Figaro Culinary Group Faces Operational Strains Amid Expansion Drive

Figaro Culinary Group, Inc. (FCG), the operator behind Angel’s Pizza and Figaro Coffee, reported steady revenues for fiscal year ending June 30, 2025, but its latest audited financial statements reveal mounting operational challenges that could weigh on future performance.

Margins Under Pressure
Despite a 4.1% revenue increase to ₱5.67 billion, gross margins slipped to 44.7% from 45.9% a year earlier. Rising delivery commissions—up 28% to ₱375.2 million—and higher store overhead costs contributed to the squeeze. Advertising spend was cut by nearly 29%, helping operating margins, but analysts warn that prolonged marketing pullbacks could hurt brand momentum.

Debt-Fueled Expansion Raises Financing Costs
The company’s aggressive store rollout drove property and equipment assets up 54% to ₱3.89 billion. However, this expansion came at a cost: loans surged to ₱1.52 billion, pushing finance expenses to ₱105.2 million, more than double last year’s figure. Net income remained flat at ₱629.6 million, signaling that interest costs are eroding profitability gains.

Cash Flow and Liquidity Concerns
Operating cash flow fell 19% to ₱1.14 billion, while capital expenditures ballooned to ₱1.73 billion, resulting in negative free cash flow of roughly ₱743 million. The company relied on fresh borrowings to bridge the gap, raising questions about sustainability if expansion continues at the current pace.

Franchise and Receivables Risks
Royalty income plunged to ₱83.3 million from ₱162.6 million, and franchise deposits fell to zero, suggesting possible weakness in the franchising model. Trade receivables climbed 22% to ₱199.9 million, with ₱48.8 million overdue for more than 60 days, yet no impairment provision was recorded.

Concentration and Lease Exposure
Angel’s Pizza now accounts for over 70% of total sales, underscoring brand concentration risk. Meanwhile, prepaid rent soared to ₱47.7 million, and lease extensions remain non-binding, exposing the group to potential occupancy uncertainties.

What’s Next?
Industry observers suggest FCG must recalibrate its growth strategy, tighten credit controls, and renegotiate lease terms to safeguard liquidity. While its flagship pizza brand continues to dominate, diversification and operational discipline will be critical to sustaining long-term shareholder value.

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