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Burger Fuel turns profitable in first-half as Middle East franchise fees kick in

Friday 25th November 2011

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Burger Fuel Worldwide, the local fast-food chain, turned profitable in the first half as falling New Zealand sales were bolstered by the uptake in franchise fees in the Middle Eastern.

The burger chain, which went public in 2007, made a net profit of $225,000 in the six months ended Sept. 30, turning around a loss of $219,000 a year earlier. Operating revenue climbed 16 percent to $4.9 million, with Middle East franchise fees contributing $442,000. That came as the company’s biggest revenue stream, New Zealand sales, fell 13 percent to $1.7 million.

Still, total New Zealand revenue climbed 7.6 percent to $3.5 million, while earnings out of the Middle East nearly tripled to $1.2 million. Total revenue in Australia shrank by more than two-thirds to $182 million.

Burger Fuel chief executive Josef Roberts said the fast food operator is targeting growth opportunities in New Zealand and the Middle East as it looks to cash in on its franchising success.

“Burger Fuel is now continuing to evolve into a New Zealand based international franchise business,” Roberts said. “A focus on more stores, better service to our ever expanding customer base and further systemisation to ensure a stronger more scalable business model – will see us continue to make solid progress.”

The first-half result follows a maiden annual profit of $34,000 in the year through June after the burger chain consolidated its New Zealand stores and closed its company-owned Kings Cross, Sydney store.

Total operating expenses increased to $4.6 million from $4.4 million, and Roberts said retail rents around the country are “unrealistically high.”

Burger Fuel this year it opened four stores in the Middle East, two in Saudi Arabia and in Dubai, taking the total number of stores in the region to six. It also signed a Master License for Egypt and entered into a joint venture with United Arab Emirates to open stores in Cairo and Abu Dhabi from the middle of 2012.

It is part of the Beachheads Global public-private partnership run by New Zealand Trade & Enterprise, which provides tailored mentoring for high-growth local companies.

The board didn’t declare a dividend, and Roberts said “it is essential that at this time we continue investment to support growth and take a relatively long-term view of our operation.”

Roberts, a founding shareholder, obtained permission from shareholder to increase his stake in the company to 67 percent from 46 percent at last month’s annual meeting.

Co-founder Chris Mason is the other major shareholder, and collectively they have an 87 per cent holding through nominee company, Mason Roberts Holdings.

At the time, Burger Fuel said the deal was intended to recognise that it had not adequately paid Roberts as CEO.

BurgerFuel shares fell 1.9 percent to 52 cents in trading today, and have gained 23 percent this year.

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