Matthew Corrin, Freshii’s founder, chairman and CEO.Justin Poulsen; source photo Darryl Dyck/CP
On the website of Freshii Inc., amid lavish photos of avocado slices and shredded cabbage, each member of the executive team has filled out a brief bio, and answered questions about their favourite Freshii meal and workout routine. They also offer a quote to live by. A couple of executives were inspired by the words of published authors, while the company’s former chief financial officer wrote: “Bad stuff first, good stuff last.” He credited the line to Matthew Corrin, Freshii’s founder, chairman and CEO. Chief operating officer Adam Corrin, who is Matthew’s younger brother, lives by the maxim: “Talk is cheap, execution sets you apart.” That one comes from Matthew Corrin too. Matthew Corrin, incidentally, has also been an inspiration to Matthew Corrin. His quote to live by reads, “'Never peak’ ~ Matthew Corrin.”
If you're not familiar with the proverbs of Corrin, you probably at least know his company. Freshii, the healthy fast food chain, has spread like some kind of nutritious weed, sprouting up between restaurants better known for burgers and fries than kale and quinoa. The Toronto-based company now has nearly 450 stores in 16 countries, including far-flung locations such as Saudi Arabia, Colombia and Ecuador. (The majority are still in Canada.) Corrin, who opened the first Freshii in 2005 at age 23, had the foresight to recognize the appeal of quick, fresh food and the hustle to aggressively expand the concept.
He now has visions of transforming the company from a mere restaurant chain to a “health and wellness” brand, pushing his products through any venue possible (and offering Freshii-branded swag, such as sweatshirts and toques, as well). Freshii wraps and avocado toasts are already available on some Air Canada flights, and through 100 Walmart stores across the country. Motorists in the Greater Toronto Area can pick up Freshii green juices and deconstructed taco boxes at Shell Canada gas stations. To foist healthy eating upon children, the company rolled out a school lunch program, where students order in advance and local franchises deliver the meals.
Freshii rocketed to an initial public offering in January 2017 with bold plans to more than triple its store count in a few short years. The company hit a valuation of close to $400 million and boasted quarter after quarter of strong same-store sales growth, a rarity in a sluggish industry. For Corrin, it was a definite high point. One might even say it was the peak.
Freshii’s stock price has collapsed more than 80% since then and trades around $2 today. (Buyers of the IPO paid $11.50.) The decline is all the more stunning considering healthy eating is still the hottest trend in the restaurant industry, and Freshii was one of the first to market. Competition has intensified in the past decade, sure, but even that doesn’t explain the depths of Freshii’s troubles. Corrin, on a conference call in May, gave the impression of a founder who had searched his soul for an explanation and was preparing to offer himself as a sacrifice. “I recognized that the skills that allowed me to lead the brand to where we got are different from the skills required to get us where we want to be,” he said. “So in short, I fired myself.”
He paused, “I then rehired myself as a new CEO.”
And that might just be Freshii’s biggest problem. Corrin, now 38, built the brand from scratch and scaled it into a sizable player, but his performance since the IPO, and his brash style, have eroded credibility with public markets, according to analysts. Freshii has missed financial targets, laid off staff and seen its once stellar same-store sales turn negative. Corrin declined interview requests and did not respond to a detailed list of questions. (We did go for an off-the-record jog at his suggestion, though – five to 10 kilometres, he specified. All I can report is that I am sadly out of shape, while he didn’t break a sweat.) Instead, Freshii sent a statement through an outside public relations firm. “We have confidence in our team and our ability to drive business priorities,” the statement read in part. “All of us are focused solely on driving the business forward and delivering value and profitability to our shareholders and franchise partners.”
“Investors have said he's a very polarizing figure,” says John Zamparo, an analyst with CIBC World Markets. “They have asked what the future of this company is and whether he is the right person to lead it.”
Intense is usually the word people use to describe Corrin. He’s got a steely gaze and a firm commitment to eye contact. He’s a health fanatic (favourite workout: “Run. Fast.”) and once installed a pull-up rack in his office, even boasting of his upper body strength for a Globe and Mail reporter in an interview a few years ago, unprompted. He’s typically stylishly dressed and sports carefully groomed stubble, his bro-ish swagger at odds with Freshii’s bohemian marketing mantras.
“Let's be good to the earth. Let's let the earth be good to us,” reads one slogan on its website; it's hard to imagine a sentiment so earnest coming from Corrin's chiselled face. Around the office, he's been known to tap employees on the shoulder to acknowledge a recent accomplishment. If he can't do it in person, he records a short video message and sends it over email.
Another word that comes up when talking about Corrin is arrogant, which he has readily acknowledged, recounting to an interviewer that he was once called an “arrogant little prick” in his younger days. “You've got to learn when to fight hard, when to be an arrogant little prick and when to be humble,” he said.
A little arrogance is practically a requirement to open a restaurant with zero experience, as Corrin did with Freshii. He grew up in Winnipeg, where his father worked as a dentist and his mother as a nurse, and he completed a degree in media, information and techno-culture at Western University. After graduation, he and his then-girlfriend moved to New York, where she attended the Fashion Institute of Technology and Corrin worked in the public relations department for Oscar de la Renta. He’s said the idea for Freshii struck him while observing the salad counters at mom-and-pop delis in New York City. Despite the poor branding and customer service, people were lining up.
It might be hard to remember now, when you can't walk 10 feet without passing celery juice and spinach wraps, but options for quick, healthy fare were much more limited in 2005. That's the opportunity Corrin exploited. He was lucky to have supportive and generous parents, who loaned him $250,000 to help launch his concept. The first location opened in downtown Toronto under the name Lettuce Eatery, and Corrin attached a world-changing mission to slinging salad: Freshii was going to help people live better, healthier lives. And it worked. “They nailed it when they launched,” says Jeff Dover, president of fsStrategy, a foodservice and hospitality consulting firm in Toronto.
Corrin opened the first nine stores on his own in the next two years, and then moved to Chicago to start building a U.S. beachhead. He had his sights on global expansion early on – he never wanted Freshii to be pigeonholed as simply a Canadian brand – and franchised the concept. For would-be owners, Freshii had a lot of appeal. Not only was it unique, but the startup costs were lower than a pizza joint or burger chain. The focus on fresh food meant franchise owners didn’t have to invest in expensive kitchen equipment or large retail spaces.
To help market franchises in the U.S and abroad, Corrin struck a deal with a company in Virginia called Fransmart LLC in 2008. And then the trouble started. Freshii was obligated to fork over a share of its revenue under the terms of the contract, but in 2010, it stopped paying, and Fransmart sued in a Virginia court. As part of its defence, Freshii alleged the owner of Fransmart, Dan Rowe, had misrepresented the financial health of his company. Fransmart claimed that since Freshii had matured, it no longer wanted to share revenue and was simply trying to wriggle out of the contract.
Corrin was later grilled by Rowe’s lawyer during a deposition. “You’re the CEO of an international franchisor, aren’t you?” the lawyer asked him. “You make it sound so sexy,” Corrin said.
In 2011, the case was grinding along when Rowe asked Corrin to get together in Toronto. Rowe wanted to avoid a trial and salvage the relationship. They met in a private lounge at a downtown hotel, and after some brief small talk, Corrin instead offered $300,000 to settle the lawsuit and part ways. Rowe told Corrin he wanted them to keep working together. Besides, Corrin's offer was less than he felt he was owed.
Corrin, according to court documents, told Rowe that if his offer was not accepted, he would drag out the lawsuit and stir up “very visible, high-profile trouble” for Fransmart. “Corrin threatened that he would go public in every way, making it his ‘full-time mission to destroy Fransmart,’” Rowe claimed in court. “Corrin said he had already ‘killed’ four Fransmart deals...and would ‘kill’ four more.' “ The meeting lasted less than 10 minutes.
The next day, Corrin blind-copied Rowe on an email he sent to a new Fransmart client, one that Rowe had mentioned to him in their meeting. Fearing that Corrin was preparing to make good on his alleged threat to torpedo deals, Rowe went to court to get a temporary restraining order preventing Corrin from contacting any clients and spreading negative information. A lawyer for Corrin later told the court that the Freshii founder “would not continue to engage in the conduct giving rise” to the lawsuit, making the restraining order moot. (Rowe declined to comment.)
Meanwhile, Freshii lost the contract lawsuit and was ordered to pay Fransmart more than US$500,000, plus interest.
The legal setback did not stop Freshii’s growth. By 2017, the company had nearly 250 locations, carried in part by Corrin’s appetite for publicity. He showed up for television interviews wearing a Freshii letterman jacket, appeared on Undercover Boss and starred on a spinoff of CBC’s Dragons’ Den. One of his more notable gambits was taunting his ostensible competitors, such as McDonald’s, through open letters. “The reality is that McDonald’s is stagnating and your growth days are over,” he wrote. Media outlets lapped up Corrin’s bombastic style, although one missive urging frozen yogurt franchisees to come into the Freshii fold earned the company a $10-million trademark lawsuit from the owners of Yogen Früz, who accused Freshii of using false and misleading statements to promote itself. (It was settled last year.)
The time seemed ripe to go public, and CIBC Capital Markets and RBC Dominion Securities led Freshii's $125-million offering. During the roadshow, the story Corrin told was of a rapidly growing company with a unique offering that was ready to conquer the world.
Freshii had already hit 200 locations in less time than either McDonald's or Subway, and more growth was to come, according to the prospectus. The targets Corrin promised were ambitious. By the end of fiscal 2019, according to Freshii's prospectus, the company would have up to 840 stores, a 244% increase. That works out to approximately one new store every couple of days.
By 2017, Freshii had nearly 250 locations, carried in part by Corrin’s appetite for publicity.Justin Poulsen; source photo Darryl Dyck/CP/The Globe and Mail
Still, the story was enticing. Canada’s restaurant industry is fairly mature, with established companies eking out meagre gains each year. Overall, the $60-billion market grows between 2% and 3% annually, according to Robert Carter of the NPD Group, and traffic is relatively flat. Freshii, in contrast, churned out quarterly same-store growth that was regularly north of 6%. “The guy does a phenomenal job of presenting, and they’re all great ideas,” says Stephen Takacsy, president of Lester Asset Management in Montreal, who attended a sales pitch. “But we found it ridiculously overvalued.” Freshii’s aggressive targets left little room for error, and the company was valued at around 30 times trailing 12-months EBITDA, more akin to a frothy tech company than a restaurant chain.
That wasn’t enough to dissuade Bay Street. The four equity analysts following the stock in early 2017 all slapped a buy rating on Freshii, which started trading around $12 per share. Target prices were as high as $19.50. “There was excitement for a new, trendy, relevant brand in food service,” says Elizabeth Johnston, an analyst at Laurentian Bank Securities. She thought it would be challenging for Freshii to hit its store count target, but she was encouraged by the strong interest from franchise owners – a sign the brand had cachet. The more franchises Freshii established, the more royalty revenue head office could rake in.
But Freshii had trouble meeting its store growth count almost immediately, which the company later blamed on the “unpredictability” of selecting sites, obtaining permits and taking possession of properties. In the second half of 2017, Corrin introduced a curious new metric. On an analyst call, he hyped an “exciting new opening strategy” called “enhanced openings.” Stores that weren't actually open yet could generate revenue by offering juice cleanses, meal boxes and catering services for delivery, even though the order would actually be fulfilled by an existing location.
Corrin said the company opened 31 stores in the past quarter, 11 of which were “e-openings.” Analysts, having never heard of this concept before, were left baffled. Finding a way to help franchise owners generate sales before opening is not a bad idea, says John Zamparo at CIBC, but the company fumbled the delivery. “You shouldn’t sell it to people as a store that has opened,” he says. “`Disingenuous’ was a word I heard a lot,” Zamparo says of his conversations with investors. Freshii soon abandoned the concept entirely, and Corrin said on a later call that he promised the CFO he would never talk about e-openings again.
In the months following the IPO, Corrin met with investors to drum up interest. He didn’t always leave a good impression. One fund manager who met with him said that if Corrin was asked a question he didn’t like, he would defer to the CFO and stare at his smartphone. When the fund manager tried to explain that as head of the company, he would have to answer questions from public shareholders, Corrin bristled and said he had people who could take Freshii private, even though the company had just started trading several months prior.
The rush to open stores put a strain on head office, especially as Freshii entered multiple new markets. The company’s approach to international growth was less driven by a strategy than by franchisee demand, which led Freshii to many disparate locales, such as South America, the Middle East and Ireland. Meanwhile, other efforts seemed to suffer. Analysts noted Freshii was slow to implement mobile and digital ordering, and to ensure the process functioned smoothly. As part of his due diligence on Freshii, Zamparo frequently used the company’s app to get food, only to show up at a store and discover his order was never received. Worse, sometimes the store was closed. “It was very poor execution on the online and mobile front,” he says. Freshii retooled and relaunched its app last year, and while the design was improved, the overhaul felt superficial, Zamparo says. He still had trouble getting his banana nut smoothie.
“That's the problem with a company that has put significant growth targets and is struggling to meet them,” Zamparo says. “Your priority becomes opening up more stores rather than making sure the stores you have are functioning.” One of Corrin's pieces of advice to aspiring entrepreneurs is to “build a company with a killer culture, not a culture that kills a company.” He has heavily promoted the open, transparent vibe at Freshii, along with its unlimited vacation policy and free food for employees at head office. That office in Toronto, which has employed as many as 80 people, is overwhelmingly young. Freshii prides itself on its millennial (and now Gen Z) workforce, which also makes up its customer base. At a conference last year, Corrin said he spends a disproportionate amount of time thinking about people and culture, suggesting it's a competitive advantage. “You cannot knock off the culture,” he said.
Some found Corrin to be an encouraging, even inspiring boss. “He put a lot of trust in me,” says Jonathan Truong, who spent more than seven years at Freshii and left his role as creative director in December for a startup. It was Truong’s first professional gig, and he quickly found himself with a lot of responsibility. But even when he once made a costly printing error for some marketing materials, Corrin didn’t chew him out. “He allowed me to learn from that mistake,” Truong says, “and that’s something I’ve taken to heart.”
Not everyone had the same experience. Corrin can be blunt and direct, and with his reluctance to break eye contact, he can read as intimidating, especially when he's displeased about something. At times, according to three former employees, he has displayed behaviour they viewed as bullying, and made belittling remarks about their contributions or the quality of their work. During a meeting with other executives, he called one individual's efforts “redundant” and told another employee after a presentation she had given that it wasn't worth his time. Two of the former employees say interactions with Corrin left them in tears.
Another former employee says Corrin’s bluntness seemed like a persona of sorts, like something he gleaned from one of the many business books he reads and decided to apply to Freshii. Indeed, one book he has recommended to staff is Principles by hedge fund titan Ray Dalio, who practises what he calls “radical transparency.” Dalio recommends managers be brutally honest with themselves and their employees. “While most people prefer compliments, accurate criticism is more valuable,” Dalio writes. He also advises managers to “evaluate accurately, not kindly.” Corrin was so taken with Principles that he called out an employee at a meeting for not having read it.
Freshii's struggle to hit its targets ultimately took a toll on morale too. In September 2017, the company reduced its projected store count from 840 to 760 and cut estimated systemwide sales to US$285 million from US$365 million. Investors drove the stock down accordingly. Last November, the company withdrew guidance altogether.
The next blow came swiftly, as Freshii cut 20% of its staff at headquarters to help drive profitability. The cuts came not long after Freshii moved into a sleek new office down the street in Toronto's ritzy Rosedale neighbourhood. Corrin's brother, Adam, who still sports the built physique of the hockey player he was in university, took it upon himself to address the malaise. He rose during an all-staff meeting, according to five people who were there, and told employees to “get your heads out of your asses.” The pep talk, such as it was, did little to lift spirits.
The strange thing is that, despite the plummeting stock price and operational turmoil, Freshii’s financials are still relatively solid. The company is opening locations – 69 new stores last year-with another 140 stores in the pipeline. It has about US$27.6 million in cash. Though same-store sales fell 1.2% last year, at least the depth of the decline is shrinking: Last quarter, same-store sales dipped 0.9%. Corrin’s talk of rapid international expansion has waned as the company focuses on fixing its core North American operations.
Lately, Corrin has cited the worst-performing 10% of Freshii stores for dragging down the rest of the chain, and the company is working to shut them down or transfer ownership. In the past four quarters, Freshii has closed 43 stores. Corrin has said there is no one factor affecting the underperformers and instead put the blame on the franchise owners themselves. “Part of the bottom 10% is partners who are not doing the right things,” he said last November. The next quarter, Corrin said Freshii would be “more measured” in selecting store owners. It's worth noting the prospectus from two years ago already emphasized the company's “rigorous vetting and selection process” of its franchise partners.
Analysts are not ready to label Freshii spoiled goods. “When they have a specific plan, we’ve seen they’ve been able to execute,” says Johnston at Laurentian Securities. “I’m definitely optimistic. But it’s going to take time.” A few initiatives give her hope. Freshii launched a traditional marketing campaign this spring, with radio spots and billboards, which it hasn’t done much of in the past. Johnston says the company has a strong brand to capitalize on, and the campaign could help attract more customers.
The company is also renewing its focus on limited-time offers, an important way to lure people into stores. Corrin admitted earlier this year to mistakenly pausing development on that front. “I totally blew it,” he said on a call. It has debuted new menu items too, such as immune elixir shots, two flavours of kombucha and charcoal lemonade.
Even in a more competitive market, Freshii has advantages, according to Jeff Dover at fsStrategy. He points to the company's scale, strong brand recognition and customer loyalty. “I don't think anybody would dispute the market leader in this category is Freshii,” he says. “From everything I hear, the CEO is making the right calls.”
Investors are far more skeptical. One of the main reasons is Corrin and his executive team. “Ideally you would like to see individuals who have a long history of success in that business,” says Raymond Lam, a portfolio manager at Laurus Investment Counsel in Toronto. “There doesn’t seem to be any individual on that team with that track record. He himself doesn’t.” The leadership team is turning over too: Both the chief financial officer and the chief people officer left the company in May. (Neither responded to requests for comment.)
Nobody on Freshii’s board of directors has experience at a large-scale restaurant franchise, either. Both the Corrin brothers are on the board, along with serial entrepreneur Michele Romanow and Marc Kielburger, who co-founded We Charity. Another board member, Neil Pasricha, is an author of books on happiness and leadership who has been called “one of the most popular TED speakers.”
When a fast-growing company stumbles and investors flee, there are a few things that can happen. Sometimes a buyer swoops in. Other times, a shareholder activist whips up dissent and tries to overthrow the CEO. (Indeed, one fund manager says Freshii is probably worth more than the market pegs it at today, but unlocking that value would require a determined activist.) And in rare instances, the CEO, thoroughly chastened, recognizes new leadership is required and voluntarily steps aside.
None of these outcomes seem likely for Freshii. Corrin’s voting control means he decides the company’s fate. Sell to a competitor? Resign? That would be defeat (unless he rehires himself again). For now, Corrin seems intent on restoring Freshii back to growth himself, even if the market has abandoned him. He is no longer the young, swaggering 20-something who can impress with a better idea for fast food. He’s reached the limits of hustle. What remains now is the less glamorous work of fixing the operations and reversing the decline in same-store sales, quarter after quarter, and proving he can deliver results again. We already know Corrin can run. Fast. But getting investors to take him seriously again? That’s a long run indeed.
As seen in the July issue of Report on Business magazine.
Joe Castaldo