Saturday, 6 June 2015

Is a takeaway return of 12 times in 4 years possible?

Keuken, a fast food concept yet to be trialled, has just completed its £100k Crowdcube raise. This is an SEIS funding round so we the taxpayer are helping with £50k of this money.

Keuken claim that what people really really want is food - very very fast. This idea, that people are not getting their food fast enough, came to the founders via a report on Mintel. They plan to open their first unit and then 3 more over the next 4 years and have stated in their pitch that investors should see a 12X return on their investment. Valued today at £588k on Crowdcube, that sort of uplift would require a value of just under £3.5m when SEIS is accounted for.

One of the founders proclaimed USPs is a first mover advantage. This type of USP is really only useful if the first movers achievement is not repeatable due to copyright or costs. Surely in this case neither applies.

According to the pitch, the company will achieve a profit of 66%   - we assume this is a GP. Units will turnover around £300k each; opening 80 hours a week. So they are estimating a 2019 GP per unit of £198k. 4 units will achieve a GP of just under £800k. Takeaway the fixed costs for 4 units plus central overheads and marketing and we are struggling to find the sort of net profit to justify a £3.5m valuation - assuming as we have that they achieve these figures glitch free and more importantly they do not raise more cash (£100k is not much to kick off with) and thereby dilute investors.

We wish these guys well on the one hand but anticipate a hard landing on the other. Time will tell if this really is a good use of our taxes and the sort of business that George Osborne sees spearheading the UK's rise back to greatness.

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