Losses have piled up at Coffee Republic as the company continues its transformation to a franchising model.
For the year-ending 25 March the coffee chain made a net loss of £2.45m, up from £1.45m a year ago and saw sales fall by 34.8% to £9.7m (2006: £14.9m).
Coffee Republic said it was this conversion to franchising, from direct ownership of the coffee shops, which had caused the fall in sales and profits.
However, it said in a results statement that the rapid expansion of franchised sites, from five in March 2006 to 31 as of this month, as well as a number of regional and international franchising agreements, gave plenty of reason for optimism about the company's future performance.
Steven Bartlett, chief executive of Coffee Republic, said: "There is a sense of excitement about the business and the brand from both within the company and from outside. This is translating into franchising and co-branded licensing opportunities which we are converting apace."
By Christopher Walton