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There's a franchisee born every minute, Johnny.
I saw that, but I haven't checked it out. As I mentioned, there are now at least 11 Houston locations (13 if you count a couple in nearby towns).
My curiosity was pretty much satisfied when I ran across the first one, and I didn't seek it out. The other one was very close to my travels, so I took a detour to confirm that the location is as bad as I suspect it to be. I never found it, but I'm convinced it's a lousy location.
The front page of the R&I web site mentions quite a few types of locations (malls, airports, stadiums, museums, universities, hospitals), but office buildings isn't one of them. I think that's because VEND knows that no one is going to be excited about the potential sales associated with the typical suburban office building.
There’s a bit more to the story...
http://www.unhappyfranchisee.com/wp-content/uploads/2012/10/Wa-Consent-Order.pdf
About that California thing.....
It looks as though the good folks at R&I SoCal have been waiting since December 2017 for their "coming soon!" kiosk, and they seem to be hanging in there. And, no, they don't appear to be affiliated with Mr. Mickelson.
They have what seems to be a nifty location awaiting the arrival of their first kiosk, so let's hope the venue has an equivalent amount of patience.
Originally, they expected to have the first kiosk in California, but I guess those hopes are dashed.
What in the world could the problem be?
Yeah, not 7 flavors like the Reis & Irvy’s either
It's curious that a competitor, the folks at Frobot, have a number of soft-serve frozen yogurt kiosks in operation in California. I wonder what the difference is between their machines and VEND's?
Thanks, Alvie, I hadn't heard that detail, but I had seen someone suggest that there were health department issues there, and I saw a salesperson post on Facebook back in March that they couldn't place kiosks in California yet.
It seems like a very big problem that has persisted for a very long time.
And.... drum rolllll..... No California locations!
Hey, there is some location info if you look hard enough.
Here's a link to a clunky web page that provides some out of date information on R&I locations:
https://www.reisandirvys.com/location/
It's not user-friendly, and there's no link to it on the web site's front page. It may not be ready for prime time.
The information must be dated because it only shows a total of 219 U.S. locations. It does show the downtown Houston location I had run across, which seems to be a fairly recent install, but it doesn't show the suburban office location I discovered.
Anyway, there are 10 Houston locations listed -
- 4 of them are in office buildings (5 if you count the one I found). That's unlikely to be a great spot, but it must be easy for the VEND location team to place them in that sort of spot.
- 3 are in hospitals. I guess those are good spots.
- 1 is at a commercial school, probably not huge traffic.
- 2 are in entertainment venues, including Houston Space Center.
Not bad. I had calculated that installations in June would total around 69, and that was beginning to look doubtful with the info on the "updated" web site. So, they beat that estimate and posted $8.3 million in revenue, about their earlier low-end projection of $8.2 million and more than Nick had recently suggested.
Nick may be getting wise to the underpromise / overdeliver strategy.
But, credit where credit is due - they pulled off both deliveries and revenues within the announced target range.
The reference to short-term cash flow issues is a bit ominous. Sounds as though their private placements aren't getting filled.
The other not-so-good news is that new franchise contracts' value per kiosk has dropped from the $58,000 level down to less than $48,000. That predicted 26% profit margin may be difficult to achieve, unless it's solely from the benefit of the write-off to inventory that they took earlier.
I would have thought the biggest issue they would mention would be the transition to Stoelting, but not a peep about that. If they were ready to move forward with that, I would have expected some positive statements to that effect. I wonder if that's tied into their cash flow issues?
Alvie, I respect you and your opinion, but you have overlooked what our boy Nick said on April 29:
"The Company now estimates that it will install between 400 and 440 Reis & Irvy’s unattended retail kiosks during the full fiscal year ending June 30, 2019, with annual revenue recognized between $16.0 million and $17.6 million, compared to the most recent previous estimate of 330 to 380 installations and previously estimated recognized revenue of $12.5 million to $14.4 million."
If they claim that 342 installations is a win, they are moving the goalposts again, just as they did with the revenue projections.
They moved up the projected revenues (to pump the stock), then they chose to forget those projections when they reported actual results.
The problem with Nick and his predictions/projections is just this - When he makes his overoptimistic and unrealistic predictions, he is pumping the stock in order to get people to buy. When VEND misses those predictions, he rewrites history, makes excuses, and points in the other direction. He doesn't make predictions responsibly, and he doesn't live up to his misstatements and mis-predictions.
I tried to locate the other location on the west side of Houston, but it was harder than I thought it would be.
I happened to be driving through that area, so I thought I would swing one street over and find the parking garage with the kiosk. That was not easy. Then, once I located what I'm pretty sure is the right garage (there are numerous large garages in that neighborhood for the large buildings on the campus), it looked as though access is very limited, and I wasn't able to investigate further.
So, like I said, the west Houston location looks like a bad idea. There will be absolutely no traffic other than from one (possibly two, but I doubt it) office buildings that are right there. While there are a few visitors to those buildings, there aren't many, so the potential customer base is limited to the office workers who would be passing by between their cars and their offices. I can't see that location doing better than break-even, and I doubt it will even reach that level.
Despite what Nick has said about learning their lessons about locations, they don't seem to be picking them very well.
Consider what Nick is doing to the volume.
Average volume of shares traded in VEND today is around 56,000 shares.
Even back a year ago when things were more interesting, the average shares traded in a day looks like it was no more than 150,000 shares.
Nick is offering the equivalent of 4,000,000 shares in the most recent of many many private offerings. That's equivalent to 71 days worth of buying volume on the public markets, and it's still equal to well over a month's worth of buying volume back in the good old days.
Not only is that 4,000,000 share offering depleting the buying volume, but those buyers are going to want an exit one day, so there will be an equivalent amount of selling volume on the other side when they dump their shares on the public market.
Lacking adequate cash flow from operations, a situation that will clearly continue through the end of 2019 and probably well into 2020, means that Nick will continue to offer cheap shares in private offerings. The rate at which the offerings are made are frequent enough to ensure that the market never gets a breather from the pressure of the private offerings.
So, if you're waiting for buying volume to save the stock price, you're going to need a lot more patience.
A further thought....
It's quite curious that VEND doesn't have any resource to identify all R&I kiosk locations. At one point, they even touted an SEO program that they claimed they were instituting that would permit prospective customers to see nearby R&I locations when they typed froyo or some such into their search engine. Never happened.
The skeptic in me suggests that there's a reason the information is not readily available and that it's not a good one. Otherwise, you would think they'd want to tout where they are and all their new installs.
But before I turn too much into a negative Nancy, let me reiterate that I was impressed by how the kiosk downtown drew attention from passers-by and had two returning customers at a quiet time of day during the short few minutes I was there. In the right location, it seems to me that these kiosks could do very well (but I guess we know that, don't we?).
It's in downtown Houston.
After I ran across that one, I checked to see whether there are other installs here that I hadn't known about. There is another one on the west side of town in an office complex. It looks like it's a much less ideal location.
The downtown location is in what really amounts to a medium-size mall, including retail stores, restaurants and quickie lunch places, and with a very high concentration of large office buildings surrounding it. I think it's the only immediate food option for a group of 5 medium to large buildings, although there's plenty within walking distance. It's just that it's the default option for a quick lunch bite or a snack because it's connected by walkways to all those buildings - When I've been in those buildings in the past, I would go there to grab a bite. Anyway, although its foot traffic is limited to mostly lunch, it probably gets enough, and I'm sure workers drop down for mid-afternoon snacks. There's also a lot of folks coming and going to that office complex, like me, so there's more than just the workers in those buildings. But there's zero weekend or evening traffic. It's a good but not great location. The downtown kiosk is owned by someone other than the owners of other kiosks in Houston.
The westside location looks like a loser to me, but I haven't checked it out in person. It's in the parking garage lobby of one of a group of large office buildings. It's not in a real food court, just a grouping of vending machines. It's probably convenient enough to the one office building it services to draw some snackers from there, but I don't think workers in the other buildings are going to hike to the distant garage in the Houston heat to grab a froyo. And there's not going to be any foot traffic at all other than from folks who park in the garage. Like the downtown location, it will be dead on the weekends and evenings. I don't think it will sell enough yogurt to be profitable.
The other pre-existing Houston locations of which I'm aware are well-located. Two of them are in the Medical Center, so they get all that hospital traffic (but I'm not sure how well-located within that complex they are). My guess is that they do well. The other one, of course, is the Houston Space Center location.
So, what does that tell us about the job that VEND's doing? For me, it suggests that VEND is still happy to stick its franchisees with questionable locations. You've got to do better than vending machine groupings in suburban office buildings. Neither of the two new locations I found are going to be in the top 25 or top 50, and neither of them is going to be a true cash cow.
I am too cheap, but I am more likely to blow $5 on ice cream than froyo.
Good news for the kiosk owner- that ice cream shop closed, and I don’t see any others.
The traffic is limited to morning and lunchtime, as everyone leaves quickly at end of day. Si, it’s not going to blow the roof off, but it’s probably going to get some sales at lunch and mid-afternoon. I guess that’s enough to turn a profit , but not an exciting location in terms of potential.
I was going to buy a cup to see it in action, but I don’t care for froyo, so I was happy to see a customer waiting to get some. I am sure it is good froyo if you’re into that.
For froyo lovers (like my family), only chocolate and vanilla won’t cut it as a froyo destination, but I guess it’s a convenience thing with a kiosk right there, and it doesn’t need to draw customers in.
This place is a very large multi-floor food court that has at least one ice cream shop, probably more. It will be interesting to see if the kiosk can hold its own against local competition.
Hey, I finally got to see a kiosk in operation! It was a complete surprise!
So, I was headed to a meeting this afternoon, and lo and behold, there was a Reis & Irvy's kiosk sitting in the middle of the food court area I was passing through to get to my meeting. By all appearances, including the signage announcing that it was "coming soon", it hadn't been there long.
After my meeting, I came back to check things out. I had seen no customers either on my way in or when I came back out, but when I was walking back up to it, the few people who were passing by the machine all turned around and looked at it in curiosity. So it gets attention.
I looked the machine over - yup, just two flavors, chocolate and vanilla. No proximity sensor in operation, nothing going on in the machine to attract attention, just sitting there lit up. There were some loose sprinkles in the bottom of the machine, but not a whole lot, and there was a residue of yogurt drips on a catch pan beneath the spout, but what do you expect? I had wondered what happened to those bits that are left drooping from the spigot, so I guess the answer was obvious - they fall to the pan below. A little yucky looking, but not that bad. It did make me wonder about the need to clean things on a regular basis.
And, what do you know, while I was checking things out, a security guard came up to buy some yogurt, and before she was finished, an office worker waited in line behind her. I asked the security guard whether the machine was new and whether she liked the yogurt - yup. She also enjoyed the graphics and the robot action as she awaited the delivery of her yogurt. She paid cash and got change back, and the office worker paid with a credit card, no problemo.
There is good news and bad news about the location. It is in a busy food court with lots of offices and traffic during the week, but on the weekends, the place is probably dead. So, it's a 5-day a week location. Between the interest that I saw while I was watching, the two purchases during a fairly slow time of day and the office-worker traffic there, I have to think that this machine will sell a healthy number of cups per day, albeit only 5 of 7 days. But still, I have to admit that its KPI may be attractive.
I'll be back in that area from time to time in the future, so I'll get a chance to check things out again. I would expect the novelty to wear off with the stream of foot traffic that is comprised primarily of office workers who pass that way every day, but I suppose some of those will be converted to customers before the novelty is gone, and some of those will become repeat customers like the two I saw.
It makes me wonder what might have been if only the rest of the business had been managed well.
About that new web site -
I love that it has the claim that "6 flavors and 6 topping simultaneous options" right next to a picture of a kiosk that serves 2 (count 'em, TWO!) flavors with a twist option.
It's pretty spiffy. I think VEND has an excellent team working on its graphics, animations, presentations, etc.
I see the kiosk count has gone up, albeit slightly. With no dates, it's hard to make anything of the updates.
In the article (published yesterday), they claim that VEND has a backlog of $160 million. In the press release announcing the sale of 500,000 cups of yogurt (published the day before yesterday), they put the figure at $140 million. I don't think the backlog increased by $20 million in the course of one day.
Typical of Yates. He just can't help himself.
I doubt either number is accurate.
I looked at the top 25 and determined that they generated $4,961.25 per day as a group (25 x 35 x 5.67).
Then look at the top 50 - they generate $7,275.10 per day as a group (50 x 26.6 x 5.47), but there's 50 of them.
Subtract the revenue per day of the top 25 machines from the revenue per day of the top 50 machines to get the revenue per day of the 25 machines ranging from 26 to 50. $7,275.10 less $4,961.25 comes to $2,313.85 per day for the second 25. Divide the $2,313.85 per day by 25 kiosks, and you get average revenues per day per kiosk in the second 25 group of $92.55.
And, yes, the drop-off is quite dramatic, but I think that's to be expected in a typical distribution and in this case, we know that we have outliers like the Houston Space Center (and RoBoZo!) in the top 25.
Pardon me, sir, but your backlog is shrinking.
And it's not just because you are getting more kiosks delivered and installed.
As of December 31, VEND said that it had a total backlog of 3,956 kiosks. In the most recent announcement, the backlog is down to 3,500.
The drop of 456 kiosks can't be explained by the installs, so a very big chunk of the backlog disappeared for other reasons. We can guess that the Mickelson and Atlanta deals are part of the shrinkage.
That's still a pretty big backlog, but it includes a bunch of those big deals that one would suspect may not be all there when the company wants to provide those kiosks.
So, my guess is that quite a few of the claimed 3,500 kiosk commitments will disappear before they really materialize.
Better start selling more franchises, guys.
"We are glad we hit our projections" sez Nick.
Well, sorry to be picky, mate, but your projections were recently adjusted downwards so that you could hit them.
Remember back in April/May when you said this?
"The Company expects to ship 124 to 164 robots together in May and June, completing the Company's final quarter of the fiscal year (ending June 30). With quarterly sales of $ 8.2 to $ 9.8 million and total annual sales of $ 16.0 to $ 17.6 million, the company said."
It seems that you didn't hit those particular projections, now didja?
The May/June shipments appear to be around 126 kiosks, so you did manage to squeak into the low end of that range of predictions. It's the sales figure that you needed to fudge on. You were repeatedly touting $8.2 million to $9.8 million for the quarter. Now you claim to be hitting your projections with only $8.0 million.
Hey, you're only off by $200,000, but it's $200,000 below the low end of the range that you yourself set.
It is difficult to gain credibility with the investing community when your predictions and projections are so consistently way off, but it is even harder when you don't own up to your own targets relative to your performance.
How about those top 25 and top 50 metrics?
Clever Nick wants us to pay attention to the best-performing kiosks. Never mind what those losers with lousy locations or problem machines are doing! You're gonna be one of our best and brightest, just like RoBoZo!
If you take the performance of the top 50 and eliminate the performance of the top 25, things get a little less sanguine.
The leaders of the pack with those top 25 machines churn out revenue at a rate of $198.45 per day per kiosk, or over $72,000 a year. But if you eliminate those high-performers and focus on the next 25, things look a lot less rosy. It turns out that the machines in the second 25 only manage to generate revenue of $92.55 per day, or just shy of $34,000/year.
Between franchise fees, sales taxes, COGS and percentage rent, those guys are giving up around 55% of their revenues before miscellaneous expenses. That brings the $34,000/year down to about $15,300/year.
So, there you go - a guy who is lucky enough to own a kiosk that is in the upper 20th percentile will only manage to earn enough to get his money back after 4 years with a machine that has an expected useful life of about the same length of time. Who knows, maybe you get it to work for 5 years (or more)? Does that payback period and prospective tail end earnings excite you?
And, of course, if you get a kiosk that is a middle of the pack performer (as you should expect), your prospects are even more gloomy. You might not even make your money back after all your hard work for the 4-year period.
I suppose Nick has a little time before he has to update his franchise disclosures to reveal more recent performance, but when he does, it's going to be a whole lot tougher to sell franchises.
Let's have some fun with those sales numbers, shall we?
Nick is a little cagey with the info he releases, but with a little cyphering and reasonable assumptions, we can figure out a bit more than he's letting on.
They hit the magic 500,000 figure, and it only took 32 days from the 400,000 mark!
So, for some reason (I'm guessing because Nick wants to sell franchises), the "KPI" and "SPK" stats that get released are limited to the top-performing kiosks. It would be more meaningful and more useful to provide stats for the whole fleet of kiosks, but I guess that's a whole lot less fun for Nick.
We'll get to those top 25 / top 50 numbers in a bit, but first let's see what we can do to come up with our own SPK number, eh? There were 319 total kiosks at the end of May, but 57 of those were new installs and 14 were refurbs. We'll give VEND the benefit of the doubt and count the installed base as 248, OK?
100,000 cups over 32 days for 248 machines works out to an SPK figure of 12.6 cups per kiosk per day. Now, before you say, "Hey, maybe not all the machines were up and running", let's remember (a) we already gave them credit for the 71 machines in May including the refurbs, (b) those problems came up months ago and were supposedly fixed some time back, and (c) since when do you get to excuse your poor performance in one metric by blaming it on your other poor performance?
So, my obsession with SPK continues, and it still doesn't look so good. It's better than the 8 - 10 SPK figures I was coming up with earlier, but I don't think most franchisees will find the price of admission to be worth a measly 12.6 cups per day in sales.
We can't all be RoBoZo.
If you read the company’s public statements about Stoelting VERY carefully (which is, unfortunately, a necessity), you might note that there has never been a clear statement to the effect that a binding agreement has been entered.
I suspect Stoelting will come aboard, but I wouldn’t be surprised if there is a delay or hitch of some kind.
While there are times when it's helpful or necessary (such as in VEND's case), dilution is generally frowned upon. You are in the stock at a certain price because you think it has upside and want to enjoy that. With dilution, you are forced to give up some of "your" upside.
In VEND's case, it's much much worse than that, with the openness to sell at a substantial (sometimes steep) discount to the market price. Now you're getting diluted AND some of your present value has actually been given away. Your stock is worth less.
As I've said before, there is probably no large purchaser who would buy this stock on the open market. There is always a much better deal available through the private offerings. That reduces the number of buyers for the stock, particularly the big buyers, further reducing the price of the shares.
Someone mentioned toxic converts on this board a few months ago. While VEND isn't quite there, it's constant practice of selling cheap shares with few restrictions has a similar deleterious effect.
On a positive note, if they manage to pull off the current offering at an interest rate that is lower and a conversion price that remains at 50 cents, then maybe the need to finance future operations can be met without completely destroying your value.
One interesting theoretical question here - Suppose an acquiror approached Yates with an offer to buy the whole company at 50 cents a share. That would put $9 million in Nick's pocket plus whatever he can finagle with respect to his millions of other option shares, future employment, etc. Do you think he would pass on that offer?
Really? That’s very interesting. How did they treat you? What did they say?
Yep, that makes sense.
But when was the last time they held a shareholders' meeting?
It looks like there's no practical way to force a shareholder's meeting for a Nevada corporation like VEND.
If there hasn't been one in over 18 months, holders of 15% of the stock can petition a court to require one for the election of directors, but who (even RoBoZo) has 15% of VEND stock?
I haven't checked, but I don't think a corporation that doesn't hold annual meetings can qualify for listing on one of the exchanges.
I saw a post in March by a VEND franchise sales guy who said that they couldn't currently sell in California.
It didn't say whether the reason for that was related to the Department of Health, franchising rules or what.
I think Nick had mentioned something about a temporary cessation of sales while franchise registrations were being updated, so it could have been that.
In any event, there was something wrong in California as recently as March.
Good work, DDR.
Duane Linstrom is the relatively new General Counsel. The other one left a few months back.
I agree that the lower interest rate with the same conversion price indicates more confidence in raising the money, presumably on the advice of the broker they hired. Of course, the proof is in the pudding. You never know whether the placement will be successful, and we'll never know anything but what VEND is required to disclose in the 10-Q/10-Ks, with the exception of what industrious guys like you find out.
To clear up any confusion, a Reg D filing is a notice filing of an unregistered offering. The SEC permits you to make the unregistered sale of securities under certain registration exemptions, but it requires you to file a notice of that offering on a Form D.
Nick is a true artist- He makes statements that are technically true (or not technically false), but intentionally misleading.
Anyone reading that article, particularly if they have seen references elsewhere to “6 flavors with a twist”, could reasonably conclude that all the kiosks present a large variety of these options.
A careful reading of the statements, coupled with the knowledge that there is only frozen yogurt and only 2 flavors at a time available, would make it possible to see that the statements are technically “true”, but most uninformed readers would probably expect something more.
When I first read it, I was struck by how clever it is. But it’s still misleading.
This article doesn't make sense to me.
Why would a non-profit whose purpose is to advance the participation of minorities and women in airports and other aviation fields enter into a joint venture with VEND, "effectively becoming a Reis and Irvy's franchisee"?
- The operation of for-profit kiosks does not appear to be consistent with the organization's non-profit status or its stated purpose.
- The joint venture with VEND is not with a minority or woman-owned business.
Stranger things have happened with non-profits, but this article seems to go beyond the original announcement that sounded more like a promotional deal. Not that the original idea was all that bad - AMAC might help VEND sell kiosks to women and minority business owners and get them placed in airports. That does sound good for VEND.
But I still can't make sense of the claims in the article.
Add to that the recitation of a multitude of flavors that are "available" at the kiosk and the reference to selling not just yogurt, but also ice cream, sorbet and gelato, and this ends up smelling like a typical Nick Yates embellishment.
Maybe I'm wrong. We'll see in 3 months.
So who got this sweetheart deal?
"On May 19, 2018, the Company entered into an 18 month consulting contract with a franchisee. Consideration is a total of 300,000 shares of common stock. 50,000 shares of common stock vest every three months during the term of the contract."
I once thought it was Phil Mickelson, but he appears to have gotten nearly free kiosks plus warrants. Surely he didn't get more than that?
VEND was trading around $2.20 a share when this was granted, so that's around $660,000 in value for 18 months of "consulting".
Who could it be?
Only $1,000 per kiosk?!?!
I just noticed something else in the franchise disclosure document. Some lucky franchisee was given the right to purchase kiosks at the incredible price of $1,000. This right was granted prior to June 30, 2018.
Mr. Mickelson, I suppose?
The complaint from the Robotreats lawsuit (and others) is available but only through a subscription service. I’m too cheap to pay for it, but it’s only $20 for a one-month subscription. I just don’t think the allegations will come as a surprise worth $20.
It’s curious that VEND only discloses some but not all litigation, but I suppose they take the position that the undisclosed cases are not material.
What's the status of that big Atlanta deal?
I suppose there could be more than one company named "Robotreats", but one of them has a lawsuit pending against VEND. I don't know the particulars, but it sure smells like another unhappy franchisee.
Remember that $21 million deal for Atlanta? Well, the investors who got together to do that deal formed a company named "Robotreats". Could it be the same one as the plaintiff in the California litigation?
There seems to be a clue in the Facebook page and web site for www.robotreats.com. The Facebook page hasn't had a post since September 2018, and the web site that it links to is no longer active.
So, yeah, I'm thinking that Atlanta deal might be dead and gone.
Anybody know?