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Freshii Inc., the fast food chain that debuted on the Toronto Stock Exchange in 2017 amid self-generated hype for its healthy menu and international growth prospects, left a bad aftertaste with investors after missing quarterly targets and curtailing guidance on everything from restaurant openings to sales.

The share price plummeted as much as 50 per cent on Thursday, before recovering some lost ground. The shares closed in Toronto at $2.65, down $1.33 for the day – and 77 per cent lower than the stock’s starting price of $11.50 after an initial public offering in January, 2017.

The chain’s stunning reversal gives a black eye to a syndicate of underwriters led by CIBC World Markets Inc., Jefferies Securities Inc., RBC Dominion Securities Inc. and Robert W. Baird & Co. Inc. Less than two years ago, investment bankers had championed Freshii’s approach to fast food, which focuses on made-to-order salads, bowls and wraps – and analysts responded with stock price targets as high as $19.

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In its prospectus, Freshii said that its appeal to health-conscious consumers worldwide would drive its store count from 244 restaurants in the third quarter of 2016 to as many as 840 restaurants by the end of 2019.

At the end of September, 2018, Freshii appeared to be falling behind this aggressive pace of expansion, with just 431 locations in 17 countries – although Matthew Corrin, Freshii’s founder and chief executive, stressed that Freshii will open 175 new restaurants over the next several quarters.

However, while the company opened 18 new locations during the third quarter, it closed 8 existing locations, raising the question of whether Freshii was being met with underwhelming enthusiasm for its franchise concept.

Analysts slashed their price targets on the stock and withdrew buy recommendations, ending the company’s formerly warm and cozy relationship with the Street, which once touted Freshii as the fastest-growing publicly traded restaurant chain in North America. While analysts were overwhelmingly bullish on the stock in 2017, the stock has no buy recommendations among the nine analysts covering the stock today.

“While we are cautiously optimistic that current issues could prove transitory and also acknowledge that valuation metrics should leave some margin for error, the lack of visibility simply gives us some pause in recommending the shares on a near-term basis,” David Tarantino, an analyst at Baird, said in a note to clients.

Mr. Tarantino cut his target price on the stock to $3, down from $12 previously.

The stock’s decline on Thursday followed a loss of US$400,000, or 1 US cent a share, in the third quarter, well below the profit of 4 US cents that analysts had been expecting.

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Freshii also missed revenue expectations, reported a decline of 0.8 per cent in sales at restaurants open for at least one year (same-store sales) and expanded its restaurant count by a disappointing 10 locations.

Perhaps most worrisome, the company withdrew its outlook for next year, going silent on previously upbeat same-store sales growth and its ambitious projection of restaurant openings.

“We felt that … we didn’t have enough confidence to revise the numbers again, with conviction,” Mr. Corrin said during a conference call with analysts.

The chain’s stunning reversal gives a black eye to a syndicate of underwriters led by CIBC World Markets Inc., Jefferies Securities Inc., RBC Dominion Securities Inc. and Robert W. Baird & Co. Inc. Less than two years ago, investment bankers had championed Freshii’s approach to fast food, which focuses on made-to-order salads, bowls and wraps – and analysts responded with stock price targets as high as $19.

During the conference call, Mr. Corrin addressed the pace of store openings, noting that the complexities of selecting sites, getting permits and negotiating leases in the many jurisdictions in which Freshii operates can create delays.

“The timeline, from signing a franchise partner to the opening of a store, has been difficult to predict,” Mr. Corrin said.

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He added that the relatively large number of location closings in the third quarter comes from the company’s strategy of examining the bottom 10 per cent of locations, based not only on sales but also how the location is living up to brand standards, and closing some of them.

“What you’ll see, this quarter and into the future, is a higher level of discipline in addressing the bottom 10 per cent of our system,” Mr. Corrin said, stressing that the appetite for Freshii remains strong.

“Our mission is global, and we think we have the right team in place to properly support both domestic and international growth,” he said.

But investors, once receptive to Freshii’s bold prospects, appear to be tuning them out.

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