Saudi Alhokair to buy franchise rights for 10 international food, beverage brands

RIYADH — Leading fashion franchise retailer Fawaz Abdulaziz Alhokair & Co. (Tadawul 4240), has announced that it will acquire KSA franchise rights for 10 profitable international food and beverage brands from Food and Entertainment Company Ltd. The deal will see an exchange of non-core receivables valued at SR340 million with the current operator. Fawaz Abdulaziz Al Hokair & Co. will not make any cash payment for the transaction.

The agreement requires that Food & Entertainment Company Ltd. will be liable to compensate Fawaz Abdulaziz Alhokair & Co. if the financials of Innovative Union Company fall short of the established 2020 projections. The franchise operations of the 10 international food and beverage brands recorded an EBITDA value of SR54 million against revenue of SR354 million in FY2019.

This acquisition reinforces the company’s vision to create a stronger and more impactful “Shoppertainment” experience with over 10 F&B brands and 200 locations in Saudi Arabia. Growth will be focused on targeted Quick Service Restaurant (QSR) businesses such as Cinnabon with high margins. These types of businesses can expand quickly with lower capital investment, and maintain a higher return on investment

The primary brands of this portfolio which make up the bulk of locations within the acquisition consist of Seattle’s Best Coffee, Cinnabon, Mama Bunz, and Molten Chocolate Café. The remaining brands cater to the casual dining sector. Among them include Crêpe Affaire, Life with Cacao, Turkish coffee chain Kahve Dünyasi, Caffe Concerto, the restaurants Azal and Bluefin, and Süti?.

“This exciting transaction marks our company’s successful expansion into the food and beverage sector. The acquisition gives us a Kingdom-wide portfolio of strong brands that cover a wide range of tastes and products and fast-growing challenger brands with significant growth potential,” said CEO Marwan Moukarzel. “We are very excited about this first step, the future potential of F&B, and the value it will bring for our customers. We are going to build on this to create new experiential opportunities for our customers.”

Global F&B expert Peter King recently joined as CEO of Food for Innovation Union Company to help steer the operational transition to Fawaz Abdulaziz Alhokair & Co. and streamline the integration of the two brand powerhouses. Peter has held executive positions with some of the world’s leading brands including Krispy Kreme and Starbucks Coffee Company where he managed over 1,000 Starbucks locations across Asia.

Commenting on the acquisition, Peter said: “Our expansion plan over the next 5 years is an ambitious approach to F&B in KSA. The acquisition offers scalability and better access to resources, with all the benefits of being part of a public company. The evolution in our strategy at this stage is geared towards the Quick Service Restaurant (QSR) businesses. This will allow us to expand quickly, lower capital investment, and maintain a higher return on investment. Operating with heightened negotiation power and access under Fawaz Abdulaziz Alhokair & Co. is an ideal opportunity to begin realizing our 5-year plan.”

The completion of the transaction is subject to the completion of regulatory conditions applying to listed companies within the Kingdom and is expected in a few months’ time, to be completed latest by Q4 2019.