Business reporter for the NZ Herald

US push faces the fryer

BurgerFuel will delay expansion if big American backer cannot provide support.
Chief executive Josef Roberts says the company has a plan B, but he won't give details. Picture / Richard Robinson
Chief executive Josef Roberts says the company has a plan B, but he won't give details. Picture / Richard Robinson

BurgerFuel hopes to know in the next few weeks whether it can keep its American dream alive.

The fast-food franchiser may call off its foray into the United States if it doesn't have the support of Franchise Brands - the investment firm set up by Subway founders Fred de Luca and Peter Buck.

BurgerFuel said yesterday the timing of the proposed expansion depends on its relationship with Franchise Brands, which is grappling with challenges following de Luca's death in September.

The NZAX-listed firm hopes to know soon whether Franchise Brands wants to continue being involved with the company.

"Although it could be possible for BurgerFuel to move forward in this market independently of Franchise Brands, we feel the potential support available from a large United States-based organisation is essential to our success in this market and at this stage, we are not prepared to move forward without that support," chairman Peter Brook and chief executive Josef Roberts said yesterday.

BurgerFuel's share price skyrocketed more than 150 per cent to $3.79 when it struck a 2014 deal with Franchise Brands to help its planned push into the US. Shares yesterday closed down 15c at $1.70.

Roberts told the Herald it was in regular contact with Connecticut-based Franchise Brands, which holds a 10 per cent stake in the company.

"It doesn't mean the end of everything, it simply means there are delays ... we want to tread carefully in this process and not make hasty decisions and we feel that this partnership is valuable enough to allow it to take time to filter through and see where it goes," he said.

While Roberts said BurgerFuel did have a "plan B", he didn't want to disclose what that was.

The company yesterday reported an after-tax loss of $1.14 million in the year to March, down from a profit of $532,170 the previous year.

Revenue was up 9 per cent to $20.1 million during the period.

The company said it had recorded strong sales growth in New Zealand, where it is about to open its 50th store, with more room to grow.

Across the Tasman, BurgerFuel's experience with its five Australian stores was more mixed.

"We find the cost of operation there very high. Labour rates are high, rents are very high," Roberts said.

BurgerFuel still thought Australia was a market worth pursuing.

Despite the ongoing threat of terrorism in Middle Eastern countries, Roberts said there would still be opportunities in the region. Rather than building up a large number of stores, the company was focused on bigger restaurants with higher turnovers in the region.

"We're cautioning the market that we are in the volatile part of the world up there. Things can change ... you saw us close a store in Iraq 18 months or two years ago and you've seen one reopen again. The key message to shareholders is we don't invest our own money in any of these markets, we support the brand but we don't put money into infrastructure," Roberts said.

- NZ Herald

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