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Fast-food chain operator Cafe de Coral has extended its North American business to the United States west coast by acquiring 20 more restaurants.

The company yesterday announced it had bought fast-food retailer China Inn's 17 restaurants plus three Japanese and Chinese bistros through a joint-venture company in which it has a 48 per cent stake.

The joint venture paid HK$99.4 million for the outlets, according to Cafe de Coral chairman Michael Chan Yue-kwong.

The payment, which will be funded mainly by bank borrowings, reflects the 20 outlets' earnings before interest, tax, depreciation last year and amortisation of HK$17.8 million.

Mr Chan said the acquisition would complement the Hong Kong company's existing North American business.

It already owns 48 per cent of the Chinese quick-service restaurant chain Manchu Wok.

'As Manchu Wok's outlets are concentrated in the northeast region, the acquisition provides an opportunity for us to move into the west coast,' Mr Chan said.

The newly acquired restaurants are all in major Californian cities such as Los Angeles, San Francisco and Sacramento. Last year, their total sales were HK$125 million.

Including the new outlets, Cafe de Coral will have more than 200 restaurants in the United States and Canada through its joint-venture operations.

Given the much bigger market in the US, Mr Chan said he expected the North American operation would soon become the SAR-listed company's key source of growth.

'The US food-service industry generates total sales of about HK$2.8 trillion a year, of which more than 30 per cent comes from quick-service restaurants,' Mr Chan said.

Comparatively, Hong Kong's food-service market is worth only HK$58 billion a year, with about 17 per cent coming from the fast-food sector.

Cafe de Coral's North American business is still in its infancy. It represented only 1 per cent of the group's HK$292 million profit before tax in the 12 months to March 31 last year. In that period, more than 97 per cent of profit came from Hong Kong.

As the SAR retail industry was expected to remain difficult, Mr Chan said the company would continue to expand its North American operations.

'We plan to double the number of American outlets to 400 in the next five years,' he said, adding that 23 shops already were set to be added in the market this year. More would be self-run outlets, to boost profit margins.

Self-run outlets usually give double-digit profits while franchised outlets contribute only about 7 per cent of turnover.

Among the 200 existing North American outlets, more than 70 per cent are franchised.



Cafe de Coral purchases 20 restaurants on US west coast