BurgerFuel takes a bigger bite

BurgerFuel's store in the Dubai Mall, in a prime site above the ice-skating rink, faces stiff competition from more than 200 other eating places.

It's a long way from Ponsonby Rd to Cairo, but the New Zealand fast-food chain reckons it can go further yet - to 1000 new outlets in eight years.

Chris Mason had only modest ambitions for BurgerFuel when he opened the company's first store on Ponsonby Rd in 1995.

Back then, the founder of the now rapidly expanding gourmet burger chain thought he'd be in and out of the fast-food trade in six months flat.

"It was basically like, 'Let's do a hamburger bar, drive it up in sales and then sell it for a profit' - that was it," Mason says. "I was 29. I was just going to go off and do something else."

But things didn't turn out as planned. BurgerFuel opened a second restaurant - in Takapuna in 1997 - and Mason, who worked in the kitchens of the early stores and reckons he's still the fastest burger stacker around, eventually moved into franchising as the company expanded its New Zealand network.

Signalling its global ambitions, BurgerFuel added "Worldwide" to its company name when it listed on the stock exchange in 2007 and embarked on international expansion as the global financial crisis began to bite. The firm now operates 56 stores in New Zealand, Australia, the United Arab Emirates, Iraq and Saudi Arabia.

It is about to open its first stores in Egypt and Kuwait, and the company plans to use a newly inked partnership with the founders of the Subway sandwich chain to launch into major markets that include the United States.

BurgerFuel, whose share price more than doubled on the news of the Subway deal, hopes to open 1000 new outlets over the next eight years. Reaching that target will require a huge ramping-up of new store openings, considering it has taken almost 20 years to get to 56 sites.

Casting his mind back to 1995, Mason says: "I had no idea I'd be sitting here in Dubai in 2014."

He moved his family to the Persian Gulf city in 2010 and has overseen the company's Middle East expansion. BurgerFuel's first store in the region opened in Saudi Arabia's Al Khobar in February 2010, followed by a second in Dubai's Jumeirah Beach Residence (JBR) in July that year.

There are now 19 stores across Saudi Arabia, the UAE and Iraq.

Revenue from the Middle Eastern operations helped BurgerFuel post its maiden annual profit in 2011. In the 12 months to March 31 last year the company reported total sales of $16.7 million from its stores in Saudi Arabia, the UAE and Iraq.

Although Mason will soon move to the US to spearhead the company's launch there, he says there's plenty of scope for continued growth in the Middle East. "We see a lot of potential in the more fringe markets that we're in or going into." Mason says Iraq has enormous potential, despite sectarian attacks and a resurgent al-Qaeda presence. BurgerFuel operates only one store in Sulaymaniyah, in Iraq's autonomous Kurdish region, but the company's Iraqi franchisee is scoping out possible sites in Baghdad.

Libya, another politically volatile country that should get its first BurgerFuel store this year, is seen as a lucrative opportunity by the New Zealand brand. And the holiest city in Islam - Saudi Arabia's Mecca - might get a BurgerFuel store in the near future.

Hamad Albuali, chief executive of the Sadf Trading & Development Co, the master franchise holder in Saudi Arabia, says his firm is also looking at potential BurgerFuel sites in other cities in the kingdom, including Jeddah.

There are currently seven BurgerFuel stores in Saudi Arabia's eastern province and the capital, Riyadh.

"We don't see any limits to how far we can take the brand in this region," Albuali says.

BurgerFuel chief executive Josef Roberts says people thought the company was crazy when it first floated the idea of setting up shop in the Middle East.

"I do feel proud because we had a vision and we could see the opportunity," he says. "We got into it in the earlier days [of the Middle East gourmet burger market] and we secured some great real estate, particularly in Dubai, which is not easy to get into these days."

Talking to the Business Herald on the patio of BurgerFuel's Jumeirah Beach Residence store, Mason attributes the Kiwi brand's success in the region to "a quirkiness and menu diversity that has connected well with the way food is going in the region".

The Middle East stores are almost identical to those in New Zealand, although they're usually a bit bigger. A drive-through opened at one of the Dubai sites last year, which BurgerFuel claims is a world first for gourmet burgers.

Beef bacon is used in order to comply with Islamic dietary requirements, while the item known as a "Bastard burger" in New Zealand is more conservatively labelled a "Monster" in the Middle East.

The company has opened 11 stores in Dubai and the neighbouring emirate of Abu Dhabi since 2010 and is a market leader in the UAE's gourmet or "better burger" segment - the businesses that operate in the tier above the large multinationals such as McDonald's and Burger King.

What the company has achieved in the two emirates, especially Dubai, is no mean feat given the cut-throat competition for real estate and the vast range of existing food and beverage brands. Shoppers at the sprawling Dubai Mall, for example, can take their pick of more than 200 eateries, including BurgerFuel, which has secured a prime site above the ice-skating rink.

Dubai was ranked the "second most targeted city" by international retailers, behind London, in a survey published last year by CBRE, a commercial real estate firm.

A combination of cashed-up expats, wealthy Emiratis and a booming tourism industry is attracting food concepts from throughout the world to Dubai and competition in the city's gourmet burger market is heating up.

American brands such as Shake Shack, Elevation Burger, Johnny Rockets and California's The Counter - which allows diners to create their own burgers and is reportedly frequented by Leonardo DiCaprio and Robert Downey jr - have set up shop in the city, and Burger Joint, a New York institution, has just opened a store.

Mason says success in Dubai requires "dogged perseverance" when securing real estate. "That will always help you to stand out and we've done incredibly well to date."

Farah George Farah, food and beverage manager for Al Khayyat Investments, BurgerFuel's master franchise holder in the UAE and Kuwait, says Shake Shack - which operates four stores in Dubai - is one of BurgerFuel's strongest competitors in the city.

"They have great access to real estate and have positioned themselves in great locations within the malls," Farah says.

Shake Shack and The Counter have both moved into a seaside mall that has just opened next to BurgerFuel's JBR store.

Farah says BurgerFuel's New Zealand roots give the brand a "unique selling position" against its US competition in the Middle East and his firm has bullish expansion plans for the business in the UAE and Kuwait.

Privately-owned Al Khayyat, which earned revenue of more than US$800 million ($918 million) last year, would like to open eight more BurgerFuel stores in the UAE and wants to establish 15 outlets in Kuwait over the next decade.

Farah says BurgerFuel is the most important brand in the company's food and beverage stable, which includes high-end British food retailer Fortnum & Mason and coffee chain Il Caffe di Roma.

Like Al Khayyat, Egyptian corporation Wadi Degla has big plans for the New Zealand brand.

The company signed a master franchise deal with BurgerFuel in 2011 and the first store will open in Maadi, an affluent Cairo suburb, next month.

Wadi Degla - which has business interests in telecommunications, property development and food and beverage - couldn't have chosen a more fitting part of the city for BurgerFuel to make its debut.

More than 70,000 New Zealand soldiers were based in the area, at Maadi Camp, during World War II.

The desert outpost has since been swallowed by the Egyptian megacity's urban sprawl.

Wadi Degla deputy chief executive Ahmed Amin got a taste for BurgerFuel during a business trip to the UAE, when he visited the JBR store in Dubai and sampled the fare.

"I saw that BurgerFuel was expanding, which means it has an acceptance in the market - it's working," Amin says. "I thought the burgers were better than anything we eat in Egypt and BurgerFuel has a nice, funky look that will attract a certain age group and we want to be different from the burger chains that already exist here."

While American operators like Shake Shack are yet to enter the North African country, BurgerFuel faces competition from homegrown Egyptian chains such as Butcher's Burger, Mince and Burger Factory.

Amin says US gourmet burger brands are eyeing the Egyptian market, but he doesn't view increased competition as a threat.

"On the contrary, our experience is that more players just expand the market further."

Amin says Wadi Degla, which had revenue of US$570 million last year, may open 25 BurgerFuel stores in Egypt over the next eight to 10 years.

Two more BurgerFuel stores are expected to open in Cairo next month - one in a new retail development near the international airport and another in Mohandessin, an upmarket neighbourhood in the city centre near the banks of the Nile.

Amin is upbeat about the New Zealand brand's prospects, despite the residual impact of the Arab Spring uprising that is taking a toll on Egypt's economy.

Clashes between supporters and opponents of the military-led government that last July deposed former President Mohamed Morsi, of the Muslim Brotherhood, have kept tourists and foreign investors away.

But middle-class Egyptians, rather than tourists, are BurgerFuel's target market in Egypt and Amin says people haven't stopped eating out as a result of the disturbances.

He says the food and beverage operations at the five social clubs Wadi Degla operates in Cairo had had their highest turnover during the January 2011 revolution that removed former President Hosni Mubarak from power.

Like many Egyptians, Amin expects the business environment in the country to improve following next month's presidential election, which is widely expected to be won by former military chief Abdel Fattah el-Sisi, who led the overthrow of Morsi and has garnered mass support from a population wary of Egypt slipping into further unrest.

"We don't accept this country being divided between three segments - Muslim extremists, [Muslim] moderates and Christians," Amin says. "The Muslim Brotherhood were defeated because they tried to do that."

Back in Dubai, Mason says he'll be keeping a close eye on BurgerFuel's Middle Eastern markets after he moves to the US.

"I'll be back every quarter," he says. "We see the potential for an enormous number of stores here over the next five to 10 years."

Hitching a ride on Subway

The ink may be barely dry on his firm's partnership agreement with Subway, but Josef Roberts says the global sandwich chain's franchisees in the United States and other countries have already expressed an interest in opening BurgerFuel stores.

The Bastard burger from BurgerFuel.

BurgerFuel's shareholders approved a deal in February that allowed Franchise Brands - an investment firm established by Subway founders Fred DeLuca and Peter Buck - to purchase a 10 per cent stake in the New Zealand company, with the option to increase that to 50 per cent over the next eight years.

As it launches into its next growth phase, the Auckland-based company is targeting Subway franchisees in the US and other markets such as India, China and Britain who may want to move into a second brand and open BurgerFuel stores. Roberts says the company has not formally offered its brand to Subway franchisees, as there are US regulatory requirements around franchise agreements that must still be satisfied.

However, operators of the sandwich chain in the US and other markets have already "reached out" to BurgerFuel, asking when they can evaluate the New Zealand burger concept, he says.

Roberts says some of those franchisees had come into contact with the Kiwi brand while in the Middle East. "That's where the Middle East has been very good for us," he says."A lot of people travel through the Middle East. Less people come to New Zealand."

Roberts says it's still unclear where BurgerFuel might open its first store in the US, the home of the hamburger.

He has previously indicated that California, Texas or the northeastern state of Connecticut (where Subway is based) are possible entry points.

Roberts says BurgerFuel wants to establish its first US store by the end of its current financial year, which ends on March 31 next year.

"Even later this [calendar] year would be ideal, if we could."

Subway is the world's biggest fast food franchise, in terms of store numbers, with more than 41,000 locations across the globe, compared with hamburger chain McDonald's, which has roughly 35,000 stores worldwide.

Business Herald reporter Christopher Adams travelled to the Middle East with assistance from NZTE and BurgerFuel.