Burger Fuel: Running on empty

Listed Franchisor Burger Fuel Worldwide [BFW.NZ] results out yesterday were disappointing for shareholders.

Back in September 2007 directors anticipated NZ$50,000.00 in losses per month but losses of NZ$669,000 in the six months to 30 September 2008 were more than double that figure.

Even more worrying, losses have mounted as 2008 continued. If you strip out 2007 IPO costs the losses for the 9.5 months to 31 March 2008 were $83,578.00 per month. This compares to $111,500.00 per month for this latest reporting period.

Hardly a positive trend.

Lets look at revenue for the company to see if that changes the picture.

Surely if losses are more than double company estimates then revenue should be sharply up when we compare the 30 September 2008 revenue with the previous 3.5 month period in 2007?

Yes it is but sadly not more than double.





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With revenue of $3,518,000 in the six months to 30 September 2008 and $ 2,336,000 for the 6 months to 30 September 2007, it is quite a good lift but hardly the stellar stuff that was shouted from Burger Fuel's advertising pre IPO, because it shows costs have far outstripped income and as I pointed out above these costs appear to be increasing rather than abating.

These revenue figures are based on 4 more stores since listing so this makes income figures look even worse.

Burger Fuel management say the next six months will be about cost containment and they will not anticipate opening any new outlets until well into 2009.

This will clearly be important to stem the franchisors already increasing operating expenses as their franchisees come under pressure from increasing business costs such as labour, ingredients and energy.

Like its bigger listed cousin Restaurant Brands Ltd [RBD.NZ] who had a recent poor last quarter sales, Burger Fuel will continue to struggle in the face of increasing competition, fickle consumer tastes and demands for better service and quality fast food.

Its short company history as a listed vehicle have been wildly disappointing and it looks even further away from any tangible success than it was when it listed mid 2007.

As least there is still their bastard Burger.

Burger Fuel shares were at 38c at close of the NZX at 5.00pm Tuesday 9 December 2008.




c Share Investor 2008

Burger Fuel leaves investors hungry

Burger Fuel's gourmet burgers are delicious, ample, fresh and have plenty of filling. It is a shame that its latest profit results are meagre, lacking in substance and leave investors hungry.

Too negative?

Just look at the revenue for the last 9.5 month reporting period. Around NZ$4.7 million. This is derived from a 10% cut out of Franchisee's turnover, which probably totaled around NZ$15 million for that period. 4% of that revenue was used for marketing of the company. The balance of the revenue comes from a construction management fee, a franchise territory fee, a franchise training fee and revenue from company owned stores.

On this revenue Burger Fuel Worldwide [BFW] reported an audited loss of $2,149,067 for the nine-and-a-half month period to 31 March 2008.


Burger Fuel @ Share Investor

Burger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
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Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary


The IPO raised around $8 million dollars cash in July 2007, with $3 million contributed from the company founders because the IPO flopped, and as of 31 March 2008 it had chewed through almost $5 million of it. Granted there have been costs involved in opening a company owned store in Sydney and costs establishing the company as a franchisor to the chain of owner operator stores but as a franchisor Burger Fuel's store opening costs should be largely covered by franchisee fees and contributions as outlined above.

What it looks like is that there will be more capital needed in 12-16 months to continue company expansion.

As an investor and business owner myself, I like to be making money from my enterprise from day one. Of course there are capital costs in a "start up" such as BFW but as the listed life of this company is now almost a year old, the promise of profit doesn't look good as the company expands.

The company should be making a small profit already, excluding the almost $1 million cost of the IPO, but one of the answers why they might not be could lay here:

This included an additional elected marketing spend in NZ of $339,304 over and above the franchisee marketing budget for the period.If the franchise model is a sound one as the company expands then why would the franchisor spend money above and over the amount the franchisee pays to do the marketing? Should the marketing fee be bigger given that $339,304.00 is not a small amount of money when you consider the small revenue base and small number of stores at present?


A big worry is the progress of the brand in Australia


BurgerFuel Australia unaudited system sales for the period 1 April 2007 to 31 March 2008 are $1,453,892.


With two stores opened in OZ, one in Kings Cross opened since October 2007 and an established one in Newton, the revenue of the two combined of only $1.45 million is tiny.

An outlet based in Sydney's Kings Cross should be doing well north of A$2 million per year to cover the high costs of being based in that area. Rents are high and as this store is company owned it will have to do much better as to not continue to be a drain on franchisor company profit.

All is not lost though!

One small promising light shines from the deserts of Dubai where BFW signed a Master Franchisee agreement in May with Al Khayyat Investment Group Investments LLC to open a store there latter in the year.

The financial details of that deal are sketchy but we all wait in hope for good sales figures for the first few months to help give investors an indication if the concept will fly in a market already saturated with manifold more times competition for the disposable entertainment buck than the company faces in Australasia.

Burger Fuel reminds me of the 42 Below Vodca company, which was listed a few years back. It had a very strong brand and loyal following and struggled initially because it didn't have the funds or systems to take the company and its product to the world. It never made money but was eventually sold to Bacardi for NZ$138 million in 2006 and they had the backing and moola to take the brand somewhere.

Is Burger Fuel destined to be bought up by a YUM! or one of the many worldwide operators of fast food brands?

You never know, Josef Roberts, a director of Burger Fuel, did just that when he started up the Australasian Red Bull company and then sold it to the parent .

Judged by the latest profit announcement this could be Burger Fuel investors only hope for a return on their money.


Related Links

Burger Fuel website



c Share Investor 2008