Rave Restaurant Group Falling Amid Low Cash Position

Rave Restaurant Group Falling Amid Low Cash Position

Rave Restaurant Group has been developing its quick easygoing Pie 5 resturants at a remarkable rate. As of September 12, 2016, Rave had 62 diversified units open and had executed multi-year improvement concurrences with 23 franchisees for up to an extra 347 Pie Five Units to be situated in the U.S. Opening a lot of new restaurants in a short measure of time is an exceptionally shrewd vital technique in securing piece of the pie and is similar system Starbucks (NASDAQ:SBUX) took to ensure they secured themselves as the main brand in the easygoing café space. This has expanded their income to $60.8M in 2016 from $42.2M in 2014.

On the negative side, they have been losing cash. This would be justifiable if the expenses were connected with opening their new resturants, however these resturants are diversified out and pre-opening expenses are insignificant. The company’s share price fell from above 9 a share in the last twelve months to 2.5 a share at present

Pre-opening costs represent 1.3% of aggregate costs. The issue here is cost of offers which represent 79.7% of costs. Simply representing incomes and cost of offers gives an edge of around 12.3%. Wingstop (NASDAQ:WING) in examination would has an edge of 72.8% (income of 22,723 and cost of offers of 6,184 in thousands). Rave would have the capacity to achieve that edge in the event that they lessened their cost of offers to 44,270 (in thousands) or expanded their income to 69,844 (in thousands). This would take them from a $6M misfortune to a $3M benefit.

The issue is basic: they have to profit. The methods are apparently self-evident: through expanding income or lessening costs. The arrangement: somewhat trickier. Will they ready to cut expenses? I accept if administration made it a need they can enhance their main concern. I would likewise assume the best about them and say Pie 5 is another line of business for them and over the long haul they will observe approaches to be more proficient and cut expenses. The truth will surface eventually if Rave can make some kind of breakthrough and begin profiting.

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