Tortilla Mexican Grill (LSE:MEX) — Introduction to Tortilla Mexican Grill

0:02 Good morning, ladies and gentlemen, and welcome to the TORTILLA MEXICAN GRILL Investor Presentation. Session. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meeting Company dashboard, and we'll notify you by email when they are ready for your review. I'd also like to

0:33 remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll, and if you give that your kind attention, we would be most grateful. And I'd now like to hand over to Andy Nader, CFO, and Richard Morris, CEO. Good good morning to you both. Good morning. Good morning. Good morning. Good good morning to you all out there in Zoom world or Teams world or whatever it is. Good morning. Thank you for your your time. We'll go through the presentation, hopefully, forty five minutes. And then as Mark says, we'll take the questions and and take it from there. So let let let me start by introducing myself. My name is Richard Morris. I am the CEO of TORTILLA and have been with the business since February 2014.

1:19 I've been involved in the hospitality sector all my career, really, starting out back in the day with TGI Fridays in the in The US and running a few of their Central London locations or one of their Central London locations. Moved over and and did Rainforest Cafe in London and Disney World Paris before starting as one of the original management team of Lock Fine Restaurants, which, began in '99 in, in Cambridge, actually, our first site. And then we sold that business to Green King back end of two thousand and seven, timing being everything at that time.

1:58 From there, I did some consultancy work and joined TORTILLA in 2014 as the as the CEO. PLC. Good morning, everyone. I'm Andy. I I'm the CFO of Started my career at Deloitte, doing the classic ACA route. Always been a numbers guy with a physics degree, so you could say it was a natural path. I mostly worked with oil and gas companies, Deloitte, AIM, PLC listed. So it's a good PLC experience before then taking the role of gas from big Russian gas giant. Spent four years there before deciding I fancy doing something a bit more tangible. I've always been into food, and so I felt like a natural thing for me to join Goucher restaurants as head of finance.

2:45 Sold the business whilst I was there to Epistone Partners, then and I joined Richard at

2:49 TORTILLA about four years ago. Recently, at the beginning of the year, I've also started on some business development opportunities for the group, which we're we're gonna cover off later in there. They're super exciting. Okay. So why are we here? And why, hopefully, why are you here to to really run through what we why we're so excited about this business going forward. The key investment highlights for us are that we are already the largest and most successful fast casual Mexican restaurant chain in The UK. It's a big statement. It's a long sentence, but it's actually correct. We have very flexible site locations and formats, which have have actually become sort of even more flexible, post COVID. The trends we've always embraced, fast growing sector trends, very strong vegan vegetarian offer.

3:38 Latin American food is becoming more and more popular as as each month passes in The UK. And through COVID, it's highlighted our huge strengths with food to go and delivery. Fresh, customizable, and value for money products. I won't say any more than that now, but that theme runs through our entire presentation and and, frankly, runs through our entire business and why we consider them to be the three pillars of success for us. We have a strong marketing and multichannel strategy in the business. We have a very well invested and scalable central infrastructure, which I'll share later. COVID nineteen, whilst this isn't all about COVID, there's no doubt during and hopefully post, if I if I can say post, things have been very strong for us. So we'll highlight some of those areas as well.

4:31 The business has always been successful and has always had a strong profitable sales growth since its inception. And the future, whilst was was always looking rosy for us pre COVID, certainly, some really strong enhanced opportunities now for the business.

4:50 A little bit about us. I mean, the business was founded in 2007 by a true blue authentic San Francisco burrito eating guy who had was born and bred in the Mission District in San Francisco. So knew the the Mexican food market exceptionally well. Moved to London to do a to do a a management degree at the London School of Business and was somewhat shocked at the dreadful standard of Mexican food in the in the capital at the time, and ended up doing a business thesis on Mexican food and Mexican restaurants. And wonderfully, he lived out his dream and that he opened the first TORTIA in February 2007. Did really well. And, basically, since then, as we sit here now, we have 62 restaurants worldwide, and four, what we call cloud kitchens, cloud kitchens being the delivery only kitchens that you all know that have read about.

5:51 Again, the value for money proposition, freshly prepared, customizable food, which we'll dig into shortly. The track record of consistent performance for us, you know, CAGR of 21 and a half percent between full year 13 and full year 20. So, again, highlighting the strength of the business pre COVID. We have a strong central kitchen facility and a strong head office, which I'll highlight. And really why we're here is because the future opportunities do look so rosy for us, and we want to share the reason why we think that is the case. It's been it's quite difficult really with COVID to try and do some comparative of numbers, but we are and have been sort of doing like for like numbers versus 2019, which is the most recent normalized period of trading for us.

6:41 And we just wanted to highlight to potential investors that whilst we're 25% up on pro on on sales for the half year from 2019 versus this year, you know, our profit performance has been extraordinary. Now clearly, there have been some helps from the government on this. But nevertheless, in a sector that's been completely decimated and on its knees through through the pandemic, for us to be performing in such a way is is exceptional. And frankly, as Andy will share later, the numbers have continued to be hugely successful even since the end of the half year period.

7:22 We consider ourselves to be, what is termed as a fast casual restaurant brand, a fairly new, title for restaurants. There was always fast food or casual dining. This sector has been around, I guess, ten or fifteen years. The top left hand side shows you in The UK who we would consider ourselves to be competition and who we consider to be the market leaders within our sector. And as I'll highlight now, there have been some winners and some very big losers in this over the last twelve to eighteen months. We look at who we consider to be the the legends of the sector. Clearly, Pret A Manger and Nambos in this fast casual sector have been the largest and the most successful between the nearly a thousand locations.

8:12 Obviously, Pret has suffered through the pandemic. It's not a business that's well known for its delivery, doesn't particularly trade in the evening, and is very heavily office based. So sadly, for for what is a fantastic business, the, the model just doesn't work in its current format now, so they're obviously gonna work away and find a way of dealing with it. And I'm sure they will be successful, but they have had to close a lot of sites. Nando's obviously was closed for a large chunk of COVID, but it's such a well known brand and such a successful business that I know they've come out of the pandemic strongly.

8:50 Five guys, who play by slightly different rules to the rest of us, very, very, very well financed business owned by multibillionaires. They actually didn't close at all during COVID and have, done exceptionally well, and we see them continuing to grow at a pace. Now the rest of these, you'll hopefully or you'll you'll all know some or all of them have had a pretty shocking time. Itsu has been through a refinancing. Leon had to CVA. We've done very well. Wasabi have CVA'd. Barbarito, Chilango have CVA'd. And then at the bottom right hand side, you'll certainly recognize the name Chipotle, which has been in The UK as pretty much as long as TORTIA has, but they just haven't got it right.

9:41 They are at 12 locations at the moment, but they have closed a couple so far already. So the truth is there isn't an awful lot of competition in our sector. Some of these businesses will continue to survive, but I have no experience of anyone who's ever CVA'd who's come out of it in a particularly good position. So that in itself for us opens up great opportunities. The question is I always ask, well, what what have you done differently to everybody else? And and I think we have to, you know, without blowing our own trumpet too much. You know, we've been an incredibly well run business for a long time. You know, we've been careful at the right times. In 2017, 2018, when the market was overheated, We only opened a few sites. We didn't wanna get into the world of paying ridiculous rents for marginal locations.

10:34 And I'd have to say some of our competitors here did get involved in that. Very highly leveraged businesses, which we've never been. And I'm afraid COVID came, and and really that was the reason why they've they've struggled so much. So for us now in a strong position with a strong balance sheet, having recently IPO ed, we're in a really good position now to take advantage of this and grow our business perhaps quickly than we have in the past more quickly than we have in the past. Bottom left shows you really our competitors in Europe, and there really isn't anybody else other than Fresh Burrito, which is a French, Mexican burrito business. And the reason I highlight that and the reason I mentioned Chipotle is with 62 sites, we're the largest the second largest Mexican fast casual business in the world, second only to Chipotle who have over two and a half thousand.

11:35 So, clearly, there's a a hell of a prize out there somewhere for somebody to go out, just in The UK, but in Europe as well, and and really grow this brand. So whilst the IPO is totally based around UK growth because we see an awful lot of opportunity here, there's no doubt Europe offers up something for us to look at further down the road.

12:00 Okay. So just to follow on from what Richard was talking about around the the sort of property side of things. We've got a really experienced prop in house property team. We've got the the proud claim of having never closed the site. We we use a very data driven sort of rigorous process, which is anchored around a a 35% return on capital. That's the key metric we we we assess our ability to achieve. And we're typically spending between 350 and about 425,000 on the capital expenditure of the site. So relatively modest compared to the bigger restaurant groups. We are operating a range of locations as you can see from this slide. So you've got the high streets, what we call baby sites, which is just smaller tortilla units, are often in residential areas.

12:49 Got cloud kitchens, which are delivery only. We've got shopping centers. We've got a theme park site, transport hubs. So wherever there's customer demand, we've got a very flexible kitchen setup, which means it's that we've we've we've got an ability to take on sites that other businesses wouldn't, whether that's in terms of size because because the kitchen setup is relatively small. We've not got lots of expensive kitchen gear. We can operate quite small small locations, and we don't need large front of house because a lot of our customers either grab and go or take delivery. On top of that, one really important thing is we don't need extraction because of our central production kitchen, which Richard's gonna talk about a bit later on. Most of the preparation on-site is is, the preparation of sauces and guacamole. So, actually, as a result of that, we should benefit substantially from the the change in the, used classes on the high street. So, there's a new class that's been created e, which has, been introduced to try and free up the high streets. I mean, we can take retail sites without a plan for change of use. And I think that's gonna really open up The UK wide space for us more than other restaurant groups that need to kind of put extraction and lots of kind of kitchen machinery in.

14:04 We've also not got too many sites in the London City, a lot of site a lot of sites in, residential areas, etcetera. So they've really benefited during the pandemic, and and I think it's pretty clear from coming into London every day. There's there's definitely an increased work from home trend that we're seeing, and, you know, that will really benefit us, in the long term as well. So, yeah, super flexible, and and that that underpins a lot of the other commercial opportunities as well that we've been looking at in terms of slotting our operation into other things like, campuses or, motorway services, etcetera. So we'll talk about those a bit later on. This slide is a little bit dated now because this is sort of sort of as we came out of COVID, but I think it's important just to to highlight the strength of the sector really in terms of people wanting to continue to go out and eat. We all remember those, what seems like a long time ago. Now people, when the pubs opened, sat out in the beer gardens in the pouring rain because we were just desperate to get back out again.

15:01 And I think in the top left hand side of this, you can actually see there was a huge pent up demand for people to want to get out. We are a

15:09 nation of socializers. We like to be in pubs and restaurants and clubs and bars. And and being out, I think, was a a huge excitement for everybody having been locked down for so long. But encouraging, nevertheless, that people were were were very comfortable getting straight back out there again. There didn't seem to be any hangover or fear of of of mixing again. So really encouraging. Bottom left hand side, this is also quite exciting, and I'm sure you've probably seen the same as I have in the last eighteen months. As it does seem to be quite a large growth within our Latin American cuisine. Know, we don't benefit from sort of lots of Asian and Indian people coming over and living in The UK with Mexicans. We don't have a load of Mexicans living in The UK, so might be why it's been a slightly slower burn in terms of growing the product.

16:00 But certainly, I've noticed in the last eighteen months, the shelf space in supermarkets has almost doubled, tripled even, with hot sauces, salsas, Mexican food, Mexican offerings. So this says that, basically, the growth of Latin American food at the end of twenty twenty three will have doubled in ten years. I I feel like it's gonna be more than that. Certainly, from our numbers, it's been extraordinary, the growth in in in in popularity of our food over the last twelve, eighteen months. And, also, not just the the food itself, but the way that we prepare and the way that we get our food to our customers has been fantastic. And, you know, we benefit from the from being part of the eight menu food megatrends.

16:48 Every single one of these areas towards TORTILLA MEXICANT, and I can't think of too many other hospitality business where all of these areas would be part of their brand and their product. We are very convenient. You can have a very healthy, meal with us. We do naked burritos where you can have some kind of lettuce, some freshly grilled chicken, some sweet corn, salsa, pico de gallo, extremely healthy, low calorie, all made fresh on-site. Or if you want the indulgent burrito, the large burrito with guacamole and sour cream and all the trimmings and barbeque of beef, absolutely fantastic. But you can't eat that every day. So the great thing about our our business is although we only have five or six core menu items, there's millions of different ways to enjoy our food for for for the healthy or for the indulgent.

17:35 Customization has been very popular over the years and become more so in The UK when people go out to eat. We we absolutely embrace that. We encourage people to try different things, big tick. Value. On the next slide, I'll highlight value for us. We we see ourselves as the most competitive business, and we know we are in terms of our price point. Some good sustainability stories, things that we will obviously continue to work on as that world becomes ever more important. And it's still an experiential meal. You know, Mexican food and burritos, tacos is still slightly differentiated, which is great. You know, we're not as popular as burgers and pizzas and may well never be, but we are definitely climbing the ladder of popularity.

18:20 So it's still quite a fun different product.

18:26 So as I as I just mentioned about value for money, if you look at our competitors, you you know, know, we we are are noticeably less expensive than they are, and we've always tried to remain that way, certainly in no way in reference to the quality of our food, which we think is the best of all of them. It's just that we are very sensitive around prices. We know our consumers are, and we've managed to keep our prices lower. And I think that's an accumulation of many things. I think it's a very strong management team. We we manage our suppliers incredibly tightly. We have very few suppliers. We have an incredibly tight relationship with the people that we do use. We're very competitive on pricing when we're buying products, and I think that's really helped us. We have a central production kitchen, which, again, I'll mention. That helps us. 75% of our menu comes from that kitchen.

19:19 So, consequently, the quality of the food is incredibly consistent. We don't have 52 chefs in 52 restaurants having 52 different ways of producing something. You know, we have very simple recipes that are followed by people that we can train and teach to produce the food very quickly. So that's been a big plus for us. In terms of innovation, this is not a business that is, going to be innovating and changing its menu. There's no revolution around our food. There's just constant evolution. We have four or five core items that are very popular, but we do like to play around at the sides. We have seasonal sauces that we change on a quarterly basis reflecting the time of the year. We're looking at putting some churros on our menu as our first dessert offer, but so we're trialing those at the moment.

20:09 And we do product collaborations with other businesses. So there's always things changing, and we're always looking at, adding one or two items and taking one or two off. But, fundamentally, the core menu will always remain the same. I mentioned sustainability in provenance. You know, this is such a big area and such a moving target that we've decided that we have a sustainability ambassador who's involved with us and our supply chain who sits down with sort of Andy and I on a monthly basis and and tells us of what's going on in the world of ESG and what areas we can work on. We don't wanna knee jerk into changing things because, as we all know, you put your head above the parapet in some of these things, and then three months later, you suddenly find what you are doing actually isn't any better than what you were doing before.

20:59 So we wanted to take it very seriously. But, fundamentally, we do have a lot of our packaging is recyclable. We have a bit we have very low wastage in our business because the shelf lives of our products are quite long. Interestingly, despite being a very much a protein led business, 7575% of our menu is plant based. And the meats that we do use are all high welfare meats, red tractor from from The UK. So where possible, we've tried to make as many inroads into this area as we can. Always work to be done. And the flavor and customizability, I think we've we've talked about. In terms of marketing, we're a young brand, a young vibrant band brand. We have a young vibrant marketing team who spend their lives on social talking to our customers and communicating with them and posting wonderful Instagram pictures of our food and the events that we run and things that go on within the business.

22:01 I mentioned that we do work with some of our suppliers. Suppliers. We had a fantastic promotion with the Brooklyn Barber Coa a couple of years ago, three years ago now probably, where we did a a summer promotion where we were marinating our Barber Coa beef in their beer. Lots of fantastic promotion about that. But Brooklyn were a fairly new beer into The UK, and it worked really, really well. And in fact, it was so popular, we ended up leaving it on the menu for longer than the than the period that we said we would at the beginning.

22:34 As I say, lots of work on social. We have quite a few social influences on our program with over 12,000,000 followers. Most of them I've never heard of. They're people from Love Island and all those sorts of things, but that's our demographic. That's our customer profile. Young, 18 to 35 year olds.

22:56 And they go in and eat in our restaurants. They post themselves doing that. It's been fantastic us. We get we have a huge following, of people who were who who go in and post stuff for us, which is which is great. But the key thing for us during COVID that came out is that we have this multichannel ordering strategy. We do obviously dine in. We do takeaway. We are very strong on delivery. We have self-service kiosks in one of our locations that we've been trialing.

23:27 And during COVID, we just were simply able to get our food into the hands of people that had probably not eaten TORTIA food before. There were probably only ourselves and and five guys that were on any of the delivery channels almost as we locked down. And there's no doubt with very little choice and people slightly fed up of the supermarkets after after a month or two, that's really where we gained a lot of market share and and got a lot of people to try us, and our numbers show that shortly.

24:02 And just to confirm that, you know, being ready financially to put your foot down is one thing, but to be able to do it, you have to have an infrastructure that's set and ready. We've seen suddenly too many casualties in this sector where businesses have grown too quickly and have fallen over. That's not our intention. We've beefed up our head office team. I've recently appointed a chief operating officer who's come in to help run a lot of the day to day stuff, while myself and Andy focus on a lot more of the strategic opportunities for the business. And so we have a very strong and experienced head office team as you can see there. And, we have a central production kitchen, which is the sort of critical route of our business that allows us to double the size of our estate.

24:48 We produce all our marinated meats, one or two of our salsas, and our black beans and pinto beans are all made centrally, all delivered out to our stores six days a week. And so, you know, we have a a very consistent, brilliant product that we make centrally. So that's

25:05 able to take us up to eighty, ninety sites. So really exciting and and really good news for us to be able to do that. This is a slide that we have done hard about putting into this presentation, but I think the reality is we should talk about it because you will know and will have read and will have heard, you know, there's there's potentially some headwinds. Well, I think we're probably in the middle of of them. But I wanted to share with you why we feel as a business we're much better placed than most of our competitors in the sector. If we take people for an example, obviously, we're reading a lot about businesses being very short staffed. We feel that we will be less affected by this. And certainly so far, as we sit here, we're in pretty good shape people wise.

25:56 And I think that some of the main reasons why we're confident that we can withstand this issue is

26:03 we are what is perceived to be unskilled. I get slightly offended when people say that working in a restaurant is unskilled because I think it's I think it's very skilled, and I think you'd probably learn more in a month in a restaurant than you would in three months at university. But that's just my personal opinion. But the fact is it doesn't take a long time for us to train anybody in our business. We have very simple recipes. We have wonderful

26:28 food, but anybody can make the food. It only takes three or four hours to teach anybody to make our food or to serve our customers. And so the one area we are not concerned about, which most people are, is chefs. Now chefs in this sector have been a challenge for many years, but even more so now. It takes three or four weeks to train a chef in a restaurant. It takes us nothing like that amount of time. So we don't need to hire chefs. We can hire people straight off the street, teach them, and that's a big, big plus. We're also able to take younger people. We recently opened a restaurant in Windsor, which is a notoriously difficult place to recruit. We opened with a load of college kids, 17 year olds, all working three or four days a week. And whilst there were some challenges, some tears, and, you know, a lot of them for a lot of them, it was their first job.

27:20 We've come through it, taking $20 a week. Business is successful. They love it. They love the food. They love the environment. They're generally working with and serving people of a very similar demographic, so it's a it's a cool place to work. So, again, we know that this is going to be our market now, so we have to embrace that and then work with those younger people. And it's great to see young people with their first jobs working with us.

27:46 We offer very competitive rates. We pay more than the minimum wage, and we don't differentiate on age. Our view is if you're good enough, you should get paid the same as somebody who might be a few years older than you. So, again, that's an attraction for people. We're not a restaurant business that finishes at 01:00 in the morning. We are generally done and dusted by 10:30 in the evening, which is wonderful for our staff. They can get home safely before it all gets a bit messy in the town centers. So it's it's a very safe place to work, and that's a big attraction for young people. They don't particularly like having to travel in the middle of the night or getting night buses. So we are not a business that finishes particularly late. And let's let's let's be honest. This is a business in a really good position. There's lots of career opportunities for for our people.

28:37 We've 50% of our assistant managers have come up through the ranks and 30% of of our general managers. There's a great opportunity for people to grow with us. So, again, that's an attraction. And we do offer great rewards and and recognition. You know, we have something called Perkbox where they get lots of benefits and discounts at cinemas and other restaurants and hairdressers and all sorts of things. We're very conscious that looking after people is gonna be absolutely crucial over the next six to twelve months as it always is, but more so now. So we've we've put in quite a lot in place here to make sure that we we keep the people that we have, and we have a good way of recruiting them. And with regards to the supply chain, well, I think these are relatively short term problems.

29:24 We haven't really suffered from the issues. We work with FreshDirect who are probably the best blue chip food delivery production business in The UK. We've been working with them for many years. They are owned by Cisco, so they're very well financed, very well backed. They've been able to ride out the storm of drivers better than most. We haven't been totally unaffected, but in relation to some of the colleagues I I know, we we really have had very few issues. It also helps that we don't buy products that are difficult to get hold of. We have a limited menu, so we're only buying kind of regular produce. So that's really good. In terms of our meats, because we marinate all our meats, we're not competing with other restaurants on the same cuts of meat.

30:14 We don't sell chicken breast. We sell chicken thighs. And the same with our pork and our beef. We're not using the popular cuts because we're marinating. So, actually, it doesn't matter. The quality of our marinated meats is fantastic. So, again, less of an issue for us. We will see. Time will tell. Will there be pricing and increase in supply chain? Yes. I think Andy and I realize that, and we have baked in some expectation of slightly increased prices over the next six to twelve months. But so far, we haven't seen anything that we weren't expecting. So, generally, let's let's assume that will remain the same way. And COVID nineteen, well, only positives really for us. It sounds a bit churlish to talk about positives out of COVID, but, frankly, for our business, it's certainly given us a bit of a leg up.

31:12 Okay. So just moving on to onto some numbers. I'll I'll touch on this briefly because I think the really interesting stuff on the next couple of slides. But just to talk a little bit about the last few years. 2019 was a good year for the group. It was very much defined by '6 quality site opens, though, of which only well, five of them were in q four. So, actually, it didn't generate a significant amount of profit 2019, but they're they're all generating really healthy sort of run rate profits now. And then 2020 was obviously sadly defined by COVID. For us, obviously, to show a minimal EBITDA drop year on year from 2.5 to 2.4 is remarkable, really, and goes to show some how well we've managed to fare during that time. A lot of businesses were making losses.

32:02 But I think the only other thing I just wanted to point out on this slide is and we're talking about a lot about kind of COVID performance, but pre COVID, you can in the bottom right corner, we were in a very good position. The last few years, we've been generating around 5% like for like sales growth, and that compares to the industry reporting tool, CJP, which they're born uses, which reported flat flat form. So great great sort of healthy business going into into the pandemic. And and as you can see from the eight months to August figures here, generated some really good numbers this year, which brings me on to the pandemic and telling the story around that. The bar graph, I think, is is the most insightful thing. You can see it's the average weekly sales of the business by channel. So the red is eat in, black is takeaway, and the gold bar is delivery. So pre pandemic, our delivery sales were around 17% of of total sales, with the rest mostly being eaten.

33:01 Clearly, well, come the 03/23/2020, we shut our entire estate, so the sales dropped off. We remain closed in April, but we in mid May, we started reopening. And, actually, we were really impressed with how the stores performed when they reopened. So it kinda gave us well, we made a bit of a, I guess, a strategic decision to try and reopen ahead of our competitors with the view that we could try and acquire some customers through sort of lack of choice and introducing our brand to new new people. And you can see remarkably by the time we got back to August, our sales were back to around 700,000 a week, which was the pre pandemic level. And they stayed at that level then pretty much thereafter by a bit of a drop off in January and February of this year when there was another national lockdown.

33:50 And all that happened as and when the rules changed and is the sales by channel just slightly varied. I think we're sort of looking back on the pandemic and sort of debriefing on it. We're really proud of our operational achievement during that time to be able to flex the different rules and change the operating model in England, Wales, and Scotland at different times because there were different rules. You know, there was a lot of agility shown by the business during that time, and I think that that separates us from a lot of our competitors. And you can see that, you know, in recent months, things have just gone from strength to strength. Everyone was sort of saying, okay. Well, you know, well, not everyone, but some people's question was, like, well, you know, you've done well during the pandemic, but when everyone else reopens on the May 17, what's going to happen? And, actually, it shows that our customers, they've tasted our product during the pandemic, and and they've stuck with us. Our sales have gone through some phenomenal growth over this summer.

34:46 You can see well above the pre pandemic levels. So fantastic. And I guess the only other thing to point on this page really is that, everyone was a little bit surprised when the, dine in was a new channel that people could do again, that the delivery sales didn't drop away that much. I think everyone in the industry was expecting delivery customers to switch back, and that's have happened a little bit, but that channel does look like it's permanently higher now. And I think for us, we really benefit from that for a couple of reasons. Firstly, compared to casual dining and full service restaurants. We were traditionally a lunch led business, and actually what delivery's done is rather than cannibalize our key daypart like it's done for those businesses, it's actually helped grow a daypart that was was was a bit quieter.

35:37 So it's really sort of supplemented our revenue stream and not cannibalized. But secondly, and probably more importantly, certainly from a financial point of view is we generate a similar level of profit on our delivery transactions. We we because our price point is so keen in store. We've got that headroom to offset the commission costs. And actually, that's a fantastic thing. And I think that's going to define restaurant businesses that do well over the next five or ten years versus those that don't, because you need to be making the same amount of money on these different channels so that you've got the ability to kind of push them all with equal prominence. Clearly, we want people in our stores. We build stores to make them look nice, but, actually, it's totally fine for us to deliver some great delivery sales in the evenings as well.

36:23 And then just moving on to some other sort of interesting data points. Our like for likes over the summer and this year have been phenomenal. There is VAT benefits in there. So with all of these like for likes, you just need to take off about 13% of them to get kind of the the underlying. These compared to 2019, which is what lounges and TRG and all the other restaurants seem to be doing now and also what CJPeach are doing. And you can see year to date, we're 22% up. And, actually, the performance over the summer has been phenomenal, sort of 40% like for like growth. The August number is not on there, but I can say it's plus 34%. So we're still well above CGAP, and I think that just further emphasizes the kind of customer acquisition point in introducing Mexican food to new people.

37:11 And also encouragingly, like the likes of volume driven as well. So it's not just sort of sales that's driving it. It's volume too. About going on on about too many numbers, I think the one other thing I'd like to point out on this slide is unlike a lot of other restaurant groups, we've really made our business model work outside of London as well. So you can see there that the the the fantastic performance is is across the estate actually inside and outside the M 25. I think outside the 25 outside the M 25, we've got about 22, 23 sites. They perform almost as well as, inside London. Gives us a phenomenal confidence in our kind of UK wide space opportunity to open up in new markets that we've done recent months and hit the ground running.

37:59 And then lastly from me, to talk a bit about these other opportunities. We've got a franchise with SSP, and we've recently opened sites in Gatwick Airport and Leeds Motorway Services. They're both trading very well despite sort of significant drop in footfall. We've also got a site in Euston Station, and we're keen on pushing that channel. SSP are looking to rationalize the number of brands that they work with. And we've we've really outperformed their expectations in the sites we've opened with them. I mean, Houston was doing about 8,000 a week as a MEXICANSAR, which was their own burrito concept. We took it over, and it's now trading at about $2,223,000 a week. And Gatwick Airport's trading very well as well. So there's there's a lot of opportunity there. We've got a trial site in a university campus in North London, and we're potentially explore well, we're hoping to explore a a further franchising opportunity with that business.

38:52 And we're also looking at other licensing and franchising opportunities as well. Because it's TORTIL concept, because of the fact that we have the CPU, it means we can derisk one of the biggest franchise risks, which is the food. It's very easy for us to then trade that into other other businesses. Clearly, we wanna, in The UK, predominantly expand into our own bricks and mortar sites, but there is obviously other ways of supplementing that in in kind of travel locations. We opened a site in Merlin, and we're in discussions about expanding that to potentially operate some other we've got Chessington at the moment. We're looking at other sites as well. And then as mentioned, there's a list of other things on this slide that we're looking at. So it's super exciting. And the fact we don't need extraction, we've got the CPU just means we're we're really well placed to kind of take advantage of other opportunities that that come our way.

39:46 Okay. So from the final final bend, really exciting opportunities, but fundamentally, this business is this IPO is about UK growth and company sites and why we found ourselves wanting to pursue this option. And and simply, the property market has fallen now very much in our favor. And we are committed to to doing another 45 openings in the next five years. So it's not outrageous growth, but it's very good, very consistent. We want to do eight or nine bricks and mortar sites a year and four or five cloud kitchens. Those are the absolute kind of bottom line requirements for us. Outside of that, clearly, Andy's talked about some wonderful opportunities with franchising and other licensing opportunities.

40:34 And at some stage, we will look at the European opportunity for us. But The UK pipeline of sites for us is looking as strong now as it's ever done, in fact, way more than it's ever done in the past. We're able to look at bricks and mortar sites in our typical high footfall locations now, but the rents have generally dropped by 20 to 30% in most locations. Obviously, we we all walk up and down high streets now. We've seen the amount of properties that are available, so we want to make the most of that because we do believe that the high streets will come back, maybe in a slightly different way. But for us, that's where we where we want to continue to trade. Because of our success on delivery, it now allows us to look at secondary locations, perhaps locations that we wouldn't have done before, some sort of secondary sites, which basically means slightly off pitch.

41:27 Slightly off pitch means much lower rents. And because we know that through our delivery platform, we can we can generate really good sales just out of a delivery business. So that's opened up other sites. And the success of our cloud kitchen so far means that we're gonna continue to pursue those. We have one of the best delivered products, out there. A lot of our fellow restaurateurs sadly don't. You know, burgers don't travel particularly well. No one sorted out the french fry issue yet. So outside of Indian and Asian cuisine and certainly our food, there's really not much stuff that gets delivered that's really good. Now we wrap our food in in silver foil, so a burrito is fantastic fifteen or twenty minutes, half an hour later than when it was made, much better than most other products.

42:19 So that's why our delivery has been so popular for us, and that's why we'll continue to pursue those cloud kitchens. We had a white space document done back end of twenty nineteen, which highlighted at least a 121 plus our existing estate of sites around all the demographics that we gave them and where all we we already traded. Frankly, that number now is is is very conservative because of these extra opportunities that we're going to find. Next year's site pipeline is virtually complete, which is fantastic for us, and we're already starting to look at twenty twenty three's pipeline going forward. I wanted to just specifically give you some examples of how the the rents and landlord relations have changed since COVID.

43:07 These are three locations that we would have done anyway, but their return on capital, Andy mentioned earlier, would have been much higher. Our sales hurdles would have been higher. Numbers that we'd have been comfortable with. But since COVID, we've been able to renegotiate at least 20% off rents on all of these. We've managed to secure phenomenal landlord contributions. So it's brought down the sales hurdle in all of these sites by sort of 5 or $6 a week. So, I mean, that's phenomenal. Now we don't envisage the landlord contributions going continuing. We're already starting to see the market changing a little bit. The rents are still 20% down, and we'll probably remain that way until finally the government decides to end this rent moratorium, and then there may well be another load of sites that become available.

43:58 So we wanna make the most of it, and so far, we have. When I talk about this being an exceptional opportunity, I've been doing this a long time. I've been running restaurants for thirty years. I think it is important to note that I I have never seen a property market in the in the favor of of this sector ever. I mean, this is a once in a lifetime opportunity, and we're delighted to have got the IPO away and and delighted to be given the opportunity of making the most of it. So, you know, in conclusion, we've got a brilliantly resilient and adaptable business. We proved that pre and during and post COVID. Our our numbers are looking exceptional. We've got a well run, well financed, strong team underneath Handy.

44:47 The property landscape is very exciting. We've got some great people, KPIs that we, you know, we've proven that we invest and we look after the people that work for us. Outside of the standard bricks and mortar sites, there's a lot of strategic opportunities for us, which we're pursuing a cracking management team. And I think as I've already said, this is a once in a lifetime opportunity for a business like ours, and we're very excited about the future. Thank you all very much. Andy, Richard, thank you very much indeed for updating investors this morning. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the right hand corner of your screen. I just wanted the company to take a few moments to review those questions submitted already. I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard, and we'll send you an email when that's ready for your review. I'd also like to remind you that your feedback is important to the company. And immediately after this presentation has ended, we'll redirect you for the opportunity to provide feedback in order that the company can really better understand your views and expectations. It'll only take a few moments to complete, but I'm sure will be greatly valued by the company.

45:58 Andy, Richard, I know I haven't given you particularly a long time to review the investor questions submitted, and you have received a number throughout today's event. But perhaps if I may, if I could just hand back to you to read out those questions and give a response where it's appropriate to do so. And, of course, any questions further coming, they would just appreciate it in that dashboard. So thank you. Absolutely. Alright. Thank you very much, Mark. Okay. So first of all, to Simon c, thank you very much for your question. The question is do you look to acquire some of the smaller brands to accelerate your growth, or do you see it through organic means? Great question. Predominantly, we'd see it through our organic means ourselves. We've said that the the pipeline is pretty strong for us. But, of course, it would be, you know, be irresponsible of us not to look at those situations. We have got some cash in the business now. We're able to look at smaller smaller businesses if they became available and if they were in the right locations for us, and they suited the plan of the business going forward, then absolutely, we would we would certainly look at those. But focus wise is organically, if something came up opportunistically, we definitely look at taking it.

47:13 Okay. Then the next question was from Sanjay h, which is given you've taken a centralized model with your CPU. What is your contingency planning and resilience plans for any impact to the top and hail site? Very good question. We have a relationship with FreshDirect. We've got space booked in their kitchen in case and they've got our recipes on hold in case we ever need to move our cooking there. And we're also exploring a relationship with an outsourced food food provider that provides food for lots of restaurant groups, and that's up north. So we've got a couple of different ideas, and we're also looking at taking the another CPU of our own. As Richard says, our our existing facilities got the capacity to to grow the business, but in the end, we will need another one.

48:04 We're looking at sort of a site either next door to the existing one or sort of elsewhere in The UK. Which one is it? If I take Mark i's one, which is how does TORTILLA differentiate itself from other burrito Mexican chains in independence? Well, I think through the presentation, I was I did highlight a lot of our competitors and and the fact that they have been through difficult times. I think the truth is because we we pushed forward and invested in a central production kitchen and our management team an early stage where we only had nine I mean, I joined when we had, I think, 10 sites, and we, you know, we then invested in the management and the central production kitchen.

48:51 That gave us a leap and a head start that allowed us to get our KPIs more consistent than our competitors. I think our, you know, very relentless approach to properties has served us well. We haven't closed the site, as Andy mentioned. And we are able, through all of those decisions that we made, to keep our prices competitive. I mean, frankly, if if if I if if if I went into Chilango or Chipotle, I like what they do. I like the food. It's fine. But they are are unable to get the same KPI levels that we are. And, you know, we have stolen the march on them now. We're at 60 old sites, and our our closest competitor in The UK has now only got 14 sites.

49:36 So So we want to keep our foot down and and keep differentiating between between ourselves and them. So just then moving on to Michael d, do you have any KPIs to which investors can measure performance, I. E, new store openings? Absolutely. New store openings is one of them. Like for like sales growth is the other. And I think, you know, for the foreseeable future, we're gonna be reporting that versus 2019 just because of the mess that that COVID created. We analyze that internally both with and without the VAT benefit, the five percent rate, which is now twelve point five percent. And then the key metric ultimately is corporate EBITDA for us and store EBITDA. So we we will continue to look at those on a on a UK GAAP basis rather than messing around with the IFRS 16 adjustments to rent, which confuse things. So they're they're the kind of key KPIs that that we use internally, and we we see as being used externally and consistent with sort of lounges and TRG and our our peers.

50:41 The next one is from Adam S. It's quite a tasty question. What would your year to date EBITDA be if you were to strip out the benefit of the COVID nineteen exceptionals? It's such an interesting question, and there's so many different ways of looking at that. Clearly, there's been a VAT benefit. We've managed to negotiate some rent concessions. We've also benefited from a business rates holiday and some restart grants. Work that I've done previously, it's not on a year to date, but if we look at the full year, we're projecting an EBITDA and the research note is just just over 8,000,000. I think that the Liberum produced, which we're pretty comfortable with. I think if you were to strip out the VAT benefit, but then also add back lost profit from sort of January, February, March when there was a national lockdown.

51:27 So you've got to obviously adjust the the good things out as well as the bad things. Our underlying EBITDA would have been around sort of 6,000,000 for this year rather than 8. So, you know, you're looking at sort of 25% lower. And and, you know, just to add to that, you know, we have had a few locations in in Central London that we haven't opened. Yeah. So, you know, we haven't traded in in, you know, not many sites, but it's three or four sites that we haven't opened. So there are puts and takes in this. Yes. We've we've we've taken advantage of the benefits that we've received from the government as we should as a responsible business. And, actually, the truth is we're still not out of this year. You know, we we who knows in in reality? So I think it's been a very, very good year. Yes. We've been helped by the government, but, equally, we have had lockdowns, and we haven't been able to open some of our our sites. So it's a it's a it's a bit of a benefit as well.

52:24 What proportion of existing holders sold IPO? It's a very good question. I of the shareholders pre IPO, a lot of them didn't sell, but obviously, most most sold proportion. I I think we'll have to come back to you with the exact number if that's of interest. I sold only 20 well, 20% down. Obviously, you know, keen to, you know, keep as much in the coming. So I think there's a great opportunity here, and and for me, you know, the value is very much in in the long term as well, but but we can certainly revert on the on specific number. The main seller was our old private equity firm, Killvest, who sold 50% of their interest down at IPO. Obviously, as a PE firm, they've been involved with with TORTILLA about eight years, so they wanted to realize some of their investment, but everyone else sold sort of considerably less than that.

53:16 As the CEO, I sold 25%. I've been in the business seven and a half years. I haven't taken any money off the table. That was as much as I wanted to. I'm, like Andy, hugely excited about the of this business. I certainly wouldn't wanna be running any other form of hospitality business at this time. So, you know, we're all aligned. Our founder, Brandon Stevens, has sold down 25%. He will remain as a nonexec, and we are quite excited that we've got Emma Woods joined us as our chairlady. She's the ex CEO of Wagamama, you know, probably the most successful casual dining business over many years, Lawrence Keane, who's joined us as our nonexec from Hollywood Bowl. So we we've really strengthened the board, and it's, you know, ready for the next stage.

54:04 So interesting question from Sahil s here. Based on planned openings for next year and the year after, will expansion be self funded from fee free cash flow? And then talk to us a bit about the international units. So yes, the funding of new sites will be self funding. The business is currently net cash, not net debt. Now post IPO with a small fundraiser we gave as part of the IPO. As we're only spending sort of 350,400,000 on the new site fix outs, and our rookies are very strong, they will be self funding. And then the international bit, that's that's we did a a white space document a few years ago on that. We've done a lot of research amongst some of our competitors. So we've got an idea of some countries that we would probably like to target.

54:51 I think the general consensus would be it's best to initially do a few of your own stores, and then depending on which country you're looking at in some countries, once you've proven your concept, it's better to franchise it. So we we we we kind of make that decision further down the line, really. I think it would to to get any decent scare in Europe would then need to be an element of franchise for us without a significant, obviously, increase in our own head office. A couple. Steve and I, how often do the sites need to be refreshed and what sort of cost is involved? Generally, we build these things pretty solidly at the start because of the footfall and the traffic that's in them. The CapEx generally is between $3.50 and 400,000 for a new site, and we look at refurbing after five years.

55:38 And, generally, that's up to a $100. They're not really complicated fit outs, you know, just hard surfaces and and and and generally, the kitchens are, you know, the best kit that we can possibly get. But so it's about a five year plan for a refurb and up to a $100 for each side. And, again, that's all being all being budgeted going forward. Just one other question from Mark I about EU pre COVID versus now percentage of staff. Well, obviously, in London, our EU percentage of staff was quite high. It was probably 50%, 40 to 50%. Outside of London, not quite so high. We haven't done recently, certainly in the last month, what that percentage looks like now, but, you know, we're we're pretty much fully staffed in London at the moment.

56:33 So we we haven't seen too many people issued yet. As a company, the overall EU percentage is 37% at the moment from the last four months. So not not a massive rely I mean, it's not it's not an insignificant proportion of staff, but, you know, it's not a not a crazy amount either. As Richard said this, outside of London, it's certainly a lot a lot a lot easier. How no. Yes. I think we covered that one. How does your this is from Matchy. How does your delivery service differ from competitors? It well, I guess it's the delivery service versus our direct competitors, Chilango and Chipotle is pretty similar. We serve the same sort of food. We think that our our our prep times well, we know our prep times are very strong.

57:23 So when I've worked in stores myself every now and again, you the riders will come to collect food as as quick as the ticket comes out the machines because we set our our wait time to zero minutes. So we're very quick, and we just make sure that we're top top of the list with all the rankings, the operational rankings with the delivery parts to make sure we're kind of from the on the page. So we think we're very good. Burritos as a product travel very well, foil wrapped. It's a very strong delivery product, the bowls travel well as well. So I think it's kind of just a proposition that works quite well with delivery overall. And then there's a question from Sahil. In that 8,000,000 of Libra EBITDA estimate you quoted, does that include preopening costs?

58:09 No. It doesn't quote preopening costs. Our preopening costs are pretty minimal, about $40 per new store opening. So not a significant cost for us, which is a small amount of rent and training costs associated with setting that store up. So, yeah, that's not a not a big number when you're looking at the overall quantum. Andy, Richard, I think you've addressed every single question that's come in from investors. And Richard, sorry, I made you go around the other side to see the q and a. Should have made that available on your machine as well. My apologies. Well, look, Perfect timing as well with one minute to go. So you you must have yeah. Perfect responses. So, look, I know investor feedback's important, and I will shortly direct those on the call to provide you with their thoughts and expectations. But perhaps before doing so, Richard, I could just ask you for a few closing comments to wrap up with.

58:57 Well, I think I think, hopefully, the presentation says it all. You know, we are genuinely very excited about this opportunity. The opportunity to do this via an IPO is you know, we're still sort of coming down from the clouds a bit on how excited we are to have got our IPO away. It's oversubscribed, and, a lot of people are as excited as we are, and we'd be, you know, to have some more investors come on board. We do think it's genuinely a great opportunity for the business. So, yeah, looking forward to it, and thank you all very much for your time this morning. Yeah. Thank you all. Andy, Richard, thank you once again for updating investors this morning. Could I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the management team can better understand your views and expectations.

59:45 This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of TORTILLA MEXICAN GRILL, I'd like to thank you for attending today's presentation. That now concludes today's session, and good morning to you all.