Following the close of Tossed’s much publicised equity crowdfunding, we spoke with Finance Director Neil Sebba to learn more about the raise and what it means for the healthy eating chain.
QSR: Tell us more about your equity raise. How much did you raise and how many investors did you have in the book?
We raised £1.27mill in exchange for approximately 9% of the company. We had 661 investors in the book. That puts the average investment at approximately £2,000. There was no large ‘angel investor’ skewing that number either. Our largest investor contributed £25,000 and a while there were a few other large ones the majority were smaller.
Interestingly we found the investor perks we were offering was a significant contributor to the amount people invested. We had a few ‘perk tiers’, starting at £200 with another hurdle at £5,000, at which point we offered 50% off for the life of the investment. We had 150 investors investing over the £5,000 mark, which is an interesting case study in psychology. By giving a defined level where something does or doesn’t happen I think you find that people tend to invest to that amount.
QSR: What is the make-up of your investor base?
Before we started we weren’t sure if our investor base would comprise people who liked the idea of crowdfunding, or who were loyal guests who were engaged with the brands. Both are obviously good, but we were blown away by the level of engagement from our guests. We were also happy with how our suppliers supported the raise. We weren’t targeting them, but we ended up with a number invested which is a great endorsement for us.
QSR: Given your size did you consider other alternatives to an equity raise?
We are the biggest equity crowdfunding in the sector, so a debt raise could also have been an option. However we feel better inviting investors to invest alongside us and take a share of the upside than borrow money from them. We wanted to let people invest in the same shares as we did.
QSR: There was a lot of publicity around Andy Murray’s investment in your raise. Did that generate a lot of additional investment?
We had a huge surge in demand the week before the news of Andy’s investment broke, reaching the £1.1 mill mark, so we were already overfunded at that point, but it certainly raised our profile and was more like the icing on the cake than any make-or break for us.
QSR: What was attributable to the surge in investment the week before?
We had a lot of warm leads from the previous weeks who were doing due diligence, and we also had a second investor event in the middle of that week which was very well received. Once people saw that others were making their minds up and investing, it snowballed.
QSR: You ended up being overfunded. What implications does that have for your growth plans?
It doesn’t change the overall plan which was to open more sites of our own and support franchisees to open sites in areas we can’t get to. However the additional money gives us great headroom, flexibility, and gives us a better position with Santander. The extra money also gives us the flexibility to open more stores at the speed at which they come up.
QSR: What is the exit plan for the fundraise?
What we can be sure of is that if we grow the business in accordance with our plans and on the basis that healthy eating continues to grow in prominence then our business is going to be an extremely attractive one that would open a lot of potential exit avenues. However you can’t predict the future, and that will be a decision for shareholders and management when the time is right. The most important thing is that we deliver what we said we were going to do.
QSR: How many new stores do you plan to open this year?
We hope to have four sites secured by the end of our financial year in March 2016. Our franchisees also have another two stores, taking them up to nine. Our investor plan said that by end of financial year 2019 we’d have 36 of our own and 30 franchise sites. We are also working on a few other franchisee agreements at present to drive our store numbers forward further.
QSR: How is your store performance vs expectations?
Our Welcome Breaks are performing really well. They have opened two more stores than had been planned by this stage and are about 20% ahead of plan. Our own stores are also performing well. In the last financial year our like for likes increased 8.8% and we have experienced similar levels this year. We are now a big enough business that we can be resilient to seasonal trends.
QSR: Franchising is a key area for your growth. What are your franchise plans?
We have our franchised presence in the Welcome Break service stations and obviously our UAE partnership. We are also having a number of conversations with other potential franchise partners. The Welcome Break partnership has really opened up branded retailers or other retailers eyes who don’t have a healthy offering, to what we do. I think this avenue has huge potential. There is no reason for a Tossed to not be in a location where say a McDonald’s or KFC has an outlet.
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