Some decades ago a miner work camp operated out of my property, they left behind many samples bagged n tagged for assay(I don’t know the story). This is one of them after sitting out for about a year fully exposed.
The large formation on the “top” is fairly solid, non magnetic and relatively easily damaged by a finishing nail and a copper wire. Fragmentation seems to occur before crushing/flexing.

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VANCOUVER, BC / ACCESSWIRE / May 14, 2024 / Faraday Copper Corp. ("Faraday" or the "Company") (TSX:FDY)(OTCQX:CPPKF) is pleased to announce the results of five drill holes from its Phase III program at the Copper Creek Project, located in Arizona, U.S. ("Copper Creek"). One hole was drilled to test a new target area 275 metres ("m") west of Keel and one hole was drilled to test the westward extension of Old Reliable. Three holes were drilled at Area 51 as a follow-up to the recent Starship and Eclipse breccia discoveries (announced on January 16, 2024 and March 4, 2024).
Paul Harbidge, President and CEO, commented "The Phase III drill program continues to demonstrate the exploration potential of the Copper Creek Project on a number of fronts. At Area 51, we continue to intersect and expand near-surface mineralization. At Old Reliable, mineralization is being further delineated outside of the mineral resource pit shell. Additionally, the first reconnaissance hole drilled at depth, west of Keel, confirms our thesis that there is the potential for significant mineralization to be discovered below the Old Reliable breccia complex. This new data will enable us to vector to high grade zones for further drill testing".
Highlights

• At Area 51, intersected 42.05 m at 0.41% copper from 48.55 m in drill hole FCD-24-056 at the recently discovered Eclipse breccia.
  • This hole expands the known mineralization within the Eclipse breccia approximately 20 m to the east and 50 m to the north from previous intercepts**.**
• Drilling 275 m west of Keel ("Keel West") intersected 51.45 m at 0.50% copper and 1.39 grams per tonne ("g/t") silver from 820.62 m in drill hole FCD-24-053. This intercept is within a longer intercept of 186.90 m at 0.32% copper from 820.62 m.
  • This hole is in a previously undrilled area outside the Mineral Resource Estimate ("MRE") and confirms that mineralization is open to the west of Keel and below the Old Reliable breccia.
• Step-out to the west of Old Reliable intersected 70.35 m of 0.29% copper and 1.31 g/t silver from 55.53 m in drill hole FCD-24-054.
  • Mineralization is hosted in granodiorite porphyry and confirms that near-surface mineralization at Old Reliable remains open.

(For true width information see Table 1.)
Area 51 was identified as highly prospective by integrating airborne versatile time domain electromagnetic (VTEM) geophysical data and short wave infrared spectral data together with geological mapping and sampling. Area 51 encompasses a porphyry intrusion with nine mapped breccia bodies over an area of approximately 400 m by 400 m, including Starship and Eclipse. The breccias are interpreted to have been emplaced at a shallow crustal level in the hanging wall of the northwest trending Holy Joe thrust fault, which brought Proterozoic metamorphic rocks in contact with younger sedimentary rock units to the east of Area 51. This fault is also thought to have controlled the emplacement of the Paleocene Glory Hole volcanics and Copper Creek granodiorite which host the mineral resource.
Drill hole FCD-24-056 was collared northeast of the Eclipse breccia and drilled to the southwest to increase drill coverage for the Eclipse breccia (Figures 1 and 2). Mineralization is associated with chalcopyrite and minor bornite breccia cement. The hole started in granodiorite porphyry and intersected hydrothermal breccia from 28 m to 108 m followed by granodiorite porphyry to 131 m. The remainder of the hole to 187 m is in Glory Hole volcanics. The alteration in the breccia domain is quartz-sericite-pyrite with an interval from approximately 50 m to 70 m where tourmaline is abundant.
Drill hole FCD-24-051 was collared 250 m north of the Eclipse breccia and drilled to the southwest into the Ziltoid breccia (Figure 1). The hole intersected Glory Hole volcanics in the first 180 m, followed by 4 m of granodiorite porphyry. From 184 m to 247 m the dominant lithology is hydrothermal breccia. Alteration at the start of the breccia is sericitic but K-feldspar and biotite dominate from 190 m to the end of the hole.
Drill hole FCD-24-055 was collared southeast of the Eclipse breccia and drilled to the Northwest (Figure 1). The hole intercepted Glory Hole volcanics from surface to 49 m, followed by a series of granodiorite and monzogranite porphyries. From 136 m to 327 m the hole intersected hydrothermal breccia cemented by quartz, pyrite and specular hematite. Alteration within the breccia is intense quartz-sericite. Minor copper mineralization is associated with chalcocite near the upper contact of the breccia.
Keel West is the area between the Keel zone and Old Reliable. This area coincides with a prominent untested geophysical anomaly which extends westward from the known mineralization at the Mammoth breccia and Keel zone to below Old Reliable (Figure 3).
Drill hole FCD-24-053 was collared east of Old Reliable and drilled to the south-southeast (Figures 1 and 3). Mineralization is associated with bornite and chalcopyrite bearing veins with narrow sericite-biotite-K-feldspar alteration halos and the hole ends in mineralization. This type of bornite-rich, vein-hosted mineralization is known to be associated with high-grade mineralization and elevated gold grades at Keel and suggests the potential for other high-grade mineralized centers at depth below known near-surface mineralized breccias in the area.
Old Reliable was the site of small-scale underground mining for copper and molybdenum prior to World War II. Starting in the 1970s, an experimental in-situ leach operation recovered some of the near-surface copper oxide mineralization. The sulphide-hosted mineralization remains in place. During the 1990s, densely spaced vertical drilling led to resource definition to approximately 200 m below surface. Several of those drill holes end in mineralization and the resource is open at depth and laterally. Additional follow up drilling is planned for this area.
Drill hole FCD-24-054 was collared north of Old Reliable and drilled to the southwest (Figures 1 and 4). The hole was designed to test the westward extension of the mineralization outside of the open pit used to constrain the MRE. Mineralization is associated with disseminated and vein-hosted chalcopyrite within granodiorite porphyry. The drill hole intercepted Glory Hole volcanics from surface to 50 m and granodiorite porphyry to 208 m, returning to Glory Hole volcanics to 295 m and granodiorite for the last 12 m. Dominant alteration associated with the mineralization is sericite with kaolinite. Similar alteration is present in the Old Reliable breccia (as discussed in a news release dated April 10, 2024).
Figure 1: Plan View Showing Surface Geology and Location of Drill Holes
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Figure 4: Cross Section Showing Drill Hole FCD-24-054 at Old Reliable
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Table 1: Selected Drill Results from Copper Creek
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Note: All intercepts are reported as downhole drill widths. Mineralization includes bulk porphyry style and breccia mineralization true widths are approximate due to the irregular shape of mineralized domains. N/A: Not analyzed.
Table 2: Collar Locations from the Drill Holes Reported Herein
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Note: Coordinates are given as World Geodetic System 84, Universal Transverse Mercator Zone 12 north (WGS84, UTM12N).
Next Steps
Phase III drilling continues and is focussed on three objectives:

• Reconnaissance drilling on new targets;
• Expanding the MRE; and
• Better delineating high-grade mineralized zones.

As part of the Phase III program, twenty-seven drill holes have been completed and results for nineteen have been released. Thirteen holes were drilled in Area 51, three in the Copper Prince-Copper Giant area, eight in the Bald-American Eagle area and three near Old Reliable. Current focus of drilling is on the near-surface breccias in the American Eagle area.
Sampling Methodology, Chain of Custody, Quality Control and Quality Assurance
All sampling was conducted under the supervision of the Company's geologists and the chain of custody from Copper Creek to the independent sample preparation facility, ALS Laboratories in Tucson, AZ, was continuously monitored. The samples were taken as ½ core, over 2 m core length. Samples were crushed, pulverized and sample pulps were analyzed using industry standard analytical methods including a 4-Acid ICP-MS multielement package and an ICP-AES method for high-grade copper samples. Gold was analyzed on a 30 g aliquot by fire assay with an ICP-AES finish. A certified reference sample was inserted every 20th sample. Coarse and fine blanks were inserted every 20th sample. Approximately 5% of the core samples were cut into ¼ core and submitted as field duplicates. On top of internal QA-QC protocol, additional blanks, reference materials and duplicates were inserted by the analytical laboratory according to their procedure. Data verification of the analytical results included a statistical analysis of the standards and blanks that must pass certain parameters for acceptance to ensure accurate and verifiable results.
Qualified Person
The scientific and technical information contained in this news release has been reviewed and approved by Faraday's VP Exploration, Dr. Thomas Bissig, P. Geo., who is a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").
About Faraday Copper
Faraday Copper is a Canadian exploration company focused on advancing its flagship copper project in Arizona, U.S. The Copper Creek Project is one of the largest undeveloped copper projects in North America with significant district scale exploration potential. The Company is well-funded to deliver on its key milestones and benefits from a management team and board of directors with senior mining company experience and expertise. Faraday trades on the TSX under the symbol "FDY".
For additional information please contact:
Stacey Pavlova, CFA Vice President, Investor Relations & Communications Faraday Copper Corp. E-mail: [info@faradaycopper.com](mailto:info@faradaycopper.com) Website: www.faradaycopper.com
To receive news releases by e-mail, please register using the Faraday website at www.faradaycopper.com.
Cautionary Note on Forward Looking Statements
Some of the statements in this news release, other than statements of historical fact, are "forward-looking statements" and are based on the opinions and estimates of management as of the date such statements are made and are necessarily based on estimates and assumptions that are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, level of activity, performance or achievements of Faraday to be materially different from those expressed or implied by such forward-looking statements. Such forward-looking statements and forward-looking information specifically include, but are not limited to, statements concerning the exploration potential of the Copper Creek property.
Although Faraday believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements should not be in any way construed as guarantees of future performance and actual results or developments may differ materially. Accordingly, readers should not place undue reliance on forward-looking statements or information.
Factors that could cause actual results to differ materially from those in forward-looking statements include without limitation: market prices for metals; the conclusions of detailed feasibility and technical analyses; lower than expected grades and quantities of mineral resources; receipt of regulatory approval; receipt of shareholder approval; mining rates and recovery rates; significant capital requirements; price volatility in the spot and forward markets for commodities; fluctuations in rates of exchange; taxation; controls, regulations and political or economic developments in the countries in which Faraday does or may carry on business; the speculative nature of mineral exploration and development, competition; loss of key employees; rising costs of labour, supplies, fuel and equipment; actual results of current exploration or reclamation activities; accidents; labour disputes; defective title to mineral claims or property or contests over claims to mineral properties; unexpected delays and costs inherent to consulting and accommodating rights of Indigenous peoples and other groups; risks, uncertainties and unanticipated delays associated with obtaining and maintaining necessary licenses, permits and authorizations and complying with permitting requirements, including those associated with the Copper Creek property; and uncertainties with respect to any future acquisitions by Faraday. In addition, there are risks and hazards associated with the business of mineral exploration, development and mining, including environmental events and hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and the risk of inadequate insurance or inability to obtain insurance to cover these risks as well as "Risk Factors" included in Faraday's disclosure documents filed on and available at www.sedarplus.ca.
This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. This press release is not, and under no circumstances is to be construed as, a prospectus, an offering memorandum, an advertisement or a public offering of securities in Faraday in Canada, the United States or any other jurisdiction. No securities commission or similar authority in Canada or in the United States has reviewed or in any way passed upon this press release, and any representation to the contrary is an offence.
SOURCE: Faraday Copper Corp.
View the original press release on accesswire.com
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The kitchen is on fire. Welcome to the final part of the Vapiano story where the tables are turning. In the first two episodes we followed Mark Korzilius' journey from setbacks to founding Vapiano, a groundbreaking restaurant concept, highlighting its fresh ingredients, dynamic atmosphere, and data-driven operations that drove rapid success. While achieving initial profitability and garnering attention from industry giants like McDonald's, Vapiano's global expansion has led to stellar revenue growth. However, it has also resulted in the emergence of numerous side projects (or distractions), operational challenges, increased costs, significant investments, and a notable accumulation of debt. This underscores the prioritization of top-line growth over profitable growth. We will continue on this thread and see how the story ends, but I would encourage you to read part one and two for better context. Vapiano P1: Italian Food Made in Germany (substack.com). Let's dig in.
Before Going Public
We are now in 2015 and the year is a disaster for Vapiano's PR department. Employee time stamps are being manipulated, endless overtime for employees and high turnover in managerial roles are reported; mice in the kitchen and even rotten food allegedly found.
The company is confronted with allegations of exceeding working hours among trainees in an article published by Welt am Sonntag, while the same outlet accuses Vapiano of manipulating punch times. The auditing firm PwC is commissioned to investigate the allegations and finds that there is no systematic approach but rather misconduct by individual employees, a mistake that’s being corrected. Internal however, investigations into stamp times are carried out regularly now and beyond its obvious reputational impact, this sucks up valuable management time and attention.
In the summer of 2015 CEO, co-founder and investor Gregor Gerlach, who has been running the group since 2011 is stepping down and Jochen Halfmann is taking over. A new Vapiano People Program with an App is being developed with the aim to better interact with customers that will incorporate innovate features such as mobile pay. The German website sees a launch of new magazine to further promote the brand and there is now a full inhouse blogger and Instagram team being installed. In October the company buys seven restaurants from original co-founder, former co-investor and ex-president previously responsible for internation expansion Kent Hahne (2x Bonn, 3x Cologne, 1x Koblenz and one in Cologne that’s under construction). This package of Vapiano restaurants is very successful and generates net sales of more than 20 million euros in 2014. Hahne opened his first Vapiano restaurant in Cologne in August 2006 and in 2015 with his company apeiron AG, Hahne operates six L'Osteria franchise restaurants, a direct Vapiano competitor, and two self-owned restaurants GinYuu.
Then in November of 2015, the next public relations bomb goes off with allegations regarding the company's quality standards. The company immediately investigates the issue through internal and external specialists but finds no evidence of any quality issues. Nevertheless, knowing that the group is now being closely watched, the company’s already in place hygiene standards are being reinforced. Additional audits and inspections are performed nationally. Further, all Vapianos worldwide are being audited twice by the partners SGS Institut Fresenius and SAI Global. Auditing software is purchased to simplify the implementation of the audits and the resulting measures. Apart from the external examinations, there is a food sampling plan in place being performed continuously. Again, all of this sucks up costs, management time and attention. With all these tumultuous developments the company’s growth engine is undeterred. Revenue grows by a whopping 50 million euros to 202 million euros, an increase of 33%. Impressive. While average spent per customer increases in all countries, the number of customers per day in Germany decreases by 3.3% partially due to the negative press towards the end of the year. Five own, four JV and 19 new franchise restaurants are added that year to the group, the total number of own managed restaurants grows to 51, there are 31 JVs and 84 franchises which bringing the total to 166 Vapiano restaurants. Global restaurant sales are now above 400 million euros.
But while revenue grows by an astronomical 50 million euros, operating profits, alarmingly, shrink again. Gross margins are staying perfectly healthy above 75% but operating costs keep growing disproportionately fast. The Company’s outstanding debt jumps by almost 30 million, close to 85 million euros by the end of the year. With operating profits at 9.5 million euros, alarm bells should be going off right now.
In Q4 of 2015, new CEO Jochen Halfmann introduces Strategy 2020. The new strategy includes five essential points. One, profitable growth in the newly defined core markets of Germany and Austria as well as in the UK, Netherlands, France and USA. Two, operational excellence through strict “best practice” management. Three, further development and digitalization of the concept considering guest feedback. Four, greater focus on long-term employee retention and five, building a modern and sustainable IT landscape. Sound’s good on paper but let’s see how things pan out.
Vapiano's investments (capital expenditures) that year are primarily directed towards new restaurant openings, renovations of existing establishments, and share acquisitions in other Vapiano restaurants from franchisees or JV partners. A significant portion of funds is allocated to the digitalization of the guest experience, including the development of a new app scheduled for market release in 2016 and the implementation of a time recording system across all group restaurants. The world's first standalone Vapiano restaurant with a delivery service that year is built in Fürth, Germany. The company keeps expanding its presence in both inner-city locations and international markets, such as Shanghai, China.
To finance all of this, the group has its own operating cash flow which comes in at 18 million while capital expenditures are 26 million euros plus 14 million for acquisitions. The funding gab is filled with 26 million euros of new debt and a seven-million-euro equity raise. At that end of the year and after the equity raise Gregor Gerlach (through his AP Leipzig GmbH & Co. KG entity) holds 30.1%, Hans-Joachim and Gisa Sander through their Exchange Bio GmbH hold 25.5% and the Tchibo heirs, Herz through their Mayfair Beteiligungsfonds II GmbH & Co. KG hold 44,4%.
But for the first time the restaurant’s concept that was so successful to date is being questioned. Some customers are starting to mislike the operational flow of the concept itself. If you want pasta, you must queue for pasta. If you want pizza you stand in a different queue. A small side salad, yet another queue. "You spend more time carrying trays than an actress in Berlin-Mitte. The audience in the pasta limbo can only consist of people who have worked for an insurance company for a long time and, like Stockholm syndrome, they can no longer get away from the industrial canteen feeling," writes TV host Beisenherz provocatively. While overly harsh in his assessment he's not entirely wrong judging by customers venting their frustrations in forums and social media channels. It isn’t uncommon for those who ordered pizza to have already finished eating while there is little movement in the pasta queue. Long term that doesn't go down well, QSRs competitors like L’Osteria are handling this process differently, with much success.
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Tipping Point

Where are now in the year 2016 and things start to deteriorate visibility. Perhaps not for the leman’s eye but any business minded observer can see that there are problems under the hood. Yes, revenue grows yet another whopping 50 million to almost 250 million euros but half of that growth, comes from acquisitions of restaurants that the group didn’t already own 100%, which is now being fully consolidated within the group’s accounts. Here is a concrete example. In the past, Vapiano SE, the group’s top holding company held an indirect 50% stake in a French subgroup via the subsidiary VAP Restaurants SA, based in Luxembourg, and included this as an associated company in the Vapiano SE consolidated financial statements using the equity method. Due to the acquisition of additional shares in September of 2016, Vapiano SE's indirect share in the French subgroup increased to 75%. This means that Vapiano SE takes control of the French subgroup, which is therefore included in the group’s financial statements as part of the full consolidation. The revenue from the acquired subsidiary now recorded in the consolidated income statement amounts to 12.8 million euros. While that’s great for the top line, the loss of the fully consolidated entity equates to 0.2 million euros. Yes, you are buying revenue, but there are losses attached to them, not profits. A similar case is the Swedish entity that runs eight restaurants with revenue of 11.5 million euros but has losses of 235 thousand euros. So much for Strategy 2020 and “profitable” growth.
That year the group’s operating profits are absolutely tanking, halving to 3.5 million euros. Operating profits are now a mere 1,4% of revenue. Remember original founder Mark Korzilius who talked about operating margins of 25% to 28% at the restaurant level? Yes, there are overhead costs for the organization that sits above the chain of restaurants, but operating margins that low indicates a course correction is needed. What’s telling is that in the annual report, in the management discussion section, the company starts talking about EBITDA as a proxy measure of profitability, rather than operating profit or net income. This wasn’t the case in the years before. Is this window dressing for an upcoming IPO? EBITDA is short for earnings before interest, tax, depreciation, and amortization. How can you measure profitability of a restaurant chain that absolutely and unequivocally needs capital investment to maintain its restaurant operations, the very source of cash generation, by simply excluding this maintenance charge (depreciation in the income statement)? Vapiano’s own annual report talks about the fact that existing restaurants must be rejuvenated from time to time and that new interior designs have to be implemented every few years. These things wear and tear, they go out of style, kitchen equipment breaks and needs replacement. This business absolutely needs maintenance capital expenditure, why anyone talks of profits before these maintenance costs is beyond me. Fun fact: in the previous annual report EBITDA is mentioned seven times, mostly around restaurant acquisitions and financing, not however as a profit indication for the group. In the new annual report, EBITDA is mentioned 28 times. Maybe it’s just me but belated Charlie Munger liked to call EBITDA: bullsh*t earnings. When in doubt I stick with Charlie. Interestingly, EBITDA for Vapiano keeps growing while operating and net profits keep falling.
Operating cashflow for the group that year is about 21 million euros, but capital expenditure is 30 million and acquisitions for subsidiaries another 20 million. To finance these expenditures another 28 million euros of debt and 16 million of equity is raised. Net debt rises above 130 million euro. The operating cashflow of the group before any capital expenditures is 21 million euros. I am not sure free cash flow would be significantly positive after maintenance capex is paid out; it’s not broken out so we can’t be sure. Granted, I am not on the ground during this time, and I am not in the board room, I am simply reading what’s in front of me, but to me this is starting to look like a distressed situation. Regardless, the following year the company goes public.

IPO

Where are now in the year 2017 and its Vapiano’s first year as public company. The company’s annual report reads the following “Sales revenue, like-for-like growth (LfL) and the earnings figures EBITDA and adjusted EBITDA are used as the most important financial performance indicators for controlling operational business activities.” The very same report however also says: “The majority of the group's investments regularly go towards opening new restaurant locations and modernizing existing restaurants. The latter are differentiated into regular replacement investments that occur during ongoing operations (Maintenance CAPEX) and fundamental investments in the renovation of a restaurant (Remodeling CAPEX). On average, a restaurant remodeling takes place nine years after opening.” It says it right there in their own report; every nine years a remodeling is taking place. Remodeling and updating is not cost free, so why exclude depreciation charges which reflect capital expenditures? I understand that perhaps you would want to strip out one-off opening costs, that’s fine and fair, but don’t go overboard.
The number of restaurants increases by 26 (previous year: 13) to a total of 205. The increase consists of 27 new openings and one closure. Group revenue grows to an astonishing 325 million euros but here comes the shocker, operating profits turn negative to 25 million. Fine, strip out foreign exchange losses of 3 million, IPO costs of 5.8 million and new opening costs of 6.1 million and you still have 10 million euros of operational losses. All the while the debt load of almost 130 million hasn’t materially changed, so those operating losses are before a six-million-euro interest payment. 184 million euros are raised through the IPO of which 85 million go to the company. This money is earmarked for further expansion as the group has ambitions to almost double the footprint to 330 restaurants by the end of 2020. The company is currently not profitable on an operating basis, and still wants to expand aggressively? I don’t get it. The remaining 100 million euros of the IPO money raised is distributed to co-founder Gregor Gerlach and Wella heirs Hans-Joachim and Gisa Sander. The family office of the former Tchibo owners Günter and Daniela Herz with a 44% stake, don’t sell a single share. After the IPO, 32% of all the company’s shares are now in free float.
One year later, in 2018, things get even worse. Revenue grows to 371 million, but operating losses mount to 85 million euros, that’s before interest expenses of 9 million. Even the beloved EBITDA figure turns negative, meaning the operating business before any expansionary or even maintenance capital expenditures is loss making. All regions are experiencing significant deterioration in their earnings profiles. Like for like sales are down 1% across the board. That’s revenue, not profitability. The question naturally arises: is the Group approaching its natural saturation point here or this operational by nature? The operating cash flow is now 9 million while financing cost are close to 7 million. That leaves 2 million for maintenance capital for 74 own restaurants and 76 joint ventures ones. Describing this as financially tight, would be an understatement.
Things are not looking good at this point. Yet the company still grows restaurants by 26 new sites. 64 million euros are spent on acquisitions, new openings, and maintenance costs, financed through a 20 million-euro equity raise and 72 million of new debt. The Company now has net debt outstanding of over 160 million euros. After the equity raise and by the end of the year 2018, Mayfair owns 47.4%, VAP Leipzig, Gregor Gerlach’s entity owns 18.9% and the Sander couple own 15.5% of the company. Yes, the Sanders and Gerlach may have taken 100 million euros off the table, but they still have substantial skin in the game. Plus, Mayfair hasn’t sold a single share and instead injects more money into the company through the equity round. The stock has now fallen from its IPO price of 23 euros per share to under 6 euros by the end of 2018. Something must be done here. And indeed, there is pivot in strategy and a hard push for change. At last, the management team abandons its aggressive growth plan and curtails new openings significantly. Additionally, the team wants to run a thorough analysis of weak locations to then either discontinue or sell sites. In Europe, the operating focus will be put on corporate restaurants and joint ventures in major cities to ensure the ideal size and location to match the respective demographic target group. Outside of Europe, the franchising business is being expanded and at the same time a consolidation of the existing corporate and joint venture markets is being sought. All future investments will be reviewed to achieve higher rates of returns on new openings. Investments are also being made in the renovation of older restaurants. The goal in the future is to also open smaller formats, like Mini-Vapianos (less than 400 square meters) or Freestander at prominent transportation hubs outside city centers (currently in Fürth and Toulouse) to cater to individual location requirements, and to enter new partnerships. I am not sure why management hasn’t stopped all expansion altogether, bringing the ship in order first, getting profitable, clean up, all hands-on deck before considering any further expansions whatsoever. But again, it’s easy to comment from the sidelines; maybe they saw white spaces that would be covered by competing concepts if they weren’t moving fast and aggressively enough. Although pushing internationally means competing with local players such as Jamie's Italian, Prezzo, Pizza Express, Wagamama, Nando's and many more which brings in its own dynamic.
Management also aims to enhance guest satisfaction. This involves refining operational processes, reorganizing the support center, and refocusing on the core offering: providing fresh and high-quality Italian food at affordable prices for a broad audience. The group also aims to reduce waiting times, especially during lunch, while also improving the evening atmosphere. There is even what I would call an evolution, away from Vapiano’s original concept, reorientating the customer journey. The ordering flow is being changed, offering guests synchronized preparations of all dishes while eliminating wait times at the cooking stations. The open show kitchen remains, staying true to original mantra of freshness and transparency but now guests can choose their preferred method of ordering through a mobile app, using a digital order point (kiosk), or by personally placing an order with a waiter. Guests can still freely choose their table and are then informed about the complete preparation of their order through a pager or their smartphone. This is a substantial deviation from the original concept, but a needed one. The group is also exploring and implementing the expansion of take-away and home delivery services but only at suitable locations, not universally across new openings. I am not sure why home delivery is even a priority here; it adds operational complexity. It’s better to clean up shop first and get back to the basics before adding new complexities. To be fair management does try to simplify. There are 49 different permanent dishes on the menu and additional 10 seasonal ones. Customers can choose from eleven different types of pasta. There is simply too much choice, and it makes orders complicated. The company announced to slim the menu down to its most popular and typical Vapiano dishes. There’s no need for an Asian salad at an Italian restaurant. "We have to go back to the roots, i.e. classic, honest Italian cuisine" says COO Everke. Regardless, in November of 2018, the supervisory board pulls the plug on CEO Jochen Halfmann and replaces him with Cornelius Everke. Everke himself has just become COO five months ago. Since 2017 he was responsible for international expansion. From 2011 to 2017 that role was filled by Mario Bauer – put a pin in that name, he’ll play a key role in the groups fate later. Then nine months later, in the middle of 2019, Cornelius Everke quits. He essentially concludes that his skillset and experience in the areas of internation expansion is no longer needed in the foreseeable future. To put it differently: Vapiano has moved from a growth story and has become a restructuring case, and other skills are required for that job. In June of 2019 Everke says the following “(we’ve) made a bit of a mistake when it came to foreign expansion”. No sh#t. Vapiano postpones the presentation of the 2018 annual financial statements three times in the spring of 2019, citing negotiations over an urgently needed loan of 30 million euros. It’s not until the end of May that a binding loan commitment comes through from the financing banks and major shareholders.
We are now in August of 2019 and the corona pandemic is just around the corner. Supervisory board chief Vanessa Hall takes over as interim-CEO and things are unravelling. Visitor numbers are declining; originally, it was planned to sell the US business but halfway through the year the buyer cannot come up with the money. But not all restaurants are performing poorly. The group's poor figures contrast starkly as an example with the experiences of the Swiss-German franchisee, who runs six restaurants. The Sodano family in Switzerland pays Vapiano a royalty of 6% of sales for the use of the brand. Enrico Sodano explains in an interview that they operate largely autonomously from the licensor. If an “accident” were to occur, he could immediately replace the Vapiano sign with Sodano, he says. The family concluded the rents and contracts with employees and suppliers independently. The Sodano family have six locations in Bern, Basel and Zurich, around one million guests every year and 350 employees. Things are going well on the ground. The delivery service they’ve built is offering them a second income stream. Expansion into Winterthur, St. Gallen and Lucerne are being planned; small locations with 150 to 250 square meters and an attached delivery service. Originally, Vapiano restaurants used to be huge but for such a large restaurant to be profitable, 800 to 1,000 guests per day are needed. That’s possible in medium-sized cities, but not in smaller towns which is why the Vapiano group now also supports smaller formats. Back to our corporate drama. The 2019 annual report would be the last report the group files. By the end 2019 the outstanding debt of the company is at an astronomical 450 million euros. Revenue has grown by another 7%, produced by four net new openings through two JVs and two franchise restaurants but operating losses come in at 317 million euros. That sound like an absolute shocker at first but depreciation and amortization charges are 345 million, so that operating cash flow is actually positive but unfortunately capital expenditures and interest payments are so large that they are eating up all of the company’s operating cash flow. Then in the beginning of 2020 Corona hits with full force and the world shuts down. As a result of the measures to prevent further spreading of the virus, the group is forced to cease all global business operations (except in Sweden). While all these shutdowns are happening, the group is the middle of negotiating with its lending banks and main shareholders. There are additional financing needs for restructuring measures, even without a pandemic happening in the background. The situation is so dire that the company starts pleading to the German government to roll out the package of financial help more quickly. Unfortunately, it’s to no end. The rapid closure of restaurants and the resulting lack of operating cash inflows in conjunction with the additional financing requirements, lead to the company’s final knockout punch. In April of 2020, the Vapiano group officially files for insolvency proceedings. The end of an era.

New Beginnings

Because of the pandemic, the majority of the group's subsidiaries in Austria, the Netherlands, Denmark, the United States, Sweden, and China also file for insolvency or seek liquidation. The US business never gets sold in the end and is wound down. In the summer of 2020, significant group divestments occur, including the sale of 75% shares in the group's French subsidiaries, shares in franchisor companies, Australian subsidiaries, German subsidiaries, associated companies, self-managed restaurants in Germany, and insolvency-related sales in the Netherlands, Great Britain, and Sweden. The buyer of the Vapiano brand and one of these bundles of Vapiano restaurants is company named Love & Food Restaurant Holding, a consortium led by Mario C. Bauer – a name I told you to remember. Bauer was a former Vapiano board member and led the national and international expansion, opening 200 sites in 33 countries from 2011 to 2017 until he was succeeded by Cornelius Everke. Bauer didn’t feel comfortable with the IPO at the time but clearly has a lot of managerial and entrepreneurial talent.
The buyer consortium is an absolute A-Team comprised of European QSR top league hitters, including the founder of the Pret A Manger chain Sinclair Beecham; Henry McGovern, the founder and Ex-CEO of the giant international restaurant and foodservice operator AmRest; the Van der Valk Family that runs hotels and Vapiano restaurants in the Netherlands, and co-founder and ex-CEO Gregor Gerlach. The acquisition value is 15 million euros and entails 30 Vapiano restaurants in Germany, albeit that’s just the purchase price which comes on top of any capital investment needed to refresh and return the sites to its former glory. Nevertheless, just as a thought experiment, if you can get each site to 2 million euros of revenue and 400,000 euros in operating profit on average, which wouldn’t be an overly aggressively assumption given the company’s history, you’ve got yourself a package that can deliver restaurant-level operating profits of 12 million euros or more. It’s not disclosed how much capex was needed to refresh the operations, just that fact that the overall investment plus purchase price was a middle double-digit million-euro figure. Stil, it probably was a decent purchase. The same consortium buys Vapiano’s French business for 25 million euros just two weeks prior. After the transaction concludes, the master franchise is given to Delf Neumann and his Gastro & Soul GmbH. Neumann is an experienced operator, and he is ambitious to revitalise the brand with new services and products. For example, instead of pizza, the restaurants will be serving pinsa - a flatbread made from sourdough, wheat and rice flour, topped similarly to a pizza. It targets a more health-oriented customer base looking for a less calory heavy option. The menu overall is expanded by including a variety of vegan and vegetarian dishes.
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Today Neumann’s Gastro & Soul GmbH operates 18 Vapianos on its own account and has 29 franchise sites, amongst other brands. By the year 2021, Vapiano operates 191 restaurants in 34 countries. This is around 50 fewer sites than before the bankruptcy. The number of branches is particularly thinned out in Germany – from 80 to 55. Nevertheless, Vapiano's home country remains by far the largest market, followed by France with 35 restaurants and Austria with 15 locations. “We have shrunk ourselves to health,” says Bauer in the aftermath and there is no further shrinking planned. Quite the opposite, the smell of expansion is in the air again – pun intended. Not as aggressively as before and with a new menu and ordering process.
Overall, the team around Bauer is filled with industry experts with knowledge and networks gained over decades who have a great track record, a long-term view, and the staying power to let Vapiano breath and finds its way back to success. The pressure of being a public company with all the associated quarterly, half-year and yearly disincentives have been removed. The menu is changed and extended with new types of pasta and sauces with significantly more vegetarian and vegan dishes available. Guests can order with restaurant staff, at terminals or on their phones and there are barcodes attached to the tables identify the respective seat. The food is brought to your table, all at the same time if you are in a group, no more annoyances with waiting in line. There is a plan for smaller, 350 square meter locations, with half the number of guests and significantly fewer staff and less set-up costs required to make the economics work. Locations that capitalize on remote work and increased demand for local lunch options, higher population density with shorter delivery routes and therefore cost-effective in house delivery services are targeted. And Bauer is testing the concept of ghost kitchens, which operate without a dining room or service staff, focusing solely on preparing food for delivery services, which for obvious reasons have a very different operational set up and footprint. Original founder Mark Korzilius however is not entirely convinced. He is not a fan of the pinsa for instance and he considers Vapiano's pizza as its cash cow, flagship product and believes that the core Vapiano proposition of Pizza, Pasta, Bar that has given the company its original success is being diluted. He instead admires the competitor L'Osteria, saying they’ve done a better job by focusing on Italian classics, especially the impressively large pizzas that sticks out beyond the plate is leaving every customer in awe. The guys who run L’Osteria are the same guys who have built Vapiano with him in the first place. Bauer on the other hand, like a true business leader, remains undeterred, stating that he is frequently asked whether Vapiano's restart was bold or foolish. He believes in entrepreneurship, franchising, in his experienced fellow partners and importantly the Vapiano concept. By the year 2024 you can find over 140 Vapiano branded restaurant in 27 countries across the globe, including locations far away from its birthplace like Australia, USA, Columbia, Chile, Bahrain, and Saudi Arabia. And why not? Italian food is, and will remain to be, incredibly popular. Vapiano offers fresh and tasty food at affordable prices in a good atmosphere. This combination of attributes should attract a lot of customers. It certainly has in the past.
For more stories: WIP Thomas Weitzendoerfer Substack

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