Christopher Adams

The Business Herald’s markets and banking reporter.

BurgerFuel stays out of price war

Listed fast-food chain avoids discounts and boosts sales as rivals fight each other, says chief

BurgerFuel, which also operates 18 stores in the Middle East and one in Australia, reported a 35.4% increase in total system sales.
BurgerFuel, which also operates 18 stores in the Middle East and one in Australia, reported a 35.4% increase in total system sales.

BurgerFuel says its brand has proven resilient to a price war between major multi-national competitors such as Burger King and McDonald's in the New Zealand market.

The NZAX-listed company, which also operates stores in the Middle East and Australia, yesterday reported a 35.4 per cent increase in total system sales, which includes sales by franchise stores, to $30 million for the six months to the end of September - a record for the half-year period.

Net profit fell to $95,691 from $308,372 in the same period last year, with the operating revenue of the listed firm - what the franchisor earns from franchisees' royalties - up 25.5 per cent to $6.73 million.

The company said the fall in profit was in line with previous market guidance and was a result of investing for future growth.

Operating expenses lifted to $6.6 million from $4.9 million in the same period a year earlier.

"During the period we have prepared the business for major global growth opportunities, which we hope to announce to you shortly," BurgerFuel said.

Chief executive Josef Roberts said BurgerFuel had not been dragged into the price war between its larger competitors. Amid an ultra-competitive fast food environment, McDonald's and Burger King have been offering burgers for as little as $2.

"We've kept away from that [discounting] and we've grown sales strongly while all of that's been going on," Roberts said. "It's become apparent that we are positioned away from the multi-nationals."

BurgerFuel said sales in New Zealand and Australia (the company runs only one store across the Tasman in Sydney) rose 19.4 per cent in the six months to September 30.

The company will open its first South Island store in Christchurch next month.

In the Middle East, where BurgerFuel now has 18 restaurants, sales rose 74.1 per cent.

Civil strife in Egypt had slowed the opening of two stores in that country's capital, Cairo.

Roberts said construction of one of the stores had been completed, but the site was too close to one of the main "fighting areas" to open.

But the other restaurant might be operational by the end of next month, he said.

Egypt has experienced months of unrest since former President Mohammed Morsi was ousted by the military in July.

Despite the troubles facing the North African country, Roberts said he still felt positive about the Egyptian market.

"The fighting is not going on all over the place - it's isolated areas and we think there's a market there for us," he said. "We'll get one store open, make sure everything's running right and then when things calm down we'll open the other one."

BurgerFuel shares closed steady yesterday at $1.50.

- NZ Herald

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