Happy Belly Food Group Inc. (CSE: HBFG | OTCQB: HBFGF): Consolidator of Emerging Food Brands
Summary
Company Overview: Happy Belly Food Group, led by CEO Shawn Black, is a Canadian consolidator of emerging quick-serve restaurant (QSR) brands, expanding into the US market.
Business Model: The company focuses on acquiring small, profitable, debt-free brands, growing corporate stores with free cash flow, and scaling through franchising, with a diversified portfolio to avoid duplication.
Growth Strategy: Happy Belly aims to reach $100 million in system sales by leveraging a mix of corporate and franchise stores, targeting 30 to 50 new restaurant openings annually across its 10 QSR brands.
Key Brands: Notable brands include Rosy's Burgers, IQ Foods, and Heel Wellness, each modeled after successful US counterparts like Shake Shack and Sweet Green, with significant growth trajectories.
Financial Health: The company is nearing cash flow positivity, with a strategic plan to achieve $100 million in system sales and a long-term vision of becoming a billion-dollar business.
Risk Management: Happy Belly mitigates risks through disciplined M&A practices, maintaining a diversified brand portfolio, and focusing on profitable, cash flow-positive acquisitions.
Insider Ownership: Insider ownership has increased to 24.5%, with performance targets set to drive share price growth, aligning management incentives with shareholder interests.
Future Outlook: The company plans to continue its disciplined growth strategy, aiming for steady expansion and increased shareholder value through dividends and share buybacks in the long term.
Transcript
This podcast is forformational purposes only and is not provided as financial, legal, or any other advice. The information is not investment advice or an offer to buy or sell any securities or make an investment. The views expressed by guest speakers are their own, and any reference to third party products, services, or information does not constitute an endorsement thereof by SNN or its affiliates. SNN expressly disclaims all liability for any individual's use of the information presented in this podcast. My guest on the show today is Shawn Black, CEO of Happy Belly Food Group. It's publicly traded company. I got a couple symbols for you. HBFG on the CSSE and HBFGF on the OTCQB. Happy Belly is a Canadian consolidator of emerging quickserve restaurant brands with expansion plans into the US. The company started as Planting Co., a niche plant-based CPG business, but under Sea's leadership pivoted to become food agnostic, focused on scalable, cash flow positive QSR concepts. The model is straightforward. Acquire small, profitable, debt-free brands, grow corporate stores with free cash flow, and scale through uh franchising. The portfolio is intentionally diversified with no duplication. Think Rosy's Burgers as a Shake Shack equivalent, IQ Foods as Canada's Sweet Greens, and Pyro as Cava style concept. I spoke with Shawn because I really wanted to learn more about the company as well as the pivot from Planting Co. to the QSR consolidation, their M&A model and brand strategy, growth targets, and the $100 million Canadian milestone as Sean states, as well as risk align risks alignment and long-term vision. With that, please enjoy my conversation with Shawn Black, CEO of Happy Belly Food Group. Sean, thank you for joining me today. How you doing, man? Thank you very much for having me. Uh, doing great. You know what? It's uh sunny and nice day here in uh the GTA. Oh, there you go. Awesome. I being from the from the the lower 50, I wish I knew what GTA was. I'm sure. Yeah. Greater area. I I was going to say I should probably know this being that we're about to do this event in Toronto. I'm sure I will find out. You'll find out. And you're coming, you know, you're coming at a good time right before it gets uh you know, unenjoyable and cold. Oh, there we go. Well, hopefully it'll stay that way for the entirety of the that week at least, you know. But, you know, look, I I've known about the company for a while. I've been following some of the news and updates and, you know, I've been seeing some some of the stuff out there. So, wanted to invite you on to get a better understanding of Happy Belly and and the full picture, the full story, the I, you know, just really want to get the full story, what's going on. So, so the first question that I ask everybody on uh this series here, and I'm not going to ask you the same thing, is can you give us that one line that best describes the company? Absolutely. We are a consolidator of emerging food brands. So if you look across Canada, um that's what we do. Anything that is growth uh oriented in food, that's a space we play in specifically QSR. So typically quick serve restaurants. Very good. Lot to dig in there. But first, you know, let's look back at the company's history. When was the company originally founded and what was the original thesis for its founding? Originally, the company was founded as Plantco. So it was a uh plant-based focused food business. Um when I joined uh we you know quickly realized that um you know that's that although the market was growing in plant-based it was still pretty niche. So to be a player and become a a company at scale uh we believe that uh we need to be agnostic to the food business. So we opened it up uh not just CPG but to QSR and we opened it up to plant and non-plant type businesses. Uh today we have two um in the QSR side that are plant-based and we have eight that are not. So that's where you know our focus is and where the growth is really coming from in the company. Uh we've went from all the way from starting with plant uh to now serving some of the I believe the best burgers in the country. So yeah, that's a trajectory, right? Going from just totally plant-based to now burgers. There we go. You know, Canadian beef. So there you go. So, um, you kind of caught us up to there, but what were some of what what give us kind of the full picture of where we're currently at today? How many restaurants are within the portfolio? You know, what's some of the trajectory where you're looking at? So, let's go from there. Yeah, today we have uh two CBG brands. Uh, good news is both them are cash flow positive and uh debtree. Uh, but they're a small piece of our business today. They used to be a significant piece of the business. probably you know more than 50% of our revenue at the start was CPG and uh today if you look at it it's you know sub 15%. uh and as we're going on system sales uh it's you know sub 2% you know I mean as an overall uh the focus shifted to QSR uh which is my background started in the restaurant business when I was 14 uh opened my first one when I was 19 and uh started scaling it so to give you an idea when we when I joined the business was doing about $250,000 a quarter in revenue uh so about a million dollars a year um on a system sales basis you know we just finished last quarter, which was our 13th record quarter in a row. Um, we're just over 16 million in in system sales, and we have a clear path to 100 million a year in system sales uh with our current pipeline in the short term. Very good. We will touch on all that in a little bit later, but want to also better understand the company's business model. Obviously, there's a clear, you know, hybrid of, you know, organic growth as well as looking at various acquisitions. So love to hear more about what you would say is the main business model for hitting some of those sales or those revenue targets that you're looking at and then also maybe some of the criteria for those acquisitions too. Absolutely. So we started off uh you know not long after I say probably well about 6 months after I joined we probably announced our first uh we did some cleanup and then uh we announced our first M&A deal. Um, again, it was a a profitable business, uh, debt-free, cash flow positive, and that's sort of the space we like to play. Find something small, uh, in the food space that we can ideally, uh, we'd like to double the IBA on that asset within 24 months or less. And we did that first on a CPG brand um, called Lumberheads Popcorn. Then we did it uh with a small QSR brand called Heel Wellness and a Sable Bowl uh chain based out of Hamilton. They had two stores, you know, were a little bit profitable, but you know, it needed some work. And uh today that brand is 27 um stores open and it'll be north of 30 by the end of the year. Uh on track to be north of 100 stores open um within 24 months and north of 100 million in system sales just on that brand. So, you know, from a brand that was doing about 1.4 million when we found it, uh we will have, you know, in short order have 100xed the revenue on it. So, um you know, it took time. It wasn't an overnight uh success story by any means. Uh we've been working on that brand for just over 3 years. Um you know, so for you know, it'll be a you know, 5-year run rate to get it from, you know, from not from scratch, but from first base all the way to to home plate. Uh the good news about that brand as well is it is debt-free, cash flow positive and growing. Um so you know that's that's sort of where we first started and we really found our niche in the um uh in the QSR space. So we've accelerated on the QSR that was our first one. Uh today we have 10 QSR brands. We're about 75 restaurants open across Canada. Uh we have uh I believe 626 stores total in our pipeline. Um across Canada and uh 10 in Texas so far. Uh that's part of that pipeline. Uh we're looking at that as our first test market. Um hopefully in early 26 you'll see us start to open stores. Um but in early 26 we're looking to be 100 stores open, $100 million run rate on our system sales um debtree and just scaling our business. So let me ask you this. I mean, how are you balancing the the clear goal of moving fast? I mean, jeez, really fast. I I was joking with you offline a minute ago. Like, there's, you know, you have a new press release every freaking day of a new QSR or something. You're like, "Oh my gosh." Like, how I I barely finished the last press release. You already got four more in the next 3 days. Jeez Louise. like how how are you balancing the mo the just moving that quickly and hitting those revenue goals with also all right this fits our criteria is there just really that many opportunities right now that you're like all right we just got to move that quickly and move that quickly is that we can hit this well that's a good question and you know big part of that is um because we have 10 brands our goal was always to you know get to the point where we could open 30 to 50 restaurants a year and now if we only had one brand that would be a lot of pressure on that one brand, you know, because you'd have to deliver 30 to 50 stores out of it. And totally uh yeah, in my opinion, that would be um you know, I believe then you have to start compromising. You have to either compromise on a franchisee or compromise on real estate or anything. If you're just trying to be just in Canada, open 50 a year. That's that's impressive. So, uh, from my standpoint, uh, what we wanted to do was get to 10 and then if every brand, you know, delivers 3 to five in a year, well, then that's so much easier. So, you know, um you know, we were very lucky to work with Fairfax and and Recipe previously and if you look at them from a grow standpoint, they're really really disciplined and uh they were previous partners of mine and uh when we owned uh two other brands and their operating discipline was something that I believe pays, you know, spades for us today. It uh their dividends are great off of that. So we look to diversify our risk and diversify the growth across a multiple um uh brand portfolio which makes it easier for us to access real estate, easier for us to access franchises and still deliver on a combined basis a significant growth number across the company. Now some of that growth of the say 30 to 50 stores two of your brands might deliver that many on its own but you don't have to. And if you do deliver more across the entire portfolio, then you can probably surprise to the upside and open more stores than you originally anticipated. For sure. And when you're thinking about, you know, having, you know, and engaging with different uh potential store concepts, different QSRs, are you careful to think about like, all right, we already have Rosy's Burgers. Can't have another burgers place. Like I mean it that's I've watched guys 100%. kind of watch guys go before us and they had a lot of duplication in their portfolio and I believe that's really tough because it's like having you know twins and then deciding which one gets something like it's really hard. So what we like to do is keep the portfolio diversified um and only have have no duplication. So if we're going to have a burger brand, we're only going to have one. And if ideally what we're going to do a little bit differently than some of the other guys down the road is if we go to another burger brand ideally what we're going to do with that brand is do what basically in the United States what Cava did. Cava went and bought Zoe's Kitchen. Cava was 60 stores. I believe Zoe's about 300 and they started to convert them and then they got that lift and that arbitrage between what Cava did sales versus what a Zoies did. So, I'd love to find another underperforming burger brand and then convert them to Rosies and get the get the lift and the arbitrage on the asset. That's what we look to do. That way, we we don't have to have duplication when it comes to real estate or franchises or anything. um if you want a bull brand like you know we we built a portfolio of basically you're in the US you'll appreciate it but um whatever is really really growing and popular in the United States we went and basically got Canadian the Canadian version of it and put it in in into growth mode. So we have a our answer small tiger is our answer to Dutch Brothers. If you look at Sweet Green we have IQ Foods. If you look at uh Cava we have Pyro. If you look at Shake Shack, we have Rosie. So, really clearly identified categories that we believe have significant legs for growth in our portfolio. Absolutely. And then another question I have, you know, and this is just to clear it up. So, I apologize for those who maybe know the story much better than I do. So, I apologize, but I'm going to ask a, you know, just to clear it up. On the actual business model side, is you're acquiring the concept itself and then just franchising it out versus owning the stores themselves? What's the or is it a mix of both? a little bit of a mix of both. We're a little more like the McDonald's model where we like to reuse our free cash flow to accelerate corporate stores um and reusing the royalties and the and the money that comes in so you get accelerated growth on the franchising side. But you using a disciplined model on the cash flow to um you know we we treat every day like we if you only have $1 to spend where am I going to get the highest rate of invest return on my capital and so we identify the brands in our portfolio and we put free cash flow towards those brands accelerating corporate store growth. So we'd like to over time ideally be about 10% of our stores will be corporate um and 90% franchise. So, I mean, I know you love all your brands equally, so I I don't want you to pick pick a favorite necessarily. I'm sure you have your favorite tastewise, and then your favorite like, oh, they just the cash cow. But, I mean, for you, what's been the most successful one thus far that you've been kind of used able to use like flying the flag like look this what we're doing, our concept is working. So, it allows you to maybe go out to additional investors, raise more capital so that you can do more equity raises to go out and purchase more concepts. That's right. So, um, we're very lucky that we've got a few strategic backers, uh, on the fund and the institutional side that, uh, that have backed us since early. Um, but, uh, and every time we've raised capital, it's been above market. We've never actually done a below market financing along the way. Um, the, you know, today, the first one that we we did a deal with with two stores that's now 27 stores is Heel Wellness, our SIE Bowl chain. Um, it's going to quickly be at 60 stores and, you know, I believe we have about 190 of them sold. So it'll quickly be a, you know, 100 store brand, probably $100 million in revenue. Uh, you know, we have, you know, in short order. So that's probably been the first one out of the gates. And I kind of say like it's the first one to leave the nest of our in our portfolio of emerging brands. Heel was first. Um, I'd say a second one out of the gates that's growing and uh has delivered an incredible uh business model uh unique economic model is Rosy's on the burger side. Uh it's a when we did the deal with them there was two stores there's now eight um it'll be in 2026 somewhere between probably 20 and 30 stores open. So that brand is likely to triple in size over the next 12 to 18 months which is you know you know impressive growth across the board for us. So that's uh that's in motion. Uh the next one that is you know we did a deal when it was four stores. Um there's now six and number seven opening shortly and that's IQ foods which is our uh our answer to uh Sweet Greens in the United States. The difference when you know from us and Sweet Greens is um our asset is cash flow positive and debtree um and accelerating the free cash flow where you know I think Sweet Greens has been you know you know they've been 25 30 million a quarter of losses off their off their model. We so we we typically run a a much more disciplined profitable model um you know with our with our book. That's probably my fault. I I stopped eating sweet greens a while ago. That's I you know what I still like it. I go there. It's fine. It works. You know like it I was in Dallas recently and I went and tried it. You mean I went to one of the stores and um you know I was shocked at how big it was and how few people were in it. But you know what I mean cuz then I've been to one in Florida. The staff are nice. People are nice. But I didn't find them as packed as I would have thought. For sure. No. And uh I I kid I've had sweet greens. Not that. Anyways, um so you know, real quick, want to hit on the CPG side because it seems clear. I mean, look, I joke again about the the pressure. Every single one's been on the QSR side, QSRS, QSR side. Not as much on the CPG side. So, can you cover a little bit more about what's going on with the name of the brand is Holy Crap. I'm not trying to make a judgment of Holy crap, but one of the brands is Holy Crap as well as the brand Lumberheads. Yeah, that was the Holy Crap was one of the two OG assets that were uh legacy assets that were in the portfolio. And uh we kept it because we turned it cash flow positive u and debtfree. So, you know, it's still a contributor to our business. Um that that whole business was on, you know, Dragon's Den and you know, our version of Shark Tank and Canada and stuff like that a while ago. um you know it was it's a cerealbased business that based on supersedes and it's meant for the microbiome. So it's meant for healthy stomach, healthy gut uh gut health and that's where the holy crap comes from the name. But uh it's one of those assets in our portfolio that um we're okay buying more profitable CPG businesses and we're also you know somebody came along and wanted to really buy one of our brands cuz it's profitable as cash positive we'd be okay selling that asset. So, you know, we're we're not um we're agnostic to the business as well. We love them all, but you know what I mean? Um any one of our individual assets could be purchased or sold anywhere along the way, but CPG is a small portion of our business, but I like it. I I I I actually eat the cereal often. Uh and I'm a customer of our popcorn brand, so uh you know what, you know, if you that's we I did the belly check on both of them and I like them both. Very good. That's what counts the most, you know. Right. Um, real quick on the barriers to entry, you know, this is a again, this is seems like a fairly obvious question. Like, you know, there there's clear capital constraints that not everybody can just jump in and do this, but you know, there are some folks with deeper pockets. I'm sure it's no uh I guess you say mystery that uh, you know, that some of these are mom and pop stores that, you know, might be looking for either an exit or new whatever, new path, so to speak, you know. So, I mean, what's stopping somebody who has also deeper pockets and good institutional backing that also has a, you know, a potential rockstar CEO moving as fast as possible, competing with, you know, happy belly to go out and get some of these other brands to to build up a portfolio like this? Uh, what's stopping them? If they have the people, capital, like the means to do it, nothing stopping them. uh you know really there's nothing just like someone else can open up another restaurant brand which one you know shareholders like and which trust and and believe in and get building that trust I believe is one of the hardest things in the micro cap world you know to build trust with shareholders um I think you know I think it should be earned uh first off I don't think it should be just given um I think it should be uh the show me world you know more people should look at the financials and look at the business and look at the track record and and they should look at as well like does the actions of the company match the words right cuz I think there's so often that does not happen so the good thing is if somebody else wants to try it um we are 3 years of record growth 13 record quarters in a row we have the money we've already done it so um I first off someone else wanted to try I'd be the first one to tell them please do like why not try it you know what I mean like I'm not the only person that's ever going to do this in the world um right now though we're one of the few liquid companies companies in the country uh that are consolidating. So we have access to to sellers, we have access to investors um and I believe the open ice uh you know down there you know a little bit hockey but you know Wayne Gretzky's line of go where the puck's going not where it was you know and you know if you can start to get that we I believe where the growth is today in the emerging brand sector in the country I don't believe there's another food company doing what we're doing. So I believe you know there's a and there's an incredible amount of open ice. I think they when I read a while ago there was over 400 independently owned restaurant chains in Canada. So when you talk about consolidating like we can do this for a long time and compound our compound our growth. Absolutely. So has there has there been a a restaurant concept that you were bidding on and just like man we really wanted that one and either lost out on it or they just you know maybe got cold feet something like that. I mean, you can name the name if you want to, but I was just curious if you, you know, cuz again, you've been moving very quickly and you can tell these guys, right? Look, like here we're signing new, you know, franchises left and right, like if you want to build the brand, like here we go. So, I'm just curious. 100%. Well, you know, two things that, you know, even with a seller, you got to build some trust, right? Like, you know, like cuz you're you're taking a lot of them, you're taking their baby or you're partnering and becoming a, you know, a JV partner. But, um, yeah, so you got to build some trust. That takes time. So, a lot of times you invest a lot of time in a deal and it just it just never materializes. You don't get them across the finish line. Probably, you know, one of every, I don't know, 10 or 20 you look at could you ever get a deal done. Um, and usually it doesn't work because of the math. You know, I mean, usually that you can, you know, when money's involved, people will usually figure a way to get along. But, um, sometimes just the deals and, you know, we've been stuck on being really disciplined. Like, I've probably been a pain in the ass to a lot of people over the years because I won't budge. uh on certain things and because I believe it's right and you know the problem you know like there's you know one of the guys that went in front of us um and was pretty big and you know they built their share price from one point from 10 cents a share to I think 7450 on the TSX which was the company I used to work at I was the chief development officer at a public company called MTY um they've been one of the most inquisitive consolidator of QSR brands you know I think in the history of North America you know they and they've done a great job but um up till a little period of time that I think up until 2019 that stock was you know one of the best performers in the history of the TSX. So um if you look at us you look at what made them great early on it was their discipline and their M&A. So take a page from their book um stay really disciplined up till 2019 and it paid incredible dividends for their shareholders. So um yeah we've had some deals uh that you know you just get to the finish line and usually one of the two things happens. um emotions get involved, you know, meaning whether it's the the buyer or the seller and one wants more or one wants to pay less or you know or and then I mean the other thing it's either emotions or it's numbers. Usually you get to the point when you do your due diligence and something doesn't check out and then that you know that requires a repricing either up or down and that's usually when emotions come in. So, um, probably had 10 deals that were really close over the, uh, last 24 months that we didn't, for one reason or another, just didn't get done. Uh, a couple of them I looked back and said, "Thank God." You know what I mean? Like, thank God. Sure. Yeah. Like, you know, doesn't matter whether it's tariffs come in or, you know, supply chain on an issue or, you know, the brand just shifted and you're thinking, "Thank goodness I didn't buy." There's probably one that got away early on and I probably look back and say, "Yeah, the founder would have been a bit of a pain in the ass, but it would have been a great business to own part of because I watched it now take off." And I So, we identified it early. We knew it was right, but for one reason or another just couldn't get it, you know, couldn't put the puck in the net and get the deal done across the finish line and across the goal line. But, uh, so, yeah, probably in my career, I could think of one that I'm I'm I'm annoyed that I didn't get done. Uh but of that there's probably 10 that I've walked away on for one reason or another. Um cuz you know little line like you can't do you know a good business deal with bad people. Sometimes you just for one reason you can't get done and it wasn't the right fit. I'm probably luckier that I you know locked away than you know the money I would have made off the one that uh I'm annoyed at myself for not getting done. I'll have to ask you over a beer which one that was for sure. Yeah. Sometimes it happens where the sacrif the like the price of admission was just too much. like I would have had to blow up my cap table. I would have had to, you know, take on dad or I would have had to do something that would made me uncomfortable. Um, and when our team looked at it, we just said, "No, we can't do that." You know what I mean? And and so that operating discipline like, "Hey, the odd time it might cost you, but I guarantee you over time it saves us a lot." You know, this sits on another question I wanted to ask you. You know, how do you tend to structure these deals? Is all cash cash in stock? You know, I'd love to hear that. We've done both actually. We've done cash deals, we've done stock deals. Um, a lot of times I prefer to do a deal where if you borrow a page from Fairfax, um, you you buy for us typically we we buy 50%. Uh, with a uh a closed end transaction on the remaining 50. So we have the exclusive rights in 3 4 5 years to buy the remainder um, and become the sole owner of the business. So we I love doing deals like that. That's been a real uh, sweet spot for us. allows us to get in uh become partners, get a peak under the hood, operate the business, and what I find is that takes a lot of execution risk away from our M&A because we're already engaged in the business. We we help with the accounting, we know the business inside and out. So when you and you can prepare for it. A lot of times when you buy a business, you're going in like you know the, you know, history of the business and that, but you've never ran it, right? So, you know, I mean, there's there's still some executional risk in there. you're not going in blind, but you're you're not going in like a partner that's been in the business for 3, four, 5 years. So, I believe it drisks significantly for us and our shareholders um to be a partner first and then buy the rest later. Absolutely. So going to ask a little devil's advocate question here and it's I wanted to address you know you mentioned it was 13 consecutive quarters of revenue growth you know just and you can correct my numbers if I'm seeing them here correctly but for 2024 company did about just over 9 million Canadian right y all right so and then on free cash was just over 900,000 Canadian or or loss of 900,000 Canadian sorry y so what would you say what's the what's the break even number you know what are we doing to continue to work towards. Yeah, I think last quarter, let's say, you know, you burnt $200,000 because you're still investing in some stuff and you're going forward and we did about 16 million um in system sales. Um our goal in the short term is to get us to $100 million uh in system sales um and you know, be cash flow positive. So, you know, whether that's one quarter away, two quarters away, you know, I mean, it's it's it's in the near term. Uh, and we believe that we will turn that top line, we'll have that kind of trickle down effect to put us to the cash flow positive side. And, uh, and then still have another, you know, 500 plus stores in the pipeline that, you know, if you average out at a million dollars a store or an average, um, you know, you got another 500 million in system sales coming. So, because there's, you know, if we want to do them all franchise, there's no capex required. We're lucky we still have several million dollars in the bank. Um, we we only have $150,000 today of secured debt across the company. Um, so we're in a very, you know, healthy situation. Um, and, uh, we have access to capital. So, I like it, you know, because it's if you look where it started, I think when I before I started, there was huge, you know, back then promo money being spent and there was, you know, losses were probably, I don't know, I'm going to say half a million or a million dollars a quarter. You know, I mean, it was it was massive. And here we are today, you know, about to flip cash flow positive and, you know, be a long-term compounder. Absolutely. So, I my next question is then also on the franchisee side. Sorry, I'm bouncing around. I got a million different I'm bouncing away. Um, so on the franchisee side, I mean, how what's that pipeline look like for each of the brands? How how are you engaging with potential? Is it mostly incoming or are you doing any kind of outbound seeing folks the interest? You know, love to know. Yeah, you know what? A lot of our franchises so far have been uh from our previous brands um and come come and join us again on the next journey because they made money and did well early. Uh thankfully we have a history in this business and a track record of opening successful brands. So attracting quality or qualified franchises is has not been an issue for us. Um and they don't all buy them because I'm cuter and that's that's not the case. They buy them because we have what I call the best unity economic model in the business and we we provide a better return on invested capital than some of the other brands do. So that's what's attracting the quality. Uh that's how you know today we have I think this year this year our goal was to open 30 to 50 restaurants. We'll deliver on that. Next year our goal is to deliver 30 to 50 restaurants. Very confident we could deliver on that. And I think a majority of those restaurants that will open will come from existing franchises opening second stores, third stores. One of our franchises is on store number I think 13. Uh but they've purchased 30. So they've got another 17 to open just themselves. So that's the, you know, we're very fortunate that our ex, one of our franchises has opened three, uh, he's bought 16. So, you know, there's a lot that, you know, are still in our pipeline to be opened by our existing group. Um, so we don't, you know, we don't do franchise shows today. Uh, we're not out there spending a bunch of money on uh, social media to generate uh, like online advertising. It's not what we're doing. We're doing it through the belly and through uh I should say social media is and and through the belly versus that, but we're not doing like online advertising. Absolutely. So, here's a question that I love asking every CEO on here. You know, you public company, you know, you're putting out your releases, Q's, K, all that. You've done a little bit of the dog and pony show. We probably met investors, institutions, whatnot. What would you say for those that, you know, have a an understanding of the business? They know, they get it. they understand but they still there's like but I'm still confused or about this one or two things you know what are some of those frequently asked questions that maybe you still get from investors that maybe we haven't even covered yet you know I think a lot of them say like uh one one of the biggest comparables out there in the market that people use is uh you know some of the big popular brands that have grown in the US to see valuation stuff like that but in Canada typically people compare us to MTY uh my former company uh where I worked um is you know because you know like what are the chances you can be that next one or you know I mean the next success story like that or why would I invest in you over them and you know like that's a that's a direct you know question that I often get and um for us it's you know investing in the management uh investing in uh the brands right then the people so it's a it's a people business the three Ps people product and process so um if you like our people and like our product you know that's the one that's out there but typically the biggest comparables out there are you know what people ask you say you know what's your you know how do you compare to them what's your valuation um and what's what's the growth that look like and if we maintain that we are the leading consolidator and leading growth company in QSR in Canada over the next 2 three years I think you know considering to to my point earlier of 13 record quarters in a row I think our franchise stores are going to do well our corporate stores are going to do well our staff will do well and if those things get taken care of then usually the in my opinion the share price and the shareholders do well also absolutely Absolutely. Another favorite question I like to ask on here, and it's another devil's advocatey type question, and you probably get this all the time, but in your opinion, what would you say are some of the company's downside risks? Uh, I got asked this one the other day. Uh, other I was going to say, other than execution risk, of course, that number one. Yeah. Um, you know, key management, I don't know, someone getting hit by a bus. Um, you know, I did I Yeah, that's that's a real risk. I mean uh in in any micro cap or any small company um you know they're saying you're only as good as your management uh and you know they're even more dependent on management uh as a small company than you know probably a bigger one is you know got a few people that could do it um and you know a big a big army of of team um so I think people is probably the biggest risk uh to that you know I recently we we lost our CFO uh he had passed away um you know a real uh you know, battle with uh with cancer and um I'm so sorry for your loss. Yeah. No, but it's the first time that some of this has ever happened uh to me uh personally and it was uh it was brutal. Uh he's one of the nicest people I've ever met. Um I never met a CFO first off that smiles every day. Like he smiled more than anybody I know, which is strange for people that in the accounting world. I don't always see that. Um so that's a you know that's through all that you learn that's probably the biggest risk is people. So what if somebody you know I if you know a successful CEO leaves uh if a successful you know team member um you know passes away those are risks you know I mean and you know today we announced a a new VP of finance that that joined us uh you know Joshy came from a TSX company he's got experience and so you know we we uh we have continued to add to the bench uh so that as we grow I believe the the people portion of it becomes the d-risk more for shareholders but I still believe that's the number one risk in in a company today, we have lots of money in the bank. We're growing. We're okay. Um, when you talk about execution, the biggest risk I could have taken in in on the business side would have been do a massive M&A that brought in either ridiculous dilution or um wasn't profitable when it came in and it came with debt, right? So, if you ever want to blow up a micro cap, um I would say take on a lot of debt and put, you know, uh put your put the knife right to your throat, you know what I mean? Like where you're you can't trade water fast enough because the bricks on your feet are pulling you down. That's and that I think a lot of companies they they try and just buy sales, they don't buy profit, right? And and I think there's a there's a real risk in any business of running out of money. 100%. The two other risks that I was also thinking about and I'd love to hear your your you know how you address them is having to do with consumer preference shifts right going towards healthier eating even maybe just stay at home home cooking that kind of stuff as well as economic conditions you know I mean I'm in LA I could tell you unfortunately a whole bunch of mom and pops that shut down just cuz it's so expensive to hire you know the people that you need to actually industry so I looked at an M&A deal previously in California backed by a very wealthy family um and was on the plant side. So, twofold, I felt that was under pressure, the plant side. And um I also felt California with the recent labor changes and stuff that um were unfavorable. So, that's why I passed on it. They had restaurants in California and Nevada. Uh the deal was brought to me from a a friendly uh friendly source. Uh I just couldn't do it. Even though they were willing to back it, do everything, support us, like they're willing to do whatever I want to to get the deal done. Um I just couldn't do it. the risks on that on that M&A deal were were uh were not favorable. So, we passed. But, you know, we're very fortunate that, you know, we have a diversified portfolio of brands. So, we have the healthy side to like IQ Foods, Heel Wellness, uh we have a plant-based brand called Lettuce Love to the Burger side and to a breakfast brand that you know I mean that is more on the indulgent side and they got sweet treats and stuff like that called Yolks out of Vancouver. So, we have both sides of the spectrum. So that we got a diversified portfolio in the mix. So healthy, not healthy, price points are different. Um also to the point of uh our our geography. So we have stores now that are going to be open from Vancouver Island all the way out to PEI. So literally coast to coast. So our if we were one single brand and concentrated on the market like that one brand that was almost all of its restaurants were in LA, that's a lot of risk in in one market, right? You know, it's a it's a tough one if it it can be boom or bust, right? You know, there was there was markets previously in Alberta, um brands that were exposed to the the big run on oil. Well, they when during boom time, it was amazing. But then when oil went down, you know, sub $50 a barrel, um those stores got destroyed. You know, it was uh the you know, it was it was awful. So, uh we're we're we're fortunate that diversified on real estate and diversified on on uh cuisine offerings. So, we're we're we're a little bit lucky on that. Got me thinking which one it is now that it's in LA. I'm thinking, all right, plant-based. Maybe it's Should I say what I think it is? Make a guess. No. Do you want me to? I won't. I think I was thinking maybe it's creation. Maybe. Nah, maybe. No, it wasn't creations. Wasn't creations. All right, cool. I like I like creation. That was that pretty legit. Cool. All right. So, look, you're you're answering most of my question. I only got a couple more for you. So, you kind of answered I mean, you pretty much answered already about what the company's path to profitability is while still focused on growth. No, the only people say, "What do you need to do? What do you need to do?" just open more stores. And the good news is like, you know, we've, you know, we've Q2 was a record for us. We opened 12th and I've openly publicly said it like Q4 we're trying to challenge that record. So like, you know, there was a previous times where we opened one in a quarter. Well, Q2, like you know, we're delivering like multiple hundreds of% of organic growth. So Q4 is going to be a challenge for us to challenging our previous record of number of openings in Q4. Q1, we've already got a ton of leases that we've announced and signed in 2026. And because our stores are usually signed 3 to 18 months in advance, we have a very predictable pipeline of for growth. So, we have predictable restaurant growth in 25 and already in 26. I think we're one of the few like predictable based on contracts and and because we're a high margin business with royalties um you know we're asset light for the most part as a business um we have predictable growth into 25 and 26. So the number one thing that makes it us tough is patience because it takes time to you know to actually build the business. So, um, nothing else to do other than be patient, keep stay focused, and open, uh, successful restaurants. And that and and for the next 18 months, we're going to open a lot of restaurants, and we're going to, I believe, deliver that profitability and numbers that uh, our shareholders have been waiting for. Absolutely. Another question that I'm sure you get asked all the time, and it's all about, you know, shareholder alignment. You know, just doing a quick search on insider ownership. Correct me if I'm wrong. It's a little over 6% something like that. I think you uh today we're totally inside ownership. When I joined was sub 2%. Uh today we're we're at 24 and a half. 24 and a2%. Yeah. Yeah. We've been buy we've been we've been buying the stock and uh ourselves and increasing our positions. And one thing I did when I joined, we were trading at about 15 cents. We priced uh we we issued uh 27 million performance warrants. And to it to earn those um we had to go hit 50 cents.75 dollar $150 and $2 by June of 26. So to get the large crosses of $150 and $2 um we by June the 26th the share price has to trade over $2. And on top of that there's about $6 million of money that insiders have to write into Treasury by June 26. So um we we we haven't taken any free stock, nothing. everything's been paid for um out of our own pockets and so we have a chance to get the insider ownership to 30 35% going into next year um once we write we'd have to write millions in the treasury from insiders so we look to increase insider ownership um and uh but to do that to have the rights to buy them we had to get to $2 and I'll tell you when we were trading at you know 15 cents and then we went to 8 cents and and I knew my my entire pay package was tied to $2 I literally felt like I was going to need a mining helmet back then. Uh I was in the mining business, uh not the restaurant business. Um because it felt like I was literally looking up at like Mount Everest, right? Like it was going to be a tough climb and it's been a grind, but business is accelerating and we're in a uh you know, very healthy financial situation. So execution for the next uh from now till June 26, you know, you can you can certainly assume that our entire team is focused on getting the $2 and having the right to buy them and then uh putting that money into Treasury. So we'll be even, you know, we'll have way more money in the bank um and it'll come from insiders. So we have very much alignment uh and our team. So, and everybody in the team in the company is tied to uh the $2 mark for for uh for full um comp package. Very good. And apologies. I guess my numbers were a little off there. Uh but so to to close us out here and again, thank you for answering all my questions here, but you know, from what you can tell us and you kind of already said you've said like four times, you know, you want to be 100 million revenues, 100 million Canadian or US. Yeah. Yeah. I mean, I wish it was 100 million US, but 100 million Canadian in our run rate in early 26 is what we plan to be. Gotcha. So, you know, in your opinion, where where would you like to see this company in even 3 to 5 years from now? You know, what and what do you think will will be some of the inflection points to get you there? Um, if I had my way, uh, we'd be, um, you know, and I think the potential of the business is a billion dollar billion dollars a year. Um, and I believe at that point in time, you produce 30 to 50 million a year in free cash flow. Um, and you're debtree. I think you can return a lot of that money to shareholders through dividends and through, uh, through share buybacks. Um, so I'd like to be known at that point in time as, you know, a billion dollar a year business. Um, with a, you know, disciplined approach to the P&L and profitable, debtree that would make me, you know, very happy and think I did pretty well for, uh, our team and our shareholders. you know, we returned uh and we're respectful. So, that would be what would I like to be known for down the road? That's that. And and if we could build it to a billion from a million, um that'd be a pretty incredible story, I think, to you know, tell the grandkids someday. 100%. Well, Sean, you answered all my questions. I really do appreciate it. Where can our audience go and find more information to follow along the Happy Belly story? Uh, a couple things. Um, a lot of people do follow myself either on LinkedIn uh, under Sha Black Sl. A lot of people follow me under on on X uh, under Extreme the word extreme SB uh, for Shan Black. Uh, my old company was called Extreme Brand. So that handle stayed with me. Um, and uh, uh, obviously on uh, online, you know, I mean under HBFG and then HBFGF for the US side. That's where you can find us. And I think as you see us move into 26, don't expect anything crazy. Just more disciplined growth quarter over quarter, year-over-year, just be known as a disciplined growth company that can compound earnings. Very good. Well, Sean, thank you so much for joining me today. Really do appreciate it. Good luck. Stay safe and uh I look forward to the next update. Thank you very much. Thank you. [Music]
Happy Belly Food Group Inc. (CSE: HBFG | OTCQB: HBFGF): Consolidator of Emerging Food Brands
Summary
Transcript
This podcast is forformational purposes only and is not provided as financial, legal, or any other advice. The information is not investment advice or an offer to buy or sell any securities or make an investment. The views expressed by guest speakers are their own, and any reference to third party products, services, or information does not constitute an endorsement thereof by SNN or its affiliates. SNN expressly disclaims all liability for any individual's use of the information presented in this podcast. My guest on the show today is Shawn Black, CEO of Happy Belly Food Group. It's publicly traded company. I got a couple symbols for you. HBFG on the CSSE and HBFGF on the OTCQB. Happy Belly is a Canadian consolidator of emerging quickserve restaurant brands with expansion plans into the US. The company started as Planting Co., a niche plant-based CPG business, but under Sea's leadership pivoted to become food agnostic, focused on scalable, cash flow positive QSR concepts. The model is straightforward. Acquire small, profitable, debt-free brands, grow corporate stores with free cash flow, and scale through uh franchising. The portfolio is intentionally diversified with no duplication. Think Rosy's Burgers as a Shake Shack equivalent, IQ Foods as Canada's Sweet Greens, and Pyro as Cava style concept. I spoke with Shawn because I really wanted to learn more about the company as well as the pivot from Planting Co. to the QSR consolidation, their M&A model and brand strategy, growth targets, and the $100 million Canadian milestone as Sean states, as well as risk align risks alignment and long-term vision. With that, please enjoy my conversation with Shawn Black, CEO of Happy Belly Food Group. Sean, thank you for joining me today. How you doing, man? Thank you very much for having me. Uh, doing great. You know what? It's uh sunny and nice day here in uh the GTA. Oh, there you go. Awesome. I being from the from the the lower 50, I wish I knew what GTA was. I'm sure. Yeah. Greater area. I I was going to say I should probably know this being that we're about to do this event in Toronto. I'm sure I will find out. You'll find out. And you're coming, you know, you're coming at a good time right before it gets uh you know, unenjoyable and cold. Oh, there we go. Well, hopefully it'll stay that way for the entirety of the that week at least, you know. But, you know, look, I I've known about the company for a while. I've been following some of the news and updates and, you know, I've been seeing some some of the stuff out there. So, wanted to invite you on to get a better understanding of Happy Belly and and the full picture, the full story, the I, you know, just really want to get the full story, what's going on. So, so the first question that I ask everybody on uh this series here, and I'm not going to ask you the same thing, is can you give us that one line that best describes the company? Absolutely. We are a consolidator of emerging food brands. So if you look across Canada, um that's what we do. Anything that is growth uh oriented in food, that's a space we play in specifically QSR. So typically quick serve restaurants. Very good. Lot to dig in there. But first, you know, let's look back at the company's history. When was the company originally founded and what was the original thesis for its founding? Originally, the company was founded as Plantco. So it was a uh plant-based focused food business. Um when I joined uh we you know quickly realized that um you know that's that although the market was growing in plant-based it was still pretty niche. So to be a player and become a a company at scale uh we believe that uh we need to be agnostic to the food business. So we opened it up uh not just CPG but to QSR and we opened it up to plant and non-plant type businesses. Uh today we have two um in the QSR side that are plant-based and we have eight that are not. So that's where you know our focus is and where the growth is really coming from in the company. Uh we've went from all the way from starting with plant uh to now serving some of the I believe the best burgers in the country. So yeah, that's a trajectory, right? Going from just totally plant-based to now burgers. There we go. You know, Canadian beef. So there you go. So, um, you kind of caught us up to there, but what were some of what what give us kind of the full picture of where we're currently at today? How many restaurants are within the portfolio? You know, what's some of the trajectory where you're looking at? So, let's go from there. Yeah, today we have uh two CBG brands. Uh, good news is both them are cash flow positive and uh debtree. Uh, but they're a small piece of our business today. They used to be a significant piece of the business. probably you know more than 50% of our revenue at the start was CPG and uh today if you look at it it's you know sub 15%. uh and as we're going on system sales uh it's you know sub 2% you know I mean as an overall uh the focus shifted to QSR uh which is my background started in the restaurant business when I was 14 uh opened my first one when I was 19 and uh started scaling it so to give you an idea when we when I joined the business was doing about $250,000 a quarter in revenue uh so about a million dollars a year um on a system sales basis you know we just finished last quarter, which was our 13th record quarter in a row. Um, we're just over 16 million in in system sales, and we have a clear path to 100 million a year in system sales uh with our current pipeline in the short term. Very good. We will touch on all that in a little bit later, but want to also better understand the company's business model. Obviously, there's a clear, you know, hybrid of, you know, organic growth as well as looking at various acquisitions. So love to hear more about what you would say is the main business model for hitting some of those sales or those revenue targets that you're looking at and then also maybe some of the criteria for those acquisitions too. Absolutely. So we started off uh you know not long after I say probably well about 6 months after I joined we probably announced our first uh we did some cleanup and then uh we announced our first M&A deal. Um, again, it was a a profitable business, uh, debt-free, cash flow positive, and that's sort of the space we like to play. Find something small, uh, in the food space that we can ideally, uh, we'd like to double the IBA on that asset within 24 months or less. And we did that first on a CPG brand um, called Lumberheads Popcorn. Then we did it uh with a small QSR brand called Heel Wellness and a Sable Bowl uh chain based out of Hamilton. They had two stores, you know, were a little bit profitable, but you know, it needed some work. And uh today that brand is 27 um stores open and it'll be north of 30 by the end of the year. Uh on track to be north of 100 stores open um within 24 months and north of 100 million in system sales just on that brand. So, you know, from a brand that was doing about 1.4 million when we found it, uh we will have, you know, in short order have 100xed the revenue on it. So, um you know, it took time. It wasn't an overnight uh success story by any means. Uh we've been working on that brand for just over 3 years. Um you know, so for you know, it'll be a you know, 5-year run rate to get it from, you know, from not from scratch, but from first base all the way to to home plate. Uh the good news about that brand as well is it is debt-free, cash flow positive and growing. Um so you know that's that's sort of where we first started and we really found our niche in the um uh in the QSR space. So we've accelerated on the QSR that was our first one. Uh today we have 10 QSR brands. We're about 75 restaurants open across Canada. Uh we have uh I believe 626 stores total in our pipeline. Um across Canada and uh 10 in Texas so far. Uh that's part of that pipeline. Uh we're looking at that as our first test market. Um hopefully in early 26 you'll see us start to open stores. Um but in early 26 we're looking to be 100 stores open, $100 million run rate on our system sales um debtree and just scaling our business. So let me ask you this. I mean, how are you balancing the the clear goal of moving fast? I mean, jeez, really fast. I I was joking with you offline a minute ago. Like, there's, you know, you have a new press release every freaking day of a new QSR or something. You're like, "Oh my gosh." Like, how I I barely finished the last press release. You already got four more in the next 3 days. Jeez Louise. like how how are you balancing the mo the just moving that quickly and hitting those revenue goals with also all right this fits our criteria is there just really that many opportunities right now that you're like all right we just got to move that quickly and move that quickly is that we can hit this well that's a good question and you know big part of that is um because we have 10 brands our goal was always to you know get to the point where we could open 30 to 50 restaurants a year and now if we only had one brand that would be a lot of pressure on that one brand, you know, because you'd have to deliver 30 to 50 stores out of it. And totally uh yeah, in my opinion, that would be um you know, I believe then you have to start compromising. You have to either compromise on a franchisee or compromise on real estate or anything. If you're just trying to be just in Canada, open 50 a year. That's that's impressive. So, uh, from my standpoint, uh, what we wanted to do was get to 10 and then if every brand, you know, delivers 3 to five in a year, well, then that's so much easier. So, you know, um you know, we were very lucky to work with Fairfax and and Recipe previously and if you look at them from a grow standpoint, they're really really disciplined and uh they were previous partners of mine and uh when we owned uh two other brands and their operating discipline was something that I believe pays, you know, spades for us today. It uh their dividends are great off of that. So we look to diversify our risk and diversify the growth across a multiple um uh brand portfolio which makes it easier for us to access real estate, easier for us to access franchises and still deliver on a combined basis a significant growth number across the company. Now some of that growth of the say 30 to 50 stores two of your brands might deliver that many on its own but you don't have to. And if you do deliver more across the entire portfolio, then you can probably surprise to the upside and open more stores than you originally anticipated. For sure. And when you're thinking about, you know, having, you know, and engaging with different uh potential store concepts, different QSRs, are you careful to think about like, all right, we already have Rosy's Burgers. Can't have another burgers place. Like I mean it that's I've watched guys 100%. kind of watch guys go before us and they had a lot of duplication in their portfolio and I believe that's really tough because it's like having you know twins and then deciding which one gets something like it's really hard. So what we like to do is keep the portfolio diversified um and only have have no duplication. So if we're going to have a burger brand, we're only going to have one. And if ideally what we're going to do a little bit differently than some of the other guys down the road is if we go to another burger brand ideally what we're going to do with that brand is do what basically in the United States what Cava did. Cava went and bought Zoe's Kitchen. Cava was 60 stores. I believe Zoe's about 300 and they started to convert them and then they got that lift and that arbitrage between what Cava did sales versus what a Zoies did. So, I'd love to find another underperforming burger brand and then convert them to Rosies and get the get the lift and the arbitrage on the asset. That's what we look to do. That way, we we don't have to have duplication when it comes to real estate or franchises or anything. um if you want a bull brand like you know we we built a portfolio of basically you're in the US you'll appreciate it but um whatever is really really growing and popular in the United States we went and basically got Canadian the Canadian version of it and put it in in into growth mode. So we have a our answer small tiger is our answer to Dutch Brothers. If you look at Sweet Green we have IQ Foods. If you look at uh Cava we have Pyro. If you look at Shake Shack, we have Rosie. So, really clearly identified categories that we believe have significant legs for growth in our portfolio. Absolutely. And then another question I have, you know, and this is just to clear it up. So, I apologize for those who maybe know the story much better than I do. So, I apologize, but I'm going to ask a, you know, just to clear it up. On the actual business model side, is you're acquiring the concept itself and then just franchising it out versus owning the stores themselves? What's the or is it a mix of both? a little bit of a mix of both. We're a little more like the McDonald's model where we like to reuse our free cash flow to accelerate corporate stores um and reusing the royalties and the and the money that comes in so you get accelerated growth on the franchising side. But you using a disciplined model on the cash flow to um you know we we treat every day like we if you only have $1 to spend where am I going to get the highest rate of invest return on my capital and so we identify the brands in our portfolio and we put free cash flow towards those brands accelerating corporate store growth. So we'd like to over time ideally be about 10% of our stores will be corporate um and 90% franchise. So, I mean, I know you love all your brands equally, so I I don't want you to pick pick a favorite necessarily. I'm sure you have your favorite tastewise, and then your favorite like, oh, they just the cash cow. But, I mean, for you, what's been the most successful one thus far that you've been kind of used able to use like flying the flag like look this what we're doing, our concept is working. So, it allows you to maybe go out to additional investors, raise more capital so that you can do more equity raises to go out and purchase more concepts. That's right. So, um, we're very lucky that we've got a few strategic backers, uh, on the fund and the institutional side that, uh, that have backed us since early. Um, but, uh, and every time we've raised capital, it's been above market. We've never actually done a below market financing along the way. Um, the, you know, today, the first one that we we did a deal with with two stores that's now 27 stores is Heel Wellness, our SIE Bowl chain. Um, it's going to quickly be at 60 stores and, you know, I believe we have about 190 of them sold. So it'll quickly be a, you know, 100 store brand, probably $100 million in revenue. Uh, you know, we have, you know, in short order. So that's probably been the first one out of the gates. And I kind of say like it's the first one to leave the nest of our in our portfolio of emerging brands. Heel was first. Um, I'd say a second one out of the gates that's growing and uh has delivered an incredible uh business model uh unique economic model is Rosy's on the burger side. Uh it's a when we did the deal with them there was two stores there's now eight um it'll be in 2026 somewhere between probably 20 and 30 stores open. So that brand is likely to triple in size over the next 12 to 18 months which is you know you know impressive growth across the board for us. So that's uh that's in motion. Uh the next one that is you know we did a deal when it was four stores. Um there's now six and number seven opening shortly and that's IQ foods which is our uh our answer to uh Sweet Greens in the United States. The difference when you know from us and Sweet Greens is um our asset is cash flow positive and debtree um and accelerating the free cash flow where you know I think Sweet Greens has been you know you know they've been 25 30 million a quarter of losses off their off their model. We so we we typically run a a much more disciplined profitable model um you know with our with our book. That's probably my fault. I I stopped eating sweet greens a while ago. That's I you know what I still like it. I go there. It's fine. It works. You know like it I was in Dallas recently and I went and tried it. You mean I went to one of the stores and um you know I was shocked at how big it was and how few people were in it. But you know what I mean cuz then I've been to one in Florida. The staff are nice. People are nice. But I didn't find them as packed as I would have thought. For sure. No. And uh I I kid I've had sweet greens. Not that. Anyways, um so you know, real quick, want to hit on the CPG side because it seems clear. I mean, look, I joke again about the the pressure. Every single one's been on the QSR side, QSRS, QSR side. Not as much on the CPG side. So, can you cover a little bit more about what's going on with the name of the brand is Holy Crap. I'm not trying to make a judgment of Holy crap, but one of the brands is Holy Crap as well as the brand Lumberheads. Yeah, that was the Holy Crap was one of the two OG assets that were uh legacy assets that were in the portfolio. And uh we kept it because we turned it cash flow positive u and debtfree. So, you know, it's still a contributor to our business. Um that that whole business was on, you know, Dragon's Den and you know, our version of Shark Tank and Canada and stuff like that a while ago. um you know it was it's a cerealbased business that based on supersedes and it's meant for the microbiome. So it's meant for healthy stomach, healthy gut uh gut health and that's where the holy crap comes from the name. But uh it's one of those assets in our portfolio that um we're okay buying more profitable CPG businesses and we're also you know somebody came along and wanted to really buy one of our brands cuz it's profitable as cash positive we'd be okay selling that asset. So, you know, we're we're not um we're agnostic to the business as well. We love them all, but you know what I mean? Um any one of our individual assets could be purchased or sold anywhere along the way, but CPG is a small portion of our business, but I like it. I I I I actually eat the cereal often. Uh and I'm a customer of our popcorn brand, so uh you know what, you know, if you that's we I did the belly check on both of them and I like them both. Very good. That's what counts the most, you know. Right. Um, real quick on the barriers to entry, you know, this is a again, this is seems like a fairly obvious question. Like, you know, there there's clear capital constraints that not everybody can just jump in and do this, but you know, there are some folks with deeper pockets. I'm sure it's no uh I guess you say mystery that uh, you know, that some of these are mom and pop stores that, you know, might be looking for either an exit or new whatever, new path, so to speak, you know. So, I mean, what's stopping somebody who has also deeper pockets and good institutional backing that also has a, you know, a potential rockstar CEO moving as fast as possible, competing with, you know, happy belly to go out and get some of these other brands to to build up a portfolio like this? Uh, what's stopping them? If they have the people, capital, like the means to do it, nothing stopping them. uh you know really there's nothing just like someone else can open up another restaurant brand which one you know shareholders like and which trust and and believe in and get building that trust I believe is one of the hardest things in the micro cap world you know to build trust with shareholders um I think you know I think it should be earned uh first off I don't think it should be just given um I think it should be uh the show me world you know more people should look at the financials and look at the business and look at the track record and and they should look at as well like does the actions of the company match the words right cuz I think there's so often that does not happen so the good thing is if somebody else wants to try it um we are 3 years of record growth 13 record quarters in a row we have the money we've already done it so um I first off someone else wanted to try I'd be the first one to tell them please do like why not try it you know what I mean like I'm not the only person that's ever going to do this in the world um right now though we're one of the few liquid companies companies in the country uh that are consolidating. So we have access to to sellers, we have access to investors um and I believe the open ice uh you know down there you know a little bit hockey but you know Wayne Gretzky's line of go where the puck's going not where it was you know and you know if you can start to get that we I believe where the growth is today in the emerging brand sector in the country I don't believe there's another food company doing what we're doing. So I believe you know there's a and there's an incredible amount of open ice. I think they when I read a while ago there was over 400 independently owned restaurant chains in Canada. So when you talk about consolidating like we can do this for a long time and compound our compound our growth. Absolutely. So has there has there been a a restaurant concept that you were bidding on and just like man we really wanted that one and either lost out on it or they just you know maybe got cold feet something like that. I mean, you can name the name if you want to, but I was just curious if you, you know, cuz again, you've been moving very quickly and you can tell these guys, right? Look, like here we're signing new, you know, franchises left and right, like if you want to build the brand, like here we go. So, I'm just curious. 100%. Well, you know, two things that, you know, even with a seller, you got to build some trust, right? Like, you know, like cuz you're you're taking a lot of them, you're taking their baby or you're partnering and becoming a, you know, a JV partner. But, um, yeah, so you got to build some trust. That takes time. So, a lot of times you invest a lot of time in a deal and it just it just never materializes. You don't get them across the finish line. Probably, you know, one of every, I don't know, 10 or 20 you look at could you ever get a deal done. Um, and usually it doesn't work because of the math. You know, I mean, usually that you can, you know, when money's involved, people will usually figure a way to get along. But, um, sometimes just the deals and, you know, we've been stuck on being really disciplined. Like, I've probably been a pain in the ass to a lot of people over the years because I won't budge. uh on certain things and because I believe it's right and you know the problem you know like there's you know one of the guys that went in front of us um and was pretty big and you know they built their share price from one point from 10 cents a share to I think 7450 on the TSX which was the company I used to work at I was the chief development officer at a public company called MTY um they've been one of the most inquisitive consolidator of QSR brands you know I think in the history of North America you know they and they've done a great job but um up till a little period of time that I think up until 2019 that stock was you know one of the best performers in the history of the TSX. So um if you look at us you look at what made them great early on it was their discipline and their M&A. So take a page from their book um stay really disciplined up till 2019 and it paid incredible dividends for their shareholders. So um yeah we've had some deals uh that you know you just get to the finish line and usually one of the two things happens. um emotions get involved, you know, meaning whether it's the the buyer or the seller and one wants more or one wants to pay less or you know or and then I mean the other thing it's either emotions or it's numbers. Usually you get to the point when you do your due diligence and something doesn't check out and then that you know that requires a repricing either up or down and that's usually when emotions come in. So, um, probably had 10 deals that were really close over the, uh, last 24 months that we didn't, for one reason or another, just didn't get done. Uh, a couple of them I looked back and said, "Thank God." You know what I mean? Like, thank God. Sure. Yeah. Like, you know, doesn't matter whether it's tariffs come in or, you know, supply chain on an issue or, you know, the brand just shifted and you're thinking, "Thank goodness I didn't buy." There's probably one that got away early on and I probably look back and say, "Yeah, the founder would have been a bit of a pain in the ass, but it would have been a great business to own part of because I watched it now take off." And I So, we identified it early. We knew it was right, but for one reason or another just couldn't get it, you know, couldn't put the puck in the net and get the deal done across the finish line and across the goal line. But, uh, so, yeah, probably in my career, I could think of one that I'm I'm I'm annoyed that I didn't get done. Uh but of that there's probably 10 that I've walked away on for one reason or another. Um cuz you know little line like you can't do you know a good business deal with bad people. Sometimes you just for one reason you can't get done and it wasn't the right fit. I'm probably luckier that I you know locked away than you know the money I would have made off the one that uh I'm annoyed at myself for not getting done. I'll have to ask you over a beer which one that was for sure. Yeah. Sometimes it happens where the sacrif the like the price of admission was just too much. like I would have had to blow up my cap table. I would have had to, you know, take on dad or I would have had to do something that would made me uncomfortable. Um, and when our team looked at it, we just said, "No, we can't do that." You know what I mean? And and so that operating discipline like, "Hey, the odd time it might cost you, but I guarantee you over time it saves us a lot." You know, this sits on another question I wanted to ask you. You know, how do you tend to structure these deals? Is all cash cash in stock? You know, I'd love to hear that. We've done both actually. We've done cash deals, we've done stock deals. Um, a lot of times I prefer to do a deal where if you borrow a page from Fairfax, um, you you buy for us typically we we buy 50%. Uh, with a uh a closed end transaction on the remaining 50. So we have the exclusive rights in 3 4 5 years to buy the remainder um, and become the sole owner of the business. So we I love doing deals like that. That's been a real uh, sweet spot for us. allows us to get in uh become partners, get a peak under the hood, operate the business, and what I find is that takes a lot of execution risk away from our M&A because we're already engaged in the business. We we help with the accounting, we know the business inside and out. So when you and you can prepare for it. A lot of times when you buy a business, you're going in like you know the, you know, history of the business and that, but you've never ran it, right? So, you know, I mean, there's there's still some executional risk in there. you're not going in blind, but you're you're not going in like a partner that's been in the business for 3, four, 5 years. So, I believe it drisks significantly for us and our shareholders um to be a partner first and then buy the rest later. Absolutely. So going to ask a little devil's advocate question here and it's I wanted to address you know you mentioned it was 13 consecutive quarters of revenue growth you know just and you can correct my numbers if I'm seeing them here correctly but for 2024 company did about just over 9 million Canadian right y all right so and then on free cash was just over 900,000 Canadian or or loss of 900,000 Canadian sorry y so what would you say what's the what's the break even number you know what are we doing to continue to work towards. Yeah, I think last quarter, let's say, you know, you burnt $200,000 because you're still investing in some stuff and you're going forward and we did about 16 million um in system sales. Um our goal in the short term is to get us to $100 million uh in system sales um and you know, be cash flow positive. So, you know, whether that's one quarter away, two quarters away, you know, I mean, it's it's it's in the near term. Uh, and we believe that we will turn that top line, we'll have that kind of trickle down effect to put us to the cash flow positive side. And, uh, and then still have another, you know, 500 plus stores in the pipeline that, you know, if you average out at a million dollars a store or an average, um, you know, you got another 500 million in system sales coming. So, because there's, you know, if we want to do them all franchise, there's no capex required. We're lucky we still have several million dollars in the bank. Um, we we only have $150,000 today of secured debt across the company. Um, so we're in a very, you know, healthy situation. Um, and, uh, we have access to capital. So, I like it, you know, because it's if you look where it started, I think when I before I started, there was huge, you know, back then promo money being spent and there was, you know, losses were probably, I don't know, I'm going to say half a million or a million dollars a quarter. You know, I mean, it was it was massive. And here we are today, you know, about to flip cash flow positive and, you know, be a long-term compounder. Absolutely. So, I my next question is then also on the franchisee side. Sorry, I'm bouncing around. I got a million different I'm bouncing away. Um, so on the franchisee side, I mean, how what's that pipeline look like for each of the brands? How how are you engaging with potential? Is it mostly incoming or are you doing any kind of outbound seeing folks the interest? You know, love to know. Yeah, you know what? A lot of our franchises so far have been uh from our previous brands um and come come and join us again on the next journey because they made money and did well early. Uh thankfully we have a history in this business and a track record of opening successful brands. So attracting quality or qualified franchises is has not been an issue for us. Um and they don't all buy them because I'm cuter and that's that's not the case. They buy them because we have what I call the best unity economic model in the business and we we provide a better return on invested capital than some of the other brands do. So that's what's attracting the quality. Uh that's how you know today we have I think this year this year our goal was to open 30 to 50 restaurants. We'll deliver on that. Next year our goal is to deliver 30 to 50 restaurants. Very confident we could deliver on that. And I think a majority of those restaurants that will open will come from existing franchises opening second stores, third stores. One of our franchises is on store number I think 13. Uh but they've purchased 30. So they've got another 17 to open just themselves. So that's the, you know, we're very fortunate that our ex, one of our franchises has opened three, uh, he's bought 16. So, you know, there's a lot that, you know, are still in our pipeline to be opened by our existing group. Um, so we don't, you know, we don't do franchise shows today. Uh, we're not out there spending a bunch of money on uh, social media to generate uh, like online advertising. It's not what we're doing. We're doing it through the belly and through uh I should say social media is and and through the belly versus that, but we're not doing like online advertising. Absolutely. So, here's a question that I love asking every CEO on here. You know, you public company, you know, you're putting out your releases, Q's, K, all that. You've done a little bit of the dog and pony show. We probably met investors, institutions, whatnot. What would you say for those that, you know, have a an understanding of the business? They know, they get it. they understand but they still there's like but I'm still confused or about this one or two things you know what are some of those frequently asked questions that maybe you still get from investors that maybe we haven't even covered yet you know I think a lot of them say like uh one one of the biggest comparables out there in the market that people use is uh you know some of the big popular brands that have grown in the US to see valuation stuff like that but in Canada typically people compare us to MTY uh my former company uh where I worked um is you know because you know like what are the chances you can be that next one or you know I mean the next success story like that or why would I invest in you over them and you know like that's a that's a direct you know question that I often get and um for us it's you know investing in the management uh investing in uh the brands right then the people so it's a it's a people business the three Ps people product and process so um if you like our people and like our product you know that's the one that's out there but typically the biggest comparables out there are you know what people ask you say you know what's your you know how do you compare to them what's your valuation um and what's what's the growth that look like and if we maintain that we are the leading consolidator and leading growth company in QSR in Canada over the next 2 three years I think you know considering to to my point earlier of 13 record quarters in a row I think our franchise stores are going to do well our corporate stores are going to do well our staff will do well and if those things get taken care of then usually the in my opinion the share price and the shareholders do well also absolutely Absolutely. Another favorite question I like to ask on here, and it's another devil's advocatey type question, and you probably get this all the time, but in your opinion, what would you say are some of the company's downside risks? Uh, I got asked this one the other day. Uh, other I was going to say, other than execution risk, of course, that number one. Yeah. Um, you know, key management, I don't know, someone getting hit by a bus. Um, you know, I did I Yeah, that's that's a real risk. I mean uh in in any micro cap or any small company um you know they're saying you're only as good as your management uh and you know they're even more dependent on management uh as a small company than you know probably a bigger one is you know got a few people that could do it um and you know a big a big army of of team um so I think people is probably the biggest risk uh to that you know I recently we we lost our CFO uh he had passed away um you know a real uh you know, battle with uh with cancer and um I'm so sorry for your loss. Yeah. No, but it's the first time that some of this has ever happened uh to me uh personally and it was uh it was brutal. Uh he's one of the nicest people I've ever met. Um I never met a CFO first off that smiles every day. Like he smiled more than anybody I know, which is strange for people that in the accounting world. I don't always see that. Um so that's a you know that's through all that you learn that's probably the biggest risk is people. So what if somebody you know I if you know a successful CEO leaves uh if a successful you know team member um you know passes away those are risks you know I mean and you know today we announced a a new VP of finance that that joined us uh you know Joshy came from a TSX company he's got experience and so you know we we uh we have continued to add to the bench uh so that as we grow I believe the the people portion of it becomes the d-risk more for shareholders but I still believe that's the number one risk in in a company today, we have lots of money in the bank. We're growing. We're okay. Um, when you talk about execution, the biggest risk I could have taken in in on the business side would have been do a massive M&A that brought in either ridiculous dilution or um wasn't profitable when it came in and it came with debt, right? So, if you ever want to blow up a micro cap, um I would say take on a lot of debt and put, you know, uh put your put the knife right to your throat, you know what I mean? Like where you're you can't trade water fast enough because the bricks on your feet are pulling you down. That's and that I think a lot of companies they they try and just buy sales, they don't buy profit, right? And and I think there's a there's a real risk in any business of running out of money. 100%. The two other risks that I was also thinking about and I'd love to hear your your you know how you address them is having to do with consumer preference shifts right going towards healthier eating even maybe just stay at home home cooking that kind of stuff as well as economic conditions you know I mean I'm in LA I could tell you unfortunately a whole bunch of mom and pops that shut down just cuz it's so expensive to hire you know the people that you need to actually industry so I looked at an M&A deal previously in California backed by a very wealthy family um and was on the plant side. So, twofold, I felt that was under pressure, the plant side. And um I also felt California with the recent labor changes and stuff that um were unfavorable. So, that's why I passed on it. They had restaurants in California and Nevada. Uh the deal was brought to me from a a friendly uh friendly source. Uh I just couldn't do it. Even though they were willing to back it, do everything, support us, like they're willing to do whatever I want to to get the deal done. Um I just couldn't do it. the risks on that on that M&A deal were were uh were not favorable. So, we passed. But, you know, we're very fortunate that, you know, we have a diversified portfolio of brands. So, we have the healthy side to like IQ Foods, Heel Wellness, uh we have a plant-based brand called Lettuce Love to the Burger side and to a breakfast brand that you know I mean that is more on the indulgent side and they got sweet treats and stuff like that called Yolks out of Vancouver. So, we have both sides of the spectrum. So that we got a diversified portfolio in the mix. So healthy, not healthy, price points are different. Um also to the point of uh our our geography. So we have stores now that are going to be open from Vancouver Island all the way out to PEI. So literally coast to coast. So our if we were one single brand and concentrated on the market like that one brand that was almost all of its restaurants were in LA, that's a lot of risk in in one market, right? You know, it's a it's a tough one if it it can be boom or bust, right? You know, there was there was markets previously in Alberta, um brands that were exposed to the the big run on oil. Well, they when during boom time, it was amazing. But then when oil went down, you know, sub $50 a barrel, um those stores got destroyed. You know, it was uh the you know, it was it was awful. So, uh we're we're we're fortunate that diversified on real estate and diversified on on uh cuisine offerings. So, we're we're we're a little bit lucky on that. Got me thinking which one it is now that it's in LA. I'm thinking, all right, plant-based. Maybe it's Should I say what I think it is? Make a guess. No. Do you want me to? I won't. I think I was thinking maybe it's creation. Maybe. Nah, maybe. No, it wasn't creations. Wasn't creations. All right, cool. I like I like creation. That was that pretty legit. Cool. All right. So, look, you're you're answering most of my question. I only got a couple more for you. So, you kind of answered I mean, you pretty much answered already about what the company's path to profitability is while still focused on growth. No, the only people say, "What do you need to do? What do you need to do?" just open more stores. And the good news is like, you know, we've, you know, we've Q2 was a record for us. We opened 12th and I've openly publicly said it like Q4 we're trying to challenge that record. So like, you know, there was a previous times where we opened one in a quarter. Well, Q2, like you know, we're delivering like multiple hundreds of% of organic growth. So Q4 is going to be a challenge for us to challenging our previous record of number of openings in Q4. Q1, we've already got a ton of leases that we've announced and signed in 2026. And because our stores are usually signed 3 to 18 months in advance, we have a very predictable pipeline of for growth. So, we have predictable restaurant growth in 25 and already in 26. I think we're one of the few like predictable based on contracts and and because we're a high margin business with royalties um you know we're asset light for the most part as a business um we have predictable growth into 25 and 26. So the number one thing that makes it us tough is patience because it takes time to you know to actually build the business. So, um, nothing else to do other than be patient, keep stay focused, and open, uh, successful restaurants. And that and and for the next 18 months, we're going to open a lot of restaurants, and we're going to, I believe, deliver that profitability and numbers that uh, our shareholders have been waiting for. Absolutely. Another question that I'm sure you get asked all the time, and it's all about, you know, shareholder alignment. You know, just doing a quick search on insider ownership. Correct me if I'm wrong. It's a little over 6% something like that. I think you uh today we're totally inside ownership. When I joined was sub 2%. Uh today we're we're at 24 and a half. 24 and a2%. Yeah. Yeah. We've been buy we've been we've been buying the stock and uh ourselves and increasing our positions. And one thing I did when I joined, we were trading at about 15 cents. We priced uh we we issued uh 27 million performance warrants. And to it to earn those um we had to go hit 50 cents.75 dollar $150 and $2 by June of 26. So to get the large crosses of $150 and $2 um we by June the 26th the share price has to trade over $2. And on top of that there's about $6 million of money that insiders have to write into Treasury by June 26. So um we we we haven't taken any free stock, nothing. everything's been paid for um out of our own pockets and so we have a chance to get the insider ownership to 30 35% going into next year um once we write we'd have to write millions in the treasury from insiders so we look to increase insider ownership um and uh but to do that to have the rights to buy them we had to get to $2 and I'll tell you when we were trading at you know 15 cents and then we went to 8 cents and and I knew my my entire pay package was tied to $2 I literally felt like I was going to need a mining helmet back then. Uh I was in the mining business, uh not the restaurant business. Um because it felt like I was literally looking up at like Mount Everest, right? Like it was going to be a tough climb and it's been a grind, but business is accelerating and we're in a uh you know, very healthy financial situation. So execution for the next uh from now till June 26, you know, you can you can certainly assume that our entire team is focused on getting the $2 and having the right to buy them and then uh putting that money into Treasury. So we'll be even, you know, we'll have way more money in the bank um and it'll come from insiders. So we have very much alignment uh and our team. So, and everybody in the team in the company is tied to uh the $2 mark for for uh for full um comp package. Very good. And apologies. I guess my numbers were a little off there. Uh but so to to close us out here and again, thank you for answering all my questions here, but you know, from what you can tell us and you kind of already said you've said like four times, you know, you want to be 100 million revenues, 100 million Canadian or US. Yeah. Yeah. I mean, I wish it was 100 million US, but 100 million Canadian in our run rate in early 26 is what we plan to be. Gotcha. So, you know, in your opinion, where where would you like to see this company in even 3 to 5 years from now? You know, what and what do you think will will be some of the inflection points to get you there? Um, if I had my way, uh, we'd be, um, you know, and I think the potential of the business is a billion dollar billion dollars a year. Um, and I believe at that point in time, you produce 30 to 50 million a year in free cash flow. Um, and you're debtree. I think you can return a lot of that money to shareholders through dividends and through, uh, through share buybacks. Um, so I'd like to be known at that point in time as, you know, a billion dollar a year business. Um, with a, you know, disciplined approach to the P&L and profitable, debtree that would make me, you know, very happy and think I did pretty well for, uh, our team and our shareholders. you know, we returned uh and we're respectful. So, that would be what would I like to be known for down the road? That's that. And and if we could build it to a billion from a million, um that'd be a pretty incredible story, I think, to you know, tell the grandkids someday. 100%. Well, Sean, you answered all my questions. I really do appreciate it. Where can our audience go and find more information to follow along the Happy Belly story? Uh, a couple things. Um, a lot of people do follow myself either on LinkedIn uh, under Sha Black Sl. A lot of people follow me under on on X uh, under Extreme the word extreme SB uh, for Shan Black. Uh, my old company was called Extreme Brand. So that handle stayed with me. Um, and uh, uh, obviously on uh, online, you know, I mean under HBFG and then HBFGF for the US side. That's where you can find us. And I think as you see us move into 26, don't expect anything crazy. Just more disciplined growth quarter over quarter, year-over-year, just be known as a disciplined growth company that can compound earnings. Very good. Well, Sean, thank you so much for joining me today. Really do appreciate it. Good luck. Stay safe and uh I look forward to the next update. Thank you very much. Thank you. [Music]