Boloco (The Wrap) Annual Report – 2001
To Our Stockholders,
We are pleased to present you with the Fiscal 2001 Annual Report for the Stellar Restaurant Group, Inc. (“SRG”). We hope that you share our tremendous sense of pride and accomplishment for what our team has achieved during the past twelve months. Despite an economic climate that littered the business world with hundreds, even thousands, of struggling and bankrupt companies, fiscal 2001 was a very successful year for SRG. We owe a debt of gratitude to our employees and their families for their dedication and support, to our shareholders for their continued trust and encouragement, and to our 20,000+ customers per week that make our achievements possible.
On that note, I invite you to learn about what we have accomplished, how we did it, and what we plan to do in the months to come.
FINANCIAL HIGHLIGHTS FOR F2001:
There is much to celebrate in the numbers we delivered in the last year. Detailed financial statements are included toward the end of this report.
- Gross sales grew to $5.68 million.
- Same-store net sales grew nearly 2%, to $5.55 million, versus the prior year, markingthe 4th year in a row of same-store sales gains.
- All seven restaurants were profitable, generating $1.12 million in restaurant-level profits, or 20.1% of net sales.
- EBITDA was $430,607, or 7.8% of net sales, versus $ -402,796 or -10.1% for F2000.
- Net Income was $34,914, versus $ -669,062 for F2000.
- Paid down over $151K in debt.
- For the first time in its history, SRG is a profitable company.
We realize with each passing day that The Wrap is all about people. Certainly it’s the customers that keep us in business, but it’s our employees that take care of these customers 360 days a year. It is our responsibility as a Company to continue finding new ways to educate them, challenge them, promote them, better compensate them for excellent performance, and ultimately, improve the quality of their lives.
As managers of The Wrap, we have come to know a number of important things during the past year. We know that focusing on the fundamentals pays off. We also know that trusting and encouraging ordinary people to do extraordinary things can lead to big results. We know that treating every customer like they are our last brings them back in the door day after day, week after week, and year after year. We know that we have a winning group of products, sought after by over 1 million consumers this past year.
Many of you may recall our Mission Statement that was adopted almost two years ago. We believe it captures the spirit of everything we do at The Wrap.
- To develop passionate and loyal employees through exceptional training, limitless learning and advancement opportunities, open communication, and compensation based on the performance of the individual and the company.
- To cultivate passionate and loyal customers through fresh, high-quality, great-tasting food customized to their liking, served by passionate employees at a lightning fast pace at the best price possible.
- To build reliable and economically-sound partnerships with professional suppliersand service providers through open communication and long-term commitments.
- To provide shareholders with a long-term return on investment such that they are motivated to continue adding great value, wisdom, and capital to our growing restaurant company.
One of the most important initiatives of this past year was to share and discuss the meaning of our Mission Statement with every employee in the Company, and to transform its words into daily activities. We had it translated into Spanish to accommodate over 60% of our employees for whom Spanish is their primary language. Reviews of each employee included an in depth analysis of why our Mission is more than words on paper, how successfully using it as a guideline for all business decisions can ultimately improve all of our lives, and how failing to follow it could lead to gradual deterioration and ultimate failure of the entire company. Every employee has a laminated Mission card, in Spanish and in English. They are not expected to know the Mission by heart; rather, they are expected to be able to explain what they can do on a daily basis to help us live up to its promise.Understanding the Mission Statement is all about communicating with each other. To that end, we believe that communication amongst our people is so critical to the long-term success of SRG that we’re launching the following initiatives in 2002:
- Provide group Spanish lessons for all of our English-speaking managers, employees, and owners.
- Through a program at Harvard University launched in the summer of 2001, continue to provide free English lessons to all of our Spanish-speaking employees.
- Invest in new, cost-effective technologies to continually pass valuable information quickly and clearly back and forth between all layers of personnel in the company.
With respect to the future of SRG, profitability in fiscal 2001 has opened up a number of options. While our projections for F2002 include no changes to the current seven store structure, we are always looking for intelligent ways to grow the company.
Expansion: We are actively looking for new locations in the Boston area. However, we are very picky, and will only sign reasonable leases, which are still hard to come by in Boston. We do not have the capital or the resources to expand outside of Boston at this time.
Partnerships: We’ve been approached by a number of companies, both large and small, looking to work with our brand name and/or management team to open new restaurants all around the country. While no deals have been inked as of yet, we are open to working with groups that could enhance our brand and ultimately add value to our Company and to our shareholders.
Although we are approached multiple times each month by interested franchisees, we do not plan to entertain any offers in the foreseeable future. First, our operational systems are still inadequate to support outside operators who don’t have specific “wrap/smoothie” operations experience. In addition, we want to protect our brand as much as possible, and can not risk a third-party doing damage to our improving reputation.
Sale: We are not actively searching for a buyer of SRG. While we are open to discussing terms of a sale with any potential buyer, we continue to operate our business with long-term success as our top motivator.
HIGHLIGHTS FOR FISCAL 2002:
As Stellar continues to mature, it becomes increasingly difficult to realize same-store sales gains. This year we are testing a number of new marketing programs to boost traffic, as well as introducing new products such as 6 daily soups and 2 monthly wrap specials. From a cost standpoint, we anticipate no major changes in our Costs of Goods Sold or Labor, though occupancy costs continue to rise quite drastically due to higher rents and significantly higher utility costs. In addition, new marketing and training/development budgets that did not exist in 2001 have been added to our projections in 2002.
Details of the following summary projections for F2002 are attached at the end of this report.Same-store net sales growth of 2.6%, to $5.61 million (approx. $5.74M gross sales)
Seven restaurants to generate $1.08 million in restaurant-level profits.
EBITDA projected to be $408,832, or 7.3% of net sales.
Expect to achieve a 2nd consecutive year of profitability, with Net Income of $49,000.STORE-LEVEL PROFIT & LOSS PROJECTIONS FOR 2002:
2001 was clearly an exciting year for SRG. We’re proud that we turned the corner and are now profitable. We have a renewed sense of confidence that we can achieve great results as a Company. With that kind of momentum in our favor, 2002 looks to be a better year than ever.
Thanks for sticking with us. Together, we will make SRG a company of which we are all proud.
John S. Pepper
Chairman of the Board and Chief Executive Officer