Nick Mazing, Ampera Capital: Do you see the gold in the Golden Arches?
Editor’s note: Below is a brief intro about the fund, a portion about ARCO and then a link to the full article.
Ampera Capital is an emerging NY-based Long/Short manager that focuses on consumer equities. The founder is former consumer banker at Lehman and operator at Aramark. Ampera has established a long position in Arcos Dorados Holding Inc (NYSE:ARCO). ARCO is the master franchisee for McDonald’s Corporation (NYSE:MCD) in Latin America. Some thoughts below.
Unit-based investment model primer
Q: What is a “unit-based” model?
A: It is a business where the primary value generation occurs in standardized, replicable units. Examples:
- Retailers
- Restaurants
- “Stretch examples”: revenue-generating managing directors at boutique investment banks (ieGHL), cosmetic sales reps (ieAVP), independent distributors (ieHLF though questions persist about this specific co.)
Q: Why do we care about units?
A: Units provide relatively predictable performance and scale
- An idealized unit-based business model follows
- 100-unit business grows units at 5% and same-store sales at 3%
- Modest store margin improvement of 0.5%/yr and SG&A growth with units
- In 10 years, sales are up 97%, EBIT is up 311% (remember this)
Arcos Dorados Information: Historical Narrative
Arcos Dorados Holding Inc (NYSE:ARCO) was formed in 2007 when Woods Staton, the Argentina partner of McDonald’s Corporation (NYSE:MCD) for 20 years, became the master franchisee of McDonalds for most of LatAmand the Caribbean. As a Master Franchisee, Arcos Dorados both operates AND sub-franchises locations (mix has been steady, as of 12/31/12, 1,538 operated and 524 sub-franchised). CEO Woods Statonis a multi-generational LatAmbusinessman whose family owned Panamerican Beverages, a Coca-Cola bottler, acquired by Coca-Cola FEMSA in 2003 for $3.6 bnEV.
CEO Woods Statonretains voting control and substantial economic interest in the company (~40%). Q1 personal purchases of Arcos Dorados Holding Inc (NYSE:ARCO). COO and CFO have been with the company for years. Arcos Dorados Holding Inc (NYSE:ARCO) went public in April 2011 with bulge bracket underwriters in New York. The timing could not have been better: almost every Lat Am market peaked in April 2011, as seen in ILF, the iShares S&P Latin America 40 Index (ETF) (NYSEARCA:ILF).
Arcos Dorados: Do You See The Gold In The Golden Arches? full article via Harvest
