MIDAS SHARE TIPS: Jam today... bakery firm Cake Box is a treat for investors with shares likely to rise
In 2008, Sukh Chamdal was a chef working in the East End of London. Members of his family didn’t eat eggs, as there are restrictions in Hindu, Buddhist and Sikh dietary laws.
That meant no cakes for his four children’s birthdays, for Mother’s Day or even just for tea at the weekend. Chamdal decided enough was enough.
He received a £30,000 Government grant, teamed up with South Bank University and tasked them with developing an egg-free cake recipe. The students came up trumps, a shop in the East End fell vacant shortly afterwards and Chamdal opened for business.
Chef Sukh Chamdal (seen left) partnered with family friend and qualified accountant Pardip Dass and set up Cake Box, a franchise business focused exclusively on egg-free cakes
The concept proved extremely popular and within a year, Chamdal had partnered with family friend and qualified accountant Pardip Dass and set up Cake Box, a franchise business focused exclusively on egg-free cakes.
Today, Cake Box has 91 franchised stores, dotted round the country from Glasgow to Southampton. The company floated on Aim last week, the shares are 137½p and are likely to rise like airy sponges as the business grows and develops.
From the start, Chamdal focused on making his cakes as tasty as traditional recipes so they would appeal to customers with or without dietary restrictions. He and Dass also realised there was a key gap in the market – not just for egg-free cakes but for instant, personalised celebration cakes.
They homed in on that gap, with fresh cream cakes that can be personalised for particular celebrations within a few minutes. Today, this type of cake accounts for 99 per cent of group sales – from birthdays to GCSE results to unexpected World Cup scores.
Celebrating: Sukh Chamdal points to rising sales at his 91 shops
The strategy works. Cake Box sells more than 22,000 cakes every week, at prices ranging from £18.99 to wedding extravaganzas costing £250 or more. Around 90 per cent of customers have no dietary restrictions – they simply like the cakes and the instant personalisation service.
The company does not actively advertise for new franchisees but receives around 75 applications a month, most of which are turned down, as Chamdal and Dass are looking for keen, determined store-keepers, who will drive sales and deliver top customer service.
Selected franchisees pay an upfront fee, in return for which they receive a fitted-out store, training and ongoing support. They are also supplied with weekly batches of sponge cakes, fresh cream and other essentials, such as jam and chocolate.
The business is growing fast, with sales soaring from £8.7 million in 2017 to £12.8 million in the year to March 2018, while pre-tax profits jumped 73 per cent to £3.34 million.
Growth has come partially from new store openings and partially from increased sales per store. The company intends to pursue an aggressive expansion strategy, hoping to hit 250 stores over the next two to three years.
The range is expanding too, with biscuits and soft cookies coming on stream and an all-natural red velvet cake launching this month.
Chamdal and Dass made a cool £16.5 million from floating the business, but they still own 50.1 per cent of the shares so they are incentivised to perform – and there will be a progressive dividend policy. Franchisees have also been awarded shares to align their interests with investors.
Midas verdict: Who can resist fresh cream cake, particularly at a time of celebration? Cake Box believes the answer is almost nobody – and the group’s figures bear that out. Established in the teeth of the recession, Cake Box has nonetheless expanded fast and should continue to do so. As a young business, Cake Box is not without risk but it is a fun addition to a balanced portfolio. Buy – and enjoy.
Traded on: Aim Ticker: CBOX Contact: investors.eggfreecake.co.uk
Most watched Money videos
- Land Rover unveil newest all-electric Range Rover SUV
- Leapmotor T03 is set to become Britain's cheapest EV from 2025
- The new Volkswagen Passat - a long range PHEV that's only available as an estate
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- MailOnline asks Lexie Limitless 5 quick fire EV road trip questions
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- 2025 Aston Martin DBX707: More luxury but comes with a higher price
- Mercedes has finally unveiled its new electric G-Class
- Mini celebrates the release of brand new all-electric car Mini Aceman
- Mail Online takes a tour of Gatwick's modern EV charging station
- Mini Cooper SE: The British icon gets an all-electric makeover
- Tesla unveils new Model 3 Performance - it's the fastest ever!
- Reality TV stars charged by City watchdog over...
- Future shares jump after publisher declares £45m share...
- Turbulence at Easyjet as boss stands down sending share...
- Sage Group shares suffer 'hyperbolic' sell-off as group...
- Drivers are being stung at the pumps by fuel retailers...
- Can we really buy a house with a 1% deposit? DAVID...
- Superdrug unveils plans to open 25 new stores this year -...
- Santander's easy-access saver will drop to 4.2% next week...
- David Beckham teams up with Hugo Boss to design menswear...
- Time to wind back the tourist tax, says Watches of...
- Chevron to sell its oil and gas assets in the North Sea...
- Barclays and HSBC cut mortgage rates: Is the tide turning?
- Almost 80% of pension savers are raiding their pots early...
- Another stink at United Utilities: Water giant pays £340m...
- BT proves investors wrong as shares soar 17% in boost for...
- HSBC eyes victory in battle to keep its Asian business as...
- Stock market chief insists there is a 'strong cause for...
- MARKET REPORT: Dow Jones tops 40,000 as investors bet on...