To the Shareholders of Meritage Hospitality Group Inc.:
Meritage recently reported two significant year-end acquisitions of 19 Wendy’s restaurants located in Atlanta, GA and Richmond, VA. This represents the Company’s completion of seven Wendy’s acquisitions in recent years. We also announced on the same day the grand opening of a newly-built Wendy’s restaurant in Jacksonville, FL, marking our 111th restaurant in operation. Management is forecasting that these 20 new Wendy’s restaurants will generate sales of $27.0 million and be materially accretive to EBITDA and net income per common share in 2013.
The Wendy’s BrandAfter forty years in business the Wendy’s restaurant system is entering a once-in-a-generation transition as many of the original “legacy franchisees,” now at an average age of 62 years old, begin to retire from the system. Wendy’s has created a name for this process termed “system optimization”. The net result of system optimization will be fewer franchisees, operating larger restaurant portfolios at higher levels of sophistication. We plan to play a meaningful role in this transition as one of the “next-generation franchisees” utilizing our web-based IT operating platform, and proven in-house acquisition and development capabilities.
Wendy’s corporate is focused on a major brand revitalization effort, starting with the re-imaging of 750 company restaurants over the next three years, at a cost of up to $500 million.
We are also planning significant capital investments in our restaurant portfolio to modernize and contemporize the guest experience. We have made commitments to complete Wendy’s tier II and tier III “image activation” restaurants in 2013. This will help us better understand the image activation construction cost variables and measure the incremental return on investment.
Twisted Rooster and Crooked GooseThe Twisted Rooster and Crooked Goose are Company owned restaurant brands capitalizing on consumer demand for fresh food in a casual, energetic atmosphere. Our food is the culinary masterpiece of our in-house executive chef and operations director. Sales and operating results continue to move in a positive direction, thanks to the hard work and focus of many team members.
During 2012 we opened our first Crooked Goose Pub & Grub restaurant. The theme is a scaled down, fun version of the Twisted Rooster bar serving freshly prepared food.
In late spring 2013 we plan to open “Freighters”, a new Twisted Rooster style restaurant, named for its prominent and unique location on the St Clair River in Port Huron, Michigan – which has more annual freighter payload transportation than the Suez Canal and Panama Canal combined.
Looking AheadWe have a busy and exciting year ahead of us in 2013, including the integration of our 19 newly acquired Wendy’s restaurants, multiple restaurant upgrades, image activation commitments, new restaurant development and the possibility of additional Wendy’s acquisitions in the pipeline.
Importantly, we are beginning to generate significant goodwill in the Wendy’s marketplace as a “buyer of choice” among Wendy’s franchisee owners. Meritage has a 25 year operating history, a young, talented management team and has completed seven acquisition transactions in recent years.
Thank you for your support
Meritage Hospitality Group Inc.
Robert E. Schermer Jr.
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