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There has been a response to more information asked from the Burger Fuel Employee and BF itself has responded:
Share Investor
Can you enlighten us further?
The reply was
Darren,
Ok, first things first. This is an ‘Official’ BurgerFuel response. But don’t worry this isn’t a generic response as we’re taking on board what people are saying about our IPO. Neither are we responding to take pot shots at you, we are fully aware that this investment is not for everyone and that all are entitled to their opinion on the BurgerFuel IPO.
Now, down to the numbers (which is what I’m sure you’re most interested in). The press release has some but not all the info contained in the prospectus (which we suggest anyone interested in the BurgerFuel IPO or expanding their portfolio in general should read – hard copies available in-store).
There are a few figures in your post which need to be corrected first to make sure we are all working off the same figures. Our Total System Sales (that is, the total sales of all the BurgerFuel stores) last financial year was $16.4M (plus GST). At the end of 31 March 2007 we had 19 stores. We can’t just divide $16.4M (plus GST) by 19 to get an average as stores open up at different times during the year. Our average sales (not including any stores not open for more than 6 mths in the year) were $20,727 per week (plus GST). So we are way above the $150k a unit turnover (closer to $1M-$1.1M per year as an average). You can see pg 53 of the Prospectus for more info on our averages and sales totals.
The $3.1M you refer to is the revenue coming into Burger Fuel Ltd (for the 9 mth period to 31 Dec 2006), it is not the sales figure for all our stores. BurgerFuel Ltd had an operating surplus. You may argue that the surplus is not a large one, but as we’ve outlined in the prospectus, significant investments have been made into marketing our brand, securing intellectual property, developing our systems and preparing the company to go global. The $250k loss relates to Burger Fuel International Ltd which carries a head office and satellite kitchen infrastructure for our one Aust. store. Essentially, we have already geared Aust. operations so that they are ready for us to start expanding as soon as we’ve raised funds. The site plans for our 2nd Aust. store in King’s Cross have already been submitted to council.
We’re certainly not trying to hide anything from the public, there is a lot of info in the prospectus (including the above figures) clearly set out. Again, we suggest that anyone looking at the BF IPO should get a prospectus and read it – hard copies are now available in-store.
Potential investors should look at the fact that the decision to list has been made in conjunction with Grant Samuel who have modeled the company and its prospects. Potential investors should also look at the Board of Directors (pg 45-46 of the prospectus)– these are not the kind of people that would get involved with a company without a thorough analysis of its potential.
Lastly, we know that the BF IPO is not for everyone. We want people who believe in the brand (and there are a lot out there) to invest if they think we’ve got what it takes to go global.
If you’d like any more info please read the prospectus or, if you’d like, we’d be happy to answer any other questions (within reason) or organise a phone interview for you.
For the many that view this blog, here is some press that will hopefully balance your opinions on things.
TVONE - Brian Gaynor on ASB Business (comments on BF IPO around the 2:20 mark): http://tvnz.co.nz/cda/tvnz/video_popup_window...
In the end, however, just remember that the NZAX is “specifically designed for fast-growing, developing companies” and that’s what BurgerFuel is.
Either way, thanks for talking about us, we appreciate your opinion.
The team at BurgerFuel
www.burgerfuel.com
PS Regarding the ‘Fuel Employee’, we’re not sure that it was one of ours. However, all our employees are extremely passionate about the brand and the company so we know that many of them would want to make sure that key facts were correctly represented.
Should I make a call and let you know more or has the Burger Fuel Correspondent given you enough info?
Any questions you would like to pose should I make a call?
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c Share Investor 2007
There are many things that are still unclear in the manifold press releases regarding the Burger Fuel IPO.
I understood the 15M from the IPO was for expansion of outlets but then the IPO according to some, is about the royalty revenue from franchising the Burger Fuel concept.
The figures given in the press releases(I havent read the prospectus as I cant seem to download it from the BF website) seem to stress the 3M odd income and 250,000 odd loss for the last 9 months or so.
One might imagine then that BF may want to open some company owned stores with the 15M. Lets face it, to fit out, train staff, leases and the like to start one of those stores is well north of half a mil, so you aint going to get more than 20 stores for that 15M IPO moola.
There is also that key comment that initial shareholders will have the right to buy shares at $1 again in the next 18 months or so.
Another factor is that public holders only get 25% of the action, so that 3M odd revenue mentioned is less than a million for the likes of you and me.
The real money for this company will be in growing the franchise model. As we have seen in New Zealand Restaurant Brands(RBD) is the poorer cousin to its big daddy YUM! the franchisor.
Having said that though, even if BF grew revenue to 500M (picked high just to prove a point) the typical royalty rate of around 8% of the gross would give 40M in gross revenue for the Burger Fuel Franchisor. Only 25% of that 40M revenue would be available to distribute to public shareholders. After tax and costs less than 10M in profit is available as profit to minority shareholders.
Much has been made of the "brand strength" and the "loyalty" of Burger Fuels' customers but this is typical of niche players in the fast food industry. Once size and scale are increased, this loyalty often wanes as the company culture cant help but change as it grows.
An important understatement by BF management in announcing this IPO is the amount of competition that they face in this sector. New Zealand has some competition but in markets like Sydney, where they have one store, there are several many similar to BF. One also must remember, having success in a market like Sydney is no gaurantee that it is going to work further afield.
It appears that management want to grow this business quicker than they have been and one must ask why, if the business is that good, why they wouldnt get a bank or private equity crew on board to get a little larger, prove their concept has scalabilty, then come out of the closet for some public funds, for goodness sake they are still holding 75% of the company!!
The lesser disclosure requirements due to a listing on the NZAX ,coupled with the bulk of the company still being management owned, mean that human nature, as it is ,favours the dominant player in this scenario and that means the majority of the power and future gain, if any, will be in the hands of those at the top of the tree. Fine if you have full disclosure but here we dont.
The recent Blackstone IPO in the United States is a similar scenario to this one. Public participants hold a minority of shares and management will continue to run the company just like a private one. Both will only want to know you if they want more capital.
Like any investment, before you consider plunking down your hard earned dollars on this one, take a good long read of the Burger Fuel prospectus, then forget it and read the overwhelming negative comment being made about this IPO. If you are still interested after that and are prepared to take a huge risk, go ahead.
It is possible, if you really want to buy Burger Fuel shares, that the SP will adjust to below the IPO price of $1 once the hype of the IPO is over and the reality of the deal sets into the market.
Don't plunk down more than you can afford to lose.
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c Share Investor 2007
There maybe mostly bad press going around about the internet concerning the BurgerFuel Worldwide [BFW.NZ] IPO but it is a VERY popular search on the search engines "Burger Fuel IPO" comes up for my blog search on a regular basis.
Interest is very high.
A poster calling him/herself "Fuel Employee" has said the following very recently in response to the following post of mine:
Burger Fuel IPO: Dont buy...yet.
The upcoming Burger Fuel IPO poses some interesting questions.
They are asking for 15M for a 25% of the company and value the whole shooting match at 60M. That is steep for a company with only 3M sales and a 250,000 loss.
20 outlets makes the unit sales an average of around $150,000 turnover a unit. Not good at all. You should be looking for at least $500,000 a unit for an outlet like that.
The 15M raised is going to be used on expansion and there is of course the possibility that the majority owners will want continuing cash inputs to keep growing.
I think at $1 a share you could pick up this puppy for less than that once we see continued losses mount.
There is alot of competition in this sector, in NZ and abroad, where BF intend to do business.
Having said that, the long-term future of the company could be worth a punt but I have reservations. I like companies to be making profits from day one and for expansion to be funded from profit.
I would avoid at this stage.
I wont be buying at the IPO, perhaps later.
Fuel Employee wrote
I think you'll find the the 3M sales and the $250,000 odd loss is a reflection of Burger Fuel head office only. The Ponsonby store alone turns over between 1.5 and 2M per annum.
I replied
With the noticable lack of info from the Burger Fuel boys how are we to know what you say is true, im not accusing you of being less than honest though.
Your figures would give BF conservative sales of $40M a much better prospect, if what you say can be validated.
As far as I can tell though ,the companies revenue-and the company at the centre of the IPO- be it food sales or royalties from frachisees the stated income is just over 3M with a loss of 250,000 odd.
Until we we out here in the unwashed uninformed world(it appears you are better informed than us)hear anything different then we can only go by what we know.
Can you enlighten us further?
The poster colours himself/herself as an insider.
A question to pose is. If "Fuel Employee" is a genuine employee then why would he/she risk management ire if caught? Then again if this individual is part of management are they just trying to counter the overwhelming bad press that this Burger Fuel IPO has garnered thus far and would you want to be involved with management that sneaks out info to the public instead of fully divulging it from the outset.
Share Investor smells a rat in the burger kitchen.
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c Share Investor 2007
The upcoming BurgerFuel Worldwide [BFW.NZ] IPO poses some interesting questions.
They are asking for 15M for a 25% of the company and value the whole shooting match at 60M. That is steep for a company with only 3M sales and a 250,000 loss.
20 outlets makes the unit sales an average of around $150,000 turnover a unit. Not good at all. You should be looking for at least $500,000 a unit for an outlet like that.
The 15M raised is going to be used on expansion and there is of course the possibility that the majority owners will want continuing cash inputs to keep growing.
I think at $1 a share you could pick up this puppy for less than that once we see continued losses mount.
There is alot of competition in this sector, in NZ and abroad, where BF intend to do business.
Having said that, the long-term future of the company could be worth a punt but I have reservations. I like companies to be making profits from day one and for expansion to be funded from profit.
I would avoid at this stage.
I wont be buying at the IPO, perhaps later.
See press release below
Burger Fuel looks for extra capital filling
NBR staff
Josef Roberts & Chris Mason
Fast-food franchise BurgerFuel is set to list on the NZAX and is looking to raise $15 million in capital.
The company is issuing 15 million shares at $1 each, with the option of purchasing additional shares at the same price in 18-months time.
The issue values the whole company at $60 million with public shareholders owning 26.7 per cent.
The remaining shares will held by staff, associate directors and the promoters of the offer, as well as the founder and managing director of the company Chris Mason and Executive Director, Josef Roberts.
Both Chris Mason and Josef Roberts have entered into stand-still agreements running for 12 months in respect of their shares.
The funds will be used to fund expansion into Australia, Europe and the US. At present, BurgerFuel has 19 outlets in New Zealand, and one in Sydney.
Prospectuses can be viewed at www.burgerfuel.com/shares
The company says it is taking an innovative and irreverent approach to capital raising, including a provision for 70,000 of its "VIB members" ("Very Important Burger Connoisseurs") to get the first chance to purchase shares.
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Discuss BFW @ Share Investor Forum - Register free
c Share Investor 2007
