Max’s Group Reports 1st Quarter 2018 Results; Refocuses Efforts to Franchising

Max’s Group, Inc. (“MGI,” “the Company”), the Philippines’ largest casual dining restaurant group, reported today the operating results for the first quarter of 2018.

“Our efforts to strengthen market relevance allowed us to maintain a double-digit topline growth trajectory notwithstanding the effects of heightened competition. As we continue to build on customer-oriented activities, there will be equal focus on cost stabilization by streamlining existing resources and deriving operational efficiencies across the business,” said Robert F. Trota, President and Chief Executive Officer of MGI.

The Company generated systemwide sales of P4.4 billion for first quarter 2018, up 13% from P3.9 billion for the same period in 2017. Total revenues rose in parallel with restaurant sales, up 11% to P3.2 billion from P2.9 billion and P2.7 billion from P2.4 billion, respectively. The strong showing is attributed to a solid same store sales performance of 5% and a 10% increase in overall transaction volume, primarily indicating guarded market share position. Commissary sales went up 21% to P377.7 million from P311.4 million as franchising operations continue to ramp up. Franchising income decreased 15% to P152.6 million for first quarter 2018 from P180.1 million owing to lower development agreement fees booked compared to the same quarter last year. For the period, MGI centered on operationalizing its current pipeline into physical stores to accelerate recurring income stream.

On the cost side, MGI was weighed down by escalating raw material prices and a larger manpower component as it realized the impact of its move towards professionalization which began in 2017. This initiative was undertaken to reinforce strategic capabilities at the management level to ensure sustainable growth. The Company likewise took into account recently enacted labor policies particularly on third-party service engagements. As a result, net income declined 30% to P123.7 million from P176.0 million year-on-year.

The Company also announced its strategic pivot to franchising as the preferred mode of expansion both domestically and overseas. This shift will leverage on Max’s Group’s brand equity, operational expertise, and scale to propel store network expansion and boost fee-based collections, which generally equate to better profit translation.

“While cost and inflationary pressures as well as prolonged currency volatility are likely to persist, we are equipped with the proper growth strategies to stay resilient under these conditions. Looking ahead, we have laid out firm plans to address controllable expenses and maximize income flow-through. This keeps us aligned with our objective of improving overall profitability in the long-run,” shared Ariel P. Fermin, Group Chief Operating Officer.

From January to March 2018, MGI opened a total of 11 new stores including two Yellow Cab Pizza outlets in Brunei and Vietnam. This sums the Company’s total store count to 679 branches, with 57 across various territories in North America, the Middle East, and Asia.