BurgerFuel narrows 1H loss, plans to buy more franchised stores, expand into US

Friday 9th December 2016

Burger Fuel Worldwide narrowed its first-half loss and says it wants to buy more stores and is still looking to expand into the US through its sales and option and collaboration agreements with investor Franchise Brands have ended.

The net loss was $115,328 in the six months ended Sept. 30, from $487,533 a year earlier, the Auckland-based company said in a statement. Group operating revenue rose 7 percent to $10.4 million, largely from long-term recurring royalties and sales. Total system sales, which includes sales by franchisees and new and existing stores, climbed 3.4 percent to $48.3 million. The company has 51 stores operating in New Zealand where it's the third largest burger concept in the market.

System sales gained 16.5 percent in Australasia, the company said, with strong sales growth in New Zealand at $8.9 million up from $7.5 million a year earlier, while it had mixed results in Australia, where it has five stores.

BurgerFuel bought the Takapuna store from its franchisee in October, adding to its existing portfolio of two and providing more training facilities for its global expansion, it said. The company plans to make more "key BurgerFuel restaurant purchases", and had no debt and cash reserves of $6.5 million as of Sept. 30.

"We have worked hard to reduce our operating costs in order to achieve our goals, and this will continue for the remainder of FY17," the notes said. "The directors remain very positive about BurgerFuel’s future and have management focused on opening in the US as well as continued expansion in other markets. We remain confident in the investment programme and preparations for future growth."

In Australia, revenue dropped to $226,000 in the first half from $527,000 the previous year. The company has moved to using locally produced products rather than those from New Zealand, which it says will improve long-term profitability, along with changing the menu for that market. In the notes, the directors said they know it will take "significant time and investment" to establish its brand there and they will review the opportunity at the end of the financial year.

In the Middle East, sales and royalty income dropped to $1.3 million, from $1.7 million a year earlier, due to political turmoil and falling oil prices. Despite this, BurgerFuel has opened three new stores this financial year, including re-opening in Baghdad, and has 26 outlets in the region.

Franchise Brands, which is backed by the founders of the Subway franchise chain, bought 10 percent of BurgerFuel for $5.9 million in 2014, with the option to increase that holding to 50 percent over eight years. In August, Burger Fuel told the market it had asked to be released from its sale and option agreement along with a collaboration agreement that included a 1 percent fee to Franchise Brands, after "significant delays in our entry to the United States." Despite the end of the formal agreements, Franchise Brands continues to hold a 10 percent stake in Burger Fuel and retains a seat on the board.

Burger Fuel said it still seems many opportunities in the US outside of the Franchise Brands deal. Its US development team is in Indianapolis and it anticipates announcing its first store location there shortly.

BurgerFuel shares were unchanged at $1.49 and have dropped 44.8 percent this year.

BusinessDesk.co.nz

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