Muscle Maker, Inc. (Nasdaq: GRIL) (“Muscle Maker” or the “Company”)
Dear Valued Investor,
As part of our continuing open dialog with
investors, I wanted to take a moment to bring everyone up to date
on our growth strategy and several recent announcements. As always,
we encourage you to sign up to our investor updates through the
Muscle Maker Grill
website https://musclemakergrill.com/investor-relations/ or
visit the sec.gov website to review our filings with the Securities
and Exchange Commission.
COVID-19 Update
The Covid-19 pandemic (“Covid”), as everyone is
aware, was detrimental to many businesses, especially in the
entertainment, retail, service and restaurant segments of the
economy. Many industries were affected and continue to be so today.
However, we believe we are beginning to see a light at the end of
the tunnel. As the economy continues to open back up we are
beginning to see revenue pick up steam as consumers begin to get
back to a post-pandemic new norm. Consumers continue to utilize
non-traditional ways to access restaurants through third-party
delivery services, ghost kitchens and meal prep. We believe there
is a significant opportunity to grow Muscle Maker utilizing these
new strategies and have been positioning the company to execute
against these strategies during Covid. Now that we are starting to
exit the pandemic, it is our goal for these strategies to begin to
be accretive to both the top line revenue and reflect improvements
in our overall performance.
As an example, we strategically built four
locations at the Northern Virginia Community College system in
support of our non-traditional location strategy with universities
and colleges. These locations are fully built and ready for
operations but we are in a holding pattern until students return to
campus. It is anticipated that students will be back at about a
70-85% capacity in the fall semester starting around August 2021.
Getting these four locations open will be accretive to the company
top-line revenue and start to drive a return on investment for
these properties. On a side note, these locations were built under
favorable lease terms whereas rent is based on net sales so we have
not been required to make any rent payments to date and are
carrying low expenses covering the basics like insurance while we
gear up for the return of the student population.
Military bases and New York City locations as
well as other hard-hit areas due to Covid are also coming back
online. Restrictions are being lifted in many places regarding
capacity, people are returning to work, travel is starting back up
and hours of operations are being extended back to pre-pandemic
levels in some geographical areas.
Covid caused, in our opinion, a fundamental
change to the restaurant industry. Consumers are more likely to
rely on delivery, ghost kitchens, meal prep, home delivery and
other non-traditional venues and methods to access restaurant
items. Through our strategy of focusing on these non-traditional
approaches, we believe we are well positioned to both strategically
and financially execute against our growth strategy.
Recent Strategic
Announcements
As mentioned in other filings, updates and press
releases, Muscle Maker, Inc. will continue to be on the lookout for
accretive strategic acquisitions. Our strategy continues to be to
develop and grow the company using non-traditional approaches and
locations to get healthy food in consumer’s stomachs. It is our
intent to continue to organically grow by opening new strategic
locations on military bases, universities, fresh-prepared meal prep
delivery and ghost kitchens. However, we also believe an expedited
way to drive revenue and performance is to acquire profitable
strategic assets when possible. Our approach is to analyze
companies we believe follow our philosophy of healthier eating
while also being unique in how they operate. This can be via
non-traditional locations or simply how they get food to consumers.
We believe there will be multiple acquisition opportunities that
will present themselves in the wake of Covid-19.
$10,000,000 Above Market Private
Placement
In order to position the company for growth to
be able to react quickly to potential strategic accretive
acquisition targets, on April 7, 2021, we completed an above-market
private placement with a single U.S. investor for $10,000,000.
The financing includes (i) 1,250,000 shares of
common stock together with warrants (the “Common Warrants”) to
purchase up to 1,250,000 shares of common stock and (ii) 2,865,227
pre-funded warrants (the “Pre-Funded Warrants”), with each
Pre-Funded Warrant exercisable for one share of common stock,
together with Common Warrants to purchase up to 2,865,227 shares of
common stock. Each share of common stock and accompanying Common
Warrant are being sold together at a combined offering price of
$2.43, and each Pre-funded Warrant and accompanying Common Warrant
are being sold together at a combined offering price of $2.42.
In our opinion, this capital raise was completed
on very favorable terms with an above market closing price
representing over a 42% increase in share price from our previous
capital raise in 2020. The offering is straight equity with no
resets.
We believe, with this capital raise, the Company
is well capitalized allowing the Company to pursue both strategic,
accretive acquisitions and organic growth.
Superfit Foods, LLC
Acquisition
On March 30, 2021, Muscle Maker, Inc. completed
our first strategic acquisition by acquiring the assets of Superfit
Foods, LLC, a fresh-prepared meal prep business located in
Jacksonville, Florida. Superfit Foods is a perfect example of the
accretive businesses we are looking to acquire – it has sustained
revenue growth, supports our non-traditional strategy and is a
driver to help get the Company to grow through acquisitions rather
than just through organic growth. Superfit Foods has experienced
significant growth since its inception with revenue increasing by
double digits year over year – even during the height of the
pandemic. This same pattern of revenue growth continued in Q1,
2021.
In 2020, Superfit Foods produced over 220,000
fresh-prepared meals. The average order size was about 8.5 meals
per order with revenue of roughly $81.70 per order. We believe
these types of acquisitions are a perfect fit with our growth
strategy.
The global meal kit delivery market was
estimated at $7.9 billion in 2019 and is expected to grow at a
compound annual growth rate of 12.8% from 2020 to 2027. Superfit
Foods is differentiated from other meal prep services by allowing
customers in the Jacksonville market to order online via the
company’s website or mobile app and pick up their fully prepared
meals from 28 company owned coolers located in gyms and wellness
centers. All orders are prepared in a single company owned kitchen
and dropped off twice per week in our coolers. This allows health
conscious consumers the ability to conveniently receive their meals
after working out or simply completing their weekly shopping
routines.
We are very excited about Superfit Foods as they
not only produce a significant amount of fresh-prepared meals today
but also have grown by double digit percentages since its
inception. Even during the pandemic, Superfit Foods was able to
grow year over year and continues to do so through Q1 2021. We
believe we have a significant growth opportunity in the
Jacksonville market alone considering our 28 pick up locations are
less than 5% of the 500+ potential gyms, wellness centers or
lifestyle centers in the market. This business model is highly
expandable and Muscle Maker, Inc. will begin leveraging our
existing footprint to better serve consumers who are looking for
convenient, subscription based, healthier for you, fresh-prepared
meal prep options not only in Jacksonville but in new markets.
Fitness and wellness takes many forms but
combining healthy eating with an active lifestyle produces the best
results. Getting healthy doesn’t work if you are only working out
or only eating healthy. Yes, there are benefits from doing only one
part of the overall process but combining an active lifestyle with
healthy eating is a strong combination to produce results. Gyms
struggle to keep consumers active with memberships, they experience
a lot of turnover. Trainers experience the same thing. Our belief
is that this is a direct result of people not seeing immediate
results. Combining healthy eating with an active lifestyle
typically produces sustainable and measurable results. By
partnering with gyms, trainers, wellness and lifestyle centers,
it’s a win-win-win scenario. Consumers see results, gyms/trainers
retain clients and Superfit Foods continues to grow at a rapid pace
via new subscribers. Combine that with convenience and we believe
we have a unique approach to this market.
Other Recent Developments
The Company continues to adapt to the changing
restaurant environment and will remain aggressive in pursuing
various growth opportunities, new technologies, menu development
and basically reviewing all aspects of the business.
Expansion of Ghost Kitchen
Brands
Ghost kitchens allow restaurants to launch
multiple brands while leveraging their existing infrastructure,
labor and ingredients. Meals are received via third-party delivery
apps such as UberEats, DoorDash and GrubHub. Consumers order meals
via these apps and food is picked up by independent drivers and
delivered to consumers’ doors – the deliveries are contactless and
convenient.
As part of our non-traditional growth strategy,
we are deploying ghost kitchens in both new stand alone and
existing restaurants. For existing restaurants, we have begun
launching multiple ghost kitchen brands out of the restaurant
kitchen facility to leverage excess capacity, labor, infrastructure
and ingredients. In various locations we have launched Burger
Joe’s, a decadent burger concept, Meal Plan AF, a meal plan
concept, Healthy Joe’s, our healthier for you sister brand, Bowls
Deep, a healthy bowl concept, Wrap It Up Wraps, a healthy wrap
concept, Gourmet Sandwich Co and Salad Vibes. While none of these
should be viewed as stand alone concepts, they do add incremental
revenue to the location without any significant cost additions.
This helps to leverage various fixed costs in each location.
We believe there is a great opportunity in ghost
kitchens and the future of restaurants as consumers have changed
their purchasing patterns and rely more heavily on home-delivered
meals and convenience.
Happy Meal Prep
The Company announced previously an agreement
with a software company called Happy Meal Prep. Basically, this is
a web-based ordering platform supporting fresh-prepared meal prep
delivery within a 250 mile radius of participating locations. We
are in the pilot stage of this program and running the
software/website out of one of our New York locations. Muscle Maker
now has the ability to ship meals, via UPS, directly to consumer
doors. This supports our fresh-prepared meal prep strategy and
opens upwards of millions of potential new customers that reside
within the 250 mile radius. The program is in its pilot stage and
we are learning how to market the program but so far we are
encouraged by the progress being made as well as the potential this
program represents. The program can be run out of most of our
locations, including franchise locations.
Text Marketing Program
To keep up with marketing trends, the Company is
moving away from its email-based marketing program to a text
message-based marketing program. Our thoughts here are that due to
many email filters, overabundance of email messages and simply that
people set up many “dummy” email accounts just to get discounts, it
makes sense to move away from email into text marketing. Consumers
will opt-in to the program and receive up to six text messages per
month with various offers or announcements. For example, we may
want to announce a new menu item. We can send out a special
promotion and clickable coupon to try the new menu item. We believe
this has a better chance of consumer interaction than an email and
tends to be more immediate in nature. We know that text messages
are instantaneous without the need to open an app or web browser to
see them. The program also has the added benefit of reducing
monthly costs by approximately $3,000 - $4,000 per month.
Summary
In summary, we have come a long way since
Covid-19 changed our world. We believe Covid-19 has created an
immense opportunity in the non-traditional development arena and
pushed new concepts like ghost kitchens and delivery to the
forefront while disrupting the restaurant industry. Muscle Maker
Grill has a unique opportunity to expand into these new areas at a
rapid pace through strategic, accretive acquisitions without being
encumbered by existing four-walled restaurants. Our strategy
focuses on getting “healthier for you” meals in consumer’s
stomachs. Whether it’s on military bases, universities, ghost
kitchens, delivery or fresh-prepared meals, we believe we are
positioned well and now well capitalized to execute against this
strategy. Our first strategic acquisition of SuperFit Foods is a
perfect example of how we plan on growing the business in an
accretive way while improving revenue and performance while still
staying a bit different than the other restaurant companies. We can
be leaders in this new economy.
Forward-Looking Statements
This document may include ''forward-looking
statements.'' To the extent that the information presented in this
document discusses financial projections, information, or
expectations about our business plans, results of operations,
products or markets, or otherwise makes statements about future
events, such statements are forward-looking. Such forward-looking
statements can be identified by the use of words such as
''should,'' ''may,'' ''intends,'' ''anticipates,'' ''believes,''
''estimates,'' ''projects,'' ''forecasts,'' ''expects,'' ''plans,''
“goals” and ''proposes.'' Although we believe that the expectations
reflected in these forward-looking statements are based on
reasonable assumptions, there are a number of risks and
uncertainties that could cause actual results to differ materially
from such forward-looking statements. You are urged to carefully
review and consider any cautionary statements and other
disclosures, including the statements made under the heading "Risk
Factors" and elsewhere in documents that we file from time to time
with the SEC. Forward-looking statements speak only as of the
date of the document in which they are contained, and Muscle Maker,
Inc does not undertake any duty to update any forward-looking
statements except as may be required by law.
Contact: Muscle Maker Grill Marketing
marketing@musclemakergrill.com
Investor Relations:
IR@musclemakergrill.com
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