Second Cup is working its way out of a six-year financial deficit under the leadership of President and CEO Alix Box, but the Canadian coffee shop chain still has a long way to go—and a lot of structural changes to make—if it hopes to compete with coffee giants like Starbucks and Tim Hortons.

Box was named CEO of Second Cup in February of 2014 to help revitalize the Second Cup brand, and steer the company back in a profitable direction. Formerly Vice President of Operations, Company, and Licensed Stores with Starbucks Canada, she has a wealth of experience in “achiev[ing] strong growth in sales and profitability” in the coffee shop business according to a 2014 press release. Almost three years later, it appears she has lived up to her reputation: Box’s strategic business plan has reduced the operating loss of the company from over $30 million in September of 2014 to just $25,000 in September 2016.

This upward trend is due in part to Box’s aggressive-but-effective franchising strategy. In a May 2016 press release, Box said that the company is “moving toward an asset-light model,” which means that it intends to close most, if not all, of the company-owned stores in order to focus on supporting the much-more-profitable franchises. Since the beginning of 2014, Box has closed 41 under-performing stores, 18 of which were company-owned. As of September 2016, only 5 per cent of Second Cup’s 298 shops were company-owned. Second Cup says that the closures, along with a 2014 internal restructuring that cut almost a third of the staff at headquarters, should save the company up to $2.3 million annually. Box says this money will be rolled into franchise relations.

Financial analyst Alex Mirhady says Second Cup has “stemmed the bleeding” by closing the money-losing shops, and that a franchise-based model is the company’s best bet at this point. “They know that franchise owners are all independent business owners who are going to work really hard. Their own profit is on the line, versus corporate-owned stores where you have a manager who works for $10 an hour and then goes home. They have a vested interest.”

The reality of this is reflected in Second Cup’s operating margin. From the fall of 2015 to the fall of 2016, the corporate-owned stores cost the company over $700,000. By contrast, the franchise stores showed a net profit of almost $1.2 million. Mirhady says that the move toward franchising is the obvious choice, but that he believes significant financial gains from the decision will take some time to materialize.

“They’ve had to invest a whole lot into renovating their stores, and they have had to pay a lot to close those stores, with severance pay, getting out of leases, and likely selling some property at a deficit,” he says.

But while the company has yet to post any substantial profit, it is getting close to breaking free of its operating loss. Box states in an October 2016 press release that she is “pleased with the significant earnings progress,” and “optimistic that this will continue into the fourth quarter.” The financial statements for the fourth quarter—or winter season—of 2016 have yet to be posted.

But Mirhady believes there is still one major hurdle that second cup will need to face, whether its profit increases or not: that is, the lack of public faith in the company, and resulting plummeting stock prices. “The stock price reflects the expectations of the market for [the business’] future profits. In terms of what the stock market thinks of them… have they really turned the corner yet? I don’t see it.”

Only time will tell if Second Cup can recapture its mantle as one of Canada’s top coffee chains. But for now, it might have to settle for being Fifth or Sixth Cup.

Second Cup Stocks 2014-Present by amberdavison on TradingView.com