Burger King widens annual losses on rising costs, increased competition

Monday 28th July 2014

Blackstone Group's Burger King chain in New Zealand widened its loss in 2013 as rising sales, in an increasingly crowded burger market, were offset by higher costs for raw materials and consumables, and increased property and consultancy expenses.

The fast-food chain made a net loss of $4.4 million in calendar 2013, wider than the $1.9 million 2012 loss, its first year under the ownership of US private equity firm Blackstone, according to financial statements for its holding company, Tango Holdings.

Sales rose 0.6 percent to $175.9 million, the accounts show. Consultancy expenses more than doubled to $3.5 million, raw materials and consumables - its biggest expense - gained 3.5 percent to $57 million, and property expenses climbed 4.8 percent to $29 million.

The local burger market is increasingly competitive, with the 2012 arrival of US chain Carl's Jr, brought over by Restaurant Brands, the NZX-listed KFC, Starbucks and Pizza Hut operator, to better compete against McDonald's and Burger King. Carl's Jr. has 15 shopfronts across the country and reported annual sales of $14.3 million for the year ended Feb. 24. BurgerFuel Worldwide, which listed on the NZAX in 2007, lifted New Zealand sales by 26 percent to $9.9 million in the year to March 31.

"Burger King New Zealand acknowledges 2013's increased competitive environment, however we remain focused on key business strategies that are right for our business," chief executive John Hunter said in an emailed statement. "Our menu innovation, restaurant expansion and refurbishment programme plus our operational and guest experience strategies remain our core focus for the continued growth of Burger King New Zealand."

Antares Restaurant Group, the operating unit of Tango Holdings which has the local franchise development rights for Burger King as well as some 80 stores, is the country's second largest burger chain by outlets after McDonald's Restaurants (NZ).

McDonald's reported a profit of $30.7 million in New Zealand last year as sales rose 5.6 percent to $216.6 million, partly reflecting the introduction of Georgie Pie.

BusinessDesk.co.nz

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