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BurgerFuel's US expansion under a cloud

NZ NewswireNZ Newswire 14/06/2016 Sophie Boot

BurgerFuel Worldwide, the NZAX-listed fast food chain franchisor, says it may ditch its plans to enter the US market and is uncertain of its support from backer Franchise Brands.

Entry into the world's biggest economy has been much more complex than BurgerFuel thought and it expects further delays as it has not had confirmation that US investor Franchise Brands will continue its involvement, the Auckland-based company said in a statement. It will update the market in the next few weeks.

Franchise Brands, which is backed by the founders of the Subway franchise chain, bought 10 per cent of BurgerFuel for $5.9 million in 2014, with the option to increase that holding to 50 per cent over eight years. It held 10 per cent as of June 3.

"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," the company said.

The shares fell 2.7 per cent to $1.80.

The news came as BurgerFuel posted a net loss of $1.1m in the year ended March 31, from a profit of $532,000 a year earlier, it said. The loss was in line with directors' expectations and was largely due to money spent on the planned US entry.

Chairman Peter Brook and chief executive Josef Roberts said they understood shareholders would be disappointed at the stall in entering the US, but the company was making good progress in other areas.

BurgerFuel opened 12 new restaurants in the year but closed four in the Middle East and two in Australia. It now has 78 restaurants, 47 of which are in New Zealand.

Revenue in New Zealand grew 15 per cent to $15.9m in 2016, and the company said it plans to open more restaurants in both the North and South Islands.

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