thinly-traded stocks do seem to be subject to manipulation on occasion. And that said, I would still maintain that in the long run, even the manipulators can't overcome the fundamentals.
Well, if they install all the machines that VEND dreams of installing, sell all the froyo that FroYoMan dreams of selling, and avoid all of the various mis-steps they've committed in the past, I would probably back up the truck to buy as many $0.65 shares as the market-maker wants to make available, and I'm sure I'd have lots of company. While I agree that penny stocks, as well as others, are sometimes the subject of price manipulation, there's only so much the market will bear.
On the other hand, if they don't sell much froyo, they won't sell many more franchises, and they will run out of cash, at which point your shares may become suitable for framing, but not much else.
Without the fundamentals, this stock will never go up and stay up.
At 20 cups/day, and a generous $5/cup, I come up with about $22,000 after COGS, royalty and sales tax (assuming 8%).
And that's before rent (whether in the form of a percentage of sales or flat rate), electricity (unless included in rent), maintenance, and other, mostly non-zero, costs.
Rent and maintenance are what would kill your returns, I imagine. You might get very low (or even free) rent in a mediocre location, but in the kind of high-traffic environments that FroYoMan dreams of and that would be required in order to achieve that level of sales, I'm sure you'd have to pay up, and that's assuming you could even get in.
Hey, thanks, Froyodude!
So, they had 188 kiosks installed as of February 14 per the 10Q. Is that more to your liking?
So, using that figure (or is that one wrong, too?), I get all the way up to 9.4 cups/kiosk/day.
So, where else am I wrong?
As far as "you always seem to think you know what is going on", I plead not guilty. I am perplexed and confused, particularly today when my belief that midnight froyo runs were indicative of improving sales, only to have my hopes dashed when I was advised that those were not real numbers. That's why I seek enlightenment from you, mon frere. Of course, if the information you provide conflicts with the golden words of VEND itself, issued under penalties of securities fraud, I'm not quite sure what to make of it. I am lost in the wilderness, seeking truth, and believing that I can believe the public statements that VEND issues.
Per the company's own statements, average sales per kiosk per day have been less than 10. Do you disagree?
FroYoMan, thanks for setting me straight.
Which of the following figures is inaccurate, dear sir?
- Cumulative sales of 200,000 cups by on or before February 14, 2019?
- Cumulative sales of 269,193 cups by on or before March 26, 2019?
- 200 kiosks up and running?
I'm sure you can do the math as well as I, and the above figures, all drawn from VEND's public pronouncements, work out to less than 9 cups per kiosk per day.
So, what am I (or VEND) missing?
Turning kudos into brickbats.
OK, so I was fully into my Johnny Tarr positivity when I posted late last night, thinking that I had found something very interesting and remarkable, even. I thought I would arise this morning to find really good sales numbers for the daylight hours. Maybe the froyorobot franchisees really were onto something and VEND would experience more franchise sales based on recent sales results.
Now, here I am losing my positivity and taking another look at the froyo sales figures, with less than optimistic results.
Using the most generous assumptions possible, by assuming that the sale of the 200,000th cup of froyo occurred on the date of the press release on February 14, I calculate the average rate per kiosk per day over the last 39 or so days to be less than 9 cups per day. And that includes the off-the-charts sales for Houston Space Center and other outliers.
So, let's assume you are a prospective new franchisee looking at a reasonable expectation of sales of 9 cups/day. And, let's assume you average a remarkably good $5/cup. That leads you to expect revenues net of franchise fees, COGS and sales taxes of less than $10,000 per year. And that's before any rent, insurance, maintenance costs, credit card fees, insurance, legal, accounting, electricity, software fees, etc.
So, if you're a prospective new franchisee, how does VEND convince you to shell out about $58,000 per kiosk with a payback period of around 6 years? Even if you are one of the lucky ones who got in at $38,000/kiosk, are those returns satisfactory? And, what if the various costs that I ignored in my calculations are material, so your results are even less glamorous? Would you be a happy franchisee? If not, what leads you to expect that sales will improve over the rate that has been experienced for the last couple of months when most of the machines have been up and running for long enough to achieve expectations?
I think that VEND's obligation to update its franchise disclosure documents with more recent figures may become its undoing, and that may explain why the numbers in the last 10Q suggest that the sales of new franchises are not keeping up with the loss of the old ones.
Hmmmm, Not sure what to think about that.
So that explains why they were reporting so many sales at that time of night. At that rate, I was curious to see what the sales were running when people were actually awake and in the venues with the kiosks. I was prepared to be impressed.
Correct me if I'm wrong here, but my recollection is that the 8 cups per day per kiosk rate was what they were experiencing a few months ago. If so, it looks as though the sales rate has not improved. That's not surprising to me (since I would expect early sales to be buoyed by the novelty of the machine), but I thought that the argument was that the sales would ramp up.
More to the point, if average sales per kiosk remain in the range of 8 per day, does that provide an acceptable return to the kiosk owner (not to mention break-even)? And is the expected rate even as high as 8 per day if you remove the high-performing outliers like the Houston Space Center?
268,497 cups of froyo sold as of now.
That makes 67 cups sold between the hours of 2:00 a.m. EPT and 3:00 a.m. EPT. That's roughly 8 cups per kiosk, and my guess would be that this is not the best hour of the day for selling froyo.
What's really remarkable is that VEND is posting the information in real time on the reisandirvys.com web site, together with revenues. Pretty cool. The page autorefreshes, so all you VEND fans can just make it your home screen and watch the cup count go up.
Perty transparent.
News from the front lines - Haverford College.
http://haverfordclerk.com/haverfords-latest-vending-machine-now-serving-frozen-yogurt-and-fraud/
Optimistic outlook, but fair enough.
Print Mates! The future of frozen yogurt!
So, I missed this the first time around - the "Founder" and CEO of Print Mates is not Nick Yates, it's Frank Yates! I wonder why Nick is promoting this unrelated business at a conference featuring Generation Next?
If you read the press releases, you'll see some striking similarities between the Print Mates pitch and the Reis & Irvy's pitch, but that's merely coincidental, I'm sure.
Anyway, you can buy some Print Mates kiosks and start making money with little effort. Just go to www.printmates.com to sign up.
My favorite part of this story, though, is that the technology is apparently coming from "Apple Industries"! Yeah, that's not the name of the company that sells iPhones, iPads, etc. - it's an intentionally similar name adopted by a photo booth company. And this, it would appear, is their latest venture that has not (I suppose) been white-labeled to Frank Yates to sell as Print Mates. I'm not 100% certain of this, but the very close timing and other similarities make it hard to escape that conclusion.
There are a few press releases floating around out there for Print Mates, dating from November 2018 and February 2019. Frank (not Nick!) says that they rolled out the kiosks in San Diego somewhere around late 2017, and, of course, customers love them.
I'll post more info and links when I have the time, but the Print Mates web site and press releases show no love for Generation Next (at least there is no mention of Generation Next in any of those places).
The Print Mates web site does not show any locations in operation, but in one of the press releases, they state that they have had them in operation in the San Diego area for a year or so.
So, I suppose the good news is that this venture may not (or shouldn't) rely upon any funding from VEND. I'd be curious to know whether they strictly avoid the sharing of corporate resources of VEND (such as location services) with Print Mates. The temptation seems nearly irresistible and unavoidable.
And, I suppose the bad news is that management's attention seems to be divided between froyo robots and other matters that may not benefit VEND.
And, in an admittedly cynical worst case, perhaps Nick is keeping his options open, riding the VEND coattails for Print Mates' benefit, but maintaining the ability to claim that Print Mates is all his, while also keeping the option of bestowing Print Mates upon VEND when things don't go so well and it needs capital or other corporate resources. But that's just my cynical point of view, so ignore it as you wish.
Thanks, Alvie.
Aside from the curious selection of an unrelated photo printing product for their next push, did you notice that the 2020 product seems to be a step backwards, at least from what the picture shows? I had to enlarge it, but the "Reis & Irvy's Small" has a self-serve feature. So much for the love of robots!
There's a lot more info in the deck besides this, but the Printmates and Reis & Irvys Small product plans are what immediately caught my attention. As our new friend Caroy asks, one wonders where the capital required to develop these new product initiatives will be derived.
Hey, Nick Yates has been busy talking up VEND.
He gave a presentation at the High Hurdles Summit in Salt Lake City last week. Here's a link to the presentation deck:
http://www.gennextbrands.com/wp-content/uploads/2019/03/GenNext-Presentation-to-High-Hurdles-03-14-19-converted.pdf
Lots to digest in there. Thought y'all would want to see.
Rolling out a printing kiosk? I saw a hint of this in a typo on their FroyoRobots.com web site, and I assumed that it was completely irrelevant, but it looks as though that really is the next idea they are pursuing.
I got to wondering how many franchises need to be sold per month to support growth. That got me wondering what the track record has been thus far on new franchise sales.
Here are the figures, drawn from VEND's filings and public announcements:
12-31-17 10Q - 943 machines sold
6-30-18 10K - 1,417 machines sold (pretty good, eh?)
9-30-18 10Q - 1,281 machines sold plus 123 installs for a total of 1,404 (uh-oh, the dreaded negative growth)
12-31-18 10Q - 1,290 sold plus 188 installs for a total of 1,478 (growth of 74, or about 25/month). At least headed in the right direction again.
Current web site figures - 1,100 sold plus 200 installs for a total of 1,300! Did they really lose a net of 178 machine commitments in a month or two?
OK, the web site figures appear to be rounded, so maybe there's a bit more to it, but that sure looks like a precipitous drop in a very short span. According to the monthly reports, there were 31 franchised machines sold in January and 41 in February. That pace does not sound as though it is anywhere near sufficient to build on the backlog, particularly in light of the number of franchisees who are bailing.
So, the more optimistic point of view is that, like NY said, they are replacing $38,000 commitments with $55,000 commitments. Also, the silver lining to the slow rate of installations is that their backlog of machine commitments plus new franchise sales still amounts to around a year's worth of installations.
So, why bother selling more franchises for the time being, given that it will take a year to install them and it must cost a lot to fund the franchise sales efforts? Some of those sales generate cash flow, since not everyone is as fortunate as FroYoMan in having their funds protected by escrow arrangements.
So, my guess is that they are generating sufficient cash from franchise sales to justify the expense. On the other hand, if they aren't, then it seems that the company could reduce some of the cash burn by curtailing those operations. At $1.7 million burnt each month, I don't know whether that would put a big enough dent in the burn to matter, but every little bit helps.
Transparency is nice, but cash flow is key.
Riddle me this: How does VEND plan to fund its operations between now and that fabled day when installations actually begin to take off?
I don't get it. I guess we'll have to wait and see, but by the company's own estimation, there are 4 more months ahead of very low revenue and cash flow from installations. Franchise sales could make up the difference, but they aren't yet. Sales of 19 Degrees units could help, but they fell off rapidly. Stock sales could do it, but at below 65 cents a share?
Let's watch and see whether they can pull that hat trick off.
That’s incredible. FroYoMan said he signed in March, and I gather he is still waiting.
What is he (and the other long-waiting franchisees) supposed to think?
I didn't go into detail in my earlier post, but I was helping a friend evaluate whether he might want to become a franchisee. He contacted a number of franchisees, and not just the ones that the company directed him to contact. It was informal, non-scientific, somewhat random and by no means comprehensive. That said, he spoke to a sufficient number of them to feel comfortable that the franchisees who actually have kiosks in operation are generally positive.
"Our" expectations were mostly my personal expectations that the difficult circumstances faced by the company would have adversely affected its relationships with franchisees, particularly in light of its history with Fresh Healthy Vending franchisees. I was surprised to hear otherwise.
My friend ultimately declined to purchase a franchise.
I have not run out of good things to say about VEND, so here goes.
I don't know how long this will continue (maybe longer if VEND issues another press release with objectively and legitimately good news, who knows?).
But, there is at least one other good thing that I can say from experience. In a fairly random survey of a number of Reis & Irvy's franchisees (that is, franchisees who actually have machines installed and operational), the consensus seemed pretty clear - they were pretty satisfied at this point with their experience and happy to be franchisees.
That response was out of line with our expectations, but it seems to have been honest. For my part, it was evidence that Yates and company had their eye on the most important of all the balls they have in the air. If the key to your survival is signing up new franchisees, you had better make sure that your current franchisees are saying good things about you. While the same can't be said about all the "pregnant" franchisees who are waiting (some patiently, some not so patiently), at least those who have managed to get a machine on the ground provide a strong endorsement for becoming a franchisee.
Well, that's it for now. If I get bored, I may revert to pointing out the negatives, but I will miss the endorphins I'm getting from all the positive new vibes I'm sharing.