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  • Writer's pictureJesse Livermore

Spagetti Cabonara... and una Coca Cola


part of the portfolio since 2017


Quickserve Restaurants and Fastfood can be a really good business and investments. Just think McDonalds... Don't you see the cash rollin in?


In truth: having a prooven and working concept in fast food is a big thing. A working and standardized process can be scaled to hundreds of restaurants and places. When customers know and value a certain brand/concept it gives pease of mind and they ofte come back. Operating leverage is huge.


The concept of Vapiano was started in 2002 in Cologne, Germany. The idea was an "Italian Fast Casual concept" combined with some elements of show-cooking.


The concept was different than normal restaurants. Customers got a kind of chip-card, had to join a queue in an kitchen area and had their meal prepared in front of them. One cook could do two meals at a time, usually there were two or three cooks available at a time.


I remember the first time I visited a Vapiano in 2008/2009 the food was good price/value with pasta freshly prepared in an open kitchen and an smooth surrounding.


Over time Vapiano opened more and more restaurants and exported the concept abroad. 2016 the company had 179 restaurants in 30 countries. Some of the restaurants were owned by franchisees, some locations were company owned. 2016 the company did EUR 250 mn in Sales and an EBITDA of EUR 28 mn with an net profit of around 0.


up a Vapiano Place did not come cheap. Especially the kitchen ventilation was a big piece of Capex and setting up a new restaurant could cost up to EUR 2,5mn. For a business doing around EUR 3mn in Sales and around EUR 500k in Contribution the place had to work properly for some time to make things work.


Berenberg (or Bubbleberg?), Baclays and Jefferies were the Joint Bookrunners. They floated the business at around EUR 23 at a valuation of around EUR 550mn. Close to 20x trailing EBITDA.


Half of the proceeds of EUR 170mn went to the company for investing in new restaurants and half went to old shareholders cashing in. Growth does require capital (especially when you need a huge and expensive ventilation system with every outlet).


As a customer I became suspicious when (over time) prices crept upwards and upwards and price/value became less and less favorable.


I remember that an Spagetti Carbonara which came around EUR 5,50 in 2010 came in at around EUR 9,75 in January of 2020. Clearly some inflation.


Adding to that, the time at the queue seemed to become longer and loger everytime you visited them. There seemed to be an lack of cooks every time you visited them. (And those lunch-times where all people do rush in at the same time - are suprisingly the same every day). (and that was not only me feeling the blues... (LINK)


Some time after the IPO it became clear that the hyper-scaling had its problems. The chain had opened locations in non-profitable locations and the concept did not work everywhere as it did at home in Germany.


Till August/September 2018 the stock went mostly sideways.


But little over a year after the IPO the music stopped. First the company announced that they would revisit their outlook for 2018 blaming the hot weather that year. (Stock went down from EUR 18 to EUR 6 in a couple of weeks. Then October 23rd 2018 comes along. Old shareholders (which sold in part of their holdings at the IPO) put in another EUR 20mn at a price of EUR 10 a shares (while the stock is trading at EUR 6). Something is obviously wrong.. they need cash.. fast. (Article at the time).


There followed a long series of guidance cuts, restructurings and changes in management. Then 2020 and Corona hit. With nearly all restaurants in lockdown the company stood no chance. They filed for bankrupcy in March 2020.


Even though there I do have mixed feelings: The original concept of Vapiano was pretty good price/value. But they overstreched and this "emotional short" worked out with a decline of close to -100% since IPO.


Link:

another long read on the topic: (hardcopy pdf)





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