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.
AI
