KLE offloads Usain Bolt restaurants to stem losses, focus on real estate
Joe Bogdanovich-led associate firm to take UBTR to China
Restaurant and entertainment company KLE Group has offloaded its core restaurant business that consisted of the Usain Bolt Tracks and Records (UBTR) eatery, sports bar and entertainment spot, to associated company FranJam, in a deal that frees the company’s balance sheet of the drag of the loss-making UBTR, while allowing KLE to focus on its real estate business that it considers more lucrative.
KLE owns a 49 per cent of FranJam, the vehicle through which the company’s franchising operations are executed, with entertainment promoter and businessman Joe Bogdanovich being the majority shareholder.
While ridding its books of the restaurant, KLE Chairman David Shirley is maintaining that the listed company hasn’t given up on the business named after track legend Usain Bolt, who is also an investor through his company Sherwood Holdings Limited. Shirley told the Financial Gleaner in an interview on Tuesday that the focus for the Bogdanovich-chaired FranJam is getting the restaurant back on track and to scout for new expansion opportunities. He said the prospects include reviving the franchising business model which was ended in early 2020, with the new one target location for the UBTR franchise being Shanghai, China.
“China doesn’t feel like they really capitalised on the Bolt experience in Beijing, so we are discussing that with potential partners. We are also looking at a smaller version of the Tracks and Records concept, Track and Records Express, at easy access locations,” Shirley said.
The first meeting to flesh out plans for UBTR Restaurant is scheduled to be held in April. KLE has hired hospitality expert, Armando Pizzuti, who has been providing consultancy services since in December 2021, to manage the restaurant division. He reports to Franjam’s board of directors headed by Bogdanovich.
“We are still involved in Tracks and Records. All we have done is shift the risk of the restaurant business to our subsidiary to allow for the benefits of the real estate and the property management to flow through the publicly traded company. Also, if there are any more shocks to the restaurant industry the risks will be reduced,” according to Shirley.
The transfer of the assets and liabilities for the UBTR restaurant, which KLE founder Gary Matalon launched in 2011, started in July last year, when the company explored ways to cauterise a massive restaurant revenue fall-off from the drying-up of traffic as a result of the COVID-19 pandemic gathering restrictions and other protocols. The business had been battling revenue slowdown and net losses for some time before the pandemic, which had fed into the earlier move to ditch the franchising model.
Full disclosure around a broader restructuring plan was made public on Monday this week via a notice on the Jamaica Stock Exchange, where KLE is listed on the junior market. The plan sees KLE’s restaurant operations, its assets and liabilities being transferred to FranJam.
“This is a non-cash transaction between the entities,” KLE said in the statement to shareholders.
The company said the board based its decision to pursue this change on the urgency of the need to stem the losses which it said KLE has been incurring since the onset of the COVID-19 pandemic.
“It was, therefore, the board’s considered opinion on the matter that the company required an urgent and significant restructuring of its assets and liabilities in order to protect against the further erosion of shareholder value,” the company said.
KLE’s audited financials for the year ended December 31, 2021 are delayed, but for the nine-month period to September 2021, the company posted a loss of $59 million after a loss of $65 million for the similar period in 2020. The company also ran out of cash. Its loss for the full year to December 2020 was $94 million.
Before the transfer of the business to FranJam, KLE was down to operating two UBTRs in Jamaica – its flagship restaurant on Constant Spring Road in Kingston and the other in Montego Bay, which was at one time a franchising arrangement.
Now that it has taken the restaurant operation off its books, KLE will focus on what it says is its “other significant and substantially more valuable business line,” the Bessa real estate development project in St Mary with its partner Sagicor Group Jamaica Limited. The project is said to be almost completed with a summer launch date in mind.
KLE has also secured an undisclosed injection of cash from Zuar Jarrett, a KLE director and investor. Jarrett is said to have provided funding to the company in exchange for an agreed but undisclosed share of profits projected to be earned from Bessa. Jarrett’s cash injection has increased his stake in the real estate investment to 10 per cent, leaving the KLE Group with 15 per cent. Majority holding is held by Sagicor Group, which owns a 75 per cent stake.