MTY Acquires Country Style: A Strategic Acquisition That Strengthens the Quebec Restaurant Empire

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In April 2009, Montreal-based MTY Group announced the acquisition of Country Style, an Ontario-based chain specializing in donuts, coffee, and sandwiches. The $16.5 million transaction perfectly illustrates the Quebec-based group’s growth strategy: building a portfolio of brands, focusing on franchising, and consolidating its presence in the Canadian fast-food sector.

An acquisition that opens new doors for MTY

The MTY Group continues its expansion and takes a new step forward in its diversification strategy. In April 2009, the Montreal-based company announced an agreement to acquire Country Style Food Services Holdings, owner of the Country Style chain, which is well-established in Ontario’s coffee and baked goods market.

The transaction, carried out through an MTY subsidiary, was completed in early May 2009 for an all-cash consideration of $16.5 million.

At the time, Country Style operated a network of approximately 485 locations and generated annual sales across its network exceeding $94 million. Its portfolio included traditional restaurants, counters located in various retail establishments, and BunsMaster bakeries.

For MTY, this acquisition represents much more than just an addition to its brand portfolio. It allows the company to establish a foothold in a particularly attractive segment: coffee, donuts, baked goods, and sandwiches.

Country Style: A Well-Established Brand in Ontario

Founded in the early 1960s, Country Style has developed a significant presence in Ontario over the decades. The brand has established itself notably through its affordable selection of coffee, donuts, pastries, and quick meals.

At the time of the acquisition, its network included:

114 traditional Country Style restaurants;
360 non-traditional locations and counters;
16 BunsMaster locations.

The vast majority of these locations are operated as franchises.

This structure represents a significant advantage for MTY. Unlike a chain that relies primarily on restaurants owned and operated directly by the parent company, Country Style already has an extensive network of franchisees and an established commercial infrastructure.

MTY thus acquires a brand, a distribution network, relationships with franchisees, and an already established commercial presence in a strategic market.

MTY’s Strategy: Expanding Through Multiple Brands Rather Than Relying on a Single Brand

The value of this transaction becomes particularly clear when examining MTY’s business model.

For several years, the Montreal-based group has been developing a strategy centered on acquiring and operating various restaurant brands. Rather than devoting all its resources to growing a single brand, MTY is building a diversified portfolio of food concepts.

This approach allows it to cover several consumer segments: Asian cuisine, Mediterranean cuisine, fast food, sandwiches, desserts, coffee shops, and other specialty concepts.

The addition of Country Style thus complements an already diverse offering.

It also allows MTY to take advantage of potential synergies in several areas:

Procurement: consolidating certain purchases to improve bargaining power with suppliers.
Administration: centralizing certain functions and reducing operating costs.
Franchising: leveraging its experience in managing and developing franchise networks.
Business Development: Capitalizing on growth opportunities in office towers, shopping centers, and non-traditional locations.

In other words, MTY isn’t simply looking to buy restaurants. The company seeks to acquire business platforms that it can integrate into a broader management structure.

A relatively modest financial transaction, but significant strategic potential

The purchase price of $16.5 million may seem relatively modest given the scale of the acquired network.

However, it is important to distinguish between the sales generated by the entire network and the revenue that flows directly to the parent company.

In a franchise model, restaurant sales are primarily generated by franchisees. The franchisor, on the other hand, derives its revenue from royalties, franchise fees, and—depending on the agreements—certain supply-related activities.

The approximately $94 million in annual sales reported for Country Style therefore does not represent $94 million in consolidated revenue directly received by MTY.

This distinction is essential to understanding the financial rationale behind the acquisition.

The real potential lies in MTY’s ability to improve the network’s profitability, support franchisees, optimize expenses, and further develop the brand.

In its closing announcement, MTY also states that the acquisition is expected to be accretive to earnings per share on a pro forma basis, even before taking anticipated synergies into account.

This is an interesting sign: the group is banking not only on revenue growth but also on a potential improvement in its financial performance.

The coffee market: a competitive sector with promising prospects

In 2009, the Canadian coffee and fast-food market was already highly competitive.

Tim Hortons largely dominated the national landscape, while several regional and independent chains sought to retain their customer base through proximity, affordable prices, and consumer loyalty.

For MTY, the acquisition of Country Style represents an opportunity to gain a stronger foothold in a segment where purchase frequency is a significant competitive advantage.

Coffee, donuts, and sandwiches cater to daily consumption habits. Unlike certain restaurant concepts more closely associated with special occasions, these products can generate repeat and regular visits.

The Country Style network also offers flexibility through its non-traditional locations, which allow the brand to reach consumers in high-traffic areas and commercial spaces.

This diversity of formats is an asset for the brand’s growth, particularly in a context where real estate costs and the investments required to open restaurants can pose significant obstacles.

The Risks Behind Growth Through Acquisitions

The acquisition strategy, however, presents challenges.

Integrating multiple brands requires rigorous management. Each brand has its own identity, customer base, franchisees, and operational characteristics.

Excessive centralization can lead to a loss of connection with franchisees and weaken the distinctiveness of the various brands.

In the case of Country Style, MTY will need to preserve brand recognition and maintain the trust of its franchisee network while implementing its own management methods.

Competition also poses a major challenge. In the coffee and baked goods sector, consumer loyalty often rests on well-established habits. A chain cannot simply rely on its distribution network to ensure its growth.

It must also offer a consistent experience, quality products, and a sufficiently distinctive positioning.

The challenge for MTY will therefore be to strike the right balance between economies of scale and the commercial autonomy of its brands.

An Important Milestone in the Growth of the MTY Group

With this acquisition, MTY has reached a new milestone in its development.

Upon closing the transaction, the group reports having more than 1,500 locations and approximately 25 brands, with annualized sales across all its networks exceeding $435 million.

Country Style thus becomes a key component of its portfolio and strengthens its presence in the Ontario market.

In hindsight, this transaction illustrates a fundamental characteristic of MTY’s growth model: the company prioritizes brand diversification and the expansion of its franchise networks to build a larger-scale organization.

Our Analysis: The Value of a Portfolio Rather Than That of a Single Brand

The acquisition of Country Style is noteworthy because it reveals an entrepreneurial approach that goes beyond the simple purchase of a restaurant chain.

MTY relies on the complementary nature of its brands and its ability to create value through a shared infrastructure. Its model is based on a relatively simple idea: acquire brands that already have a customer base and a network, then give them access to resources and expertise that can accelerate their growth.

This strategy has obvious advantages. It allows risks to be spread across multiple concepts, capitalizes on different consumer habits, and generates economies of scale.

But it also involves a fundamental challenge: knowing how to manage diversity without standardizing the brands.

This is precisely where the challenge for multi-brand groups lies. A coffee shop isn’t necessarily managed the same way as an Asian restaurant or a family-style restaurant chain. The customer bases, profit margins, operations, and success factors differ.

MTY’s success therefore depends as much on its ability to acquire companies as on its expertise in integration and management.

Ultimately, the acquisition of Country Style marks a significant step in MTY’s transformation into a major player in Canada’s fast-food industry. This transaction demonstrates that sustainable growth can also be achieved by intelligently combining brands, networks, and expertise.

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