Analysis #5: Expansion.
Final post for today. And if you have questions or comments and post them, I’m not going to reply. This was just a synopsis of the company that I put together for a different reason and I decided to take my analysis and put it here. Okay, on to the last one.
I already said that I think expansion should happen next year. And happen at a faster pace than it has so far. As we finally get structure into what we are doing, and SOPs for our cafes, we can open more of them faster. Plus we have unique opportunities as numerous restaurants are failing, and buildings are coming open right now and in the near future. No, I do NOT think we should have signed leases during the pandemic. I’ll even disclose that we HAD a lease on an LOI for Denver in 2020. It was for an okay location and a good building at a decent price. However – since the pandemic, I now know of two better locations with existing restaurants that are failing (my condolences to them. I do NOT wish that on anyone else) where we would have a better spot and the rents are now lower than our LOI. The landlords are wanting to replace the current tenants. The intricacies of evicting or leaving are long though, and neither one is available at this time. I think one or both WILL come available, so waiting has been the RIGHT decision. The LOI we had expired, and Snakes let it end. I agree and feel waiting has been a GOOD choice. Not only in Denver, but I have heard of other cities having the same situation. Even Tempe has some locations open on Mill Ave that were NOT available when we lucked into our current location. Things have changed, and opportunities are coming. It is still early though. When the timing is right, I hope Snakes jumps on them. Patience is the right move though right now, in spite of some saying we should have signed leases already. I know. I have been out there.
Anyway, I think an opportunity is coming for us to expand in numerous cities, in an even faster way than the company probably wants. I think at that time we should jump in it. Yes, it will mean more dilution for the first cafes, but as we have 6 cafes generating positive returns and one that is in construction phase generating losses, we should still be positive overall. When it was 2 open cafes and one in construction, that ate up our profits from the cafes. As it turned into 4 open and one in construction, it was a little better. Now, at 6 open and one in construction, it shall be easier. When we get to ten open, we should be able to do two in construction at one time, and we start doing them in multiplies. Granted, we need Toronto to AGREE to this, and DO it, which has been their shortcoming in the past, but this is being addressed and I see the expansion happening in 2022 that we need to start happening. Not finishing until maybe 2040 (HA) but we could expand for decades! As we have more and more open, all generating positive cash flow, it will become easier and easier to expand new locations, and we should have a well compensated CEO and USA Expansion team leader by that time. We will be bigger as a company, by a LOT, and bigger in shares as we dilute for the first cafes, but eventually as we keep getting positive cash flows from more and more cafes, we should do a share BUYBACK and that’s the opposite of dilution. (my guess is we are talking 2025 – 2027 for ANY buyback, so please don’t think I am talking about now!) For now, we put together groups like we did for Tucson, dilute to them for shares to get their money, and grow the company. That growth makes the stock go up, they can sell for profits, and that makes them wish to invest again in the next location. Keep that up until the company finally says they won’t want money for the next expansion, and then the company does it on their own.
A plan. A long term plan, but a solid plan. And one I have been putting my money behind, as I have become one of the main investors in that plan. Everyone already knows that. I’ll add a few more players when and if Denver comes on track for me, and expansion plus revenue and profit gains shall continue to grow.
That brings up a point people have asked me about. Yes, I think Denver shall still happen. Waiting on those two restaurants to finally move out and hoping to take one of their spots. But that’s MY thought, and I’ll also repeat that I am NOT the company. They may not move forward with anything I think they should. I do NOT know. When we get Tucson looking good and I feel comfortable, I’ll discuss Denver with the company and ask them what they think. There were numerous people form this board that invested in Tucson. I expect more people will want to invest in Denver if and when that time comes. That’s how we grow. We get people, like you and me, to put in money directly into the company instead of on the market, to get them money to expand. Then we dilute a little, comparatively, and open a vew café. IF the company will still go that route. We all know that Toronto has done things we don’t understand, so we’ll see at that time I guess. I just hope they get back to expansion, and are willing to dilute for a GOOD reason and offer shares for money so we can GROW into new cities.
That’s my thoughts. On lots of topics. Will ANY of it happen? I’m not part of the company. I don’t know. But as an investor who can do more than just buy some shares in my Etrade account, I’ve tried to MAKE things happen, and we’ll see what the future holds. I know that the cafes are running full and have turned profitable again. At least in the USA, and soon very probably in Canada. As we show a better reality, instead of just “promising” one “soon”, we should go back up in price, and if the pendulum swings past reality on the high side again we shall even be higher than we should be. Then, we can do expansion with less dilution. I also think the desire for many people to invest in a location shall be higher when we see the stock price finally go back up. Another reason to wait for the expansion. And yes, with the reopening of the locations and the streamlined and less costly expenses of Toronto, I DO expect the price to reflect that over the coming months. I truly believe the price is too low and shall correct back up. As the numbers increase starting in this very quarter, we shall also see other reasons for the stock to go up. So less dilution and more expansion SHOULD be our future.
For now? I’m a shareholder. I’m a bull. MOreso of a bull than I was a year ago, as the price is lower AND the cafes are reopening. I think the constant hammering has affected us, and much of it is undeserved. Some IS deserved, but I think our concept is good, our management is improving in personnel AND in knowledge how to DO this job, and there can be no denying we are BIGGER than we were a year ago, when the pandemic hit. We have six locations open right NOW, another soon to be opened, something about a dispensary opening soon (I am ONLY interested in S&L cafes. I focus there) and opportunities to open in other cities in 2022. And beyond. I just can’t tell you if it WILL happen, but I, with my bullish glasses on, see the potential. Having opinions about the future is all ANY of us can have. Mine show a company that finally rights itself, starting NOT with the construction of future venues, but starting with construction of venues over the PAST YEAR that are going to contribute to the future starting … THIS quarter. Chicago is mostly new, starting NOW. Not the future, but NOW. Tucson obviously is NOW. Tempe is HUGE on their return to business and contributing NOW. Now is when I am bullish about this company.
John - back to the sidelines!
