Burger Fuel cooks up a Dubai deal

They will be eating Burger Fuel burgers in Dubai soon, thanks to Burger Fuel Worldwide[BFW] management signing a Master franchise agreement with Dubai based Al Khayyat Investment Group Investments LLC - a holding group with diverse business interests ranging from multinational companies, automotive, retail, schooling, leasing and real estate interests.




Related links

Al Khayyat Group
NZX Announcement NBR: Burger Fuel signs franchise deal in Dubai YAHOO:Burger Fuel moves to Dubai
Burgerfuel website

It will be interesting to see the terms of the agreement, presumably it will be similar to the individual franchise agreements operated in New Zealand, Burger Fuel's home. If the Arab franchisees plunck their oil money down and really go for it, then possible investors in Burger Fuel here may get a better picture on how successful the Burger Fuel Franchise operator will fare.

Since the listed company will derive its income from ongoing royalties, currently too small to make any profit on overheads, the development of a larger group of stores will be a good indicator of the company and its long term future.

Personally, I'm still a little skeptical as to why Josef Roberts, executive director of Burger Fuel, and his fellow directors may have leaped so far across the world with their concept before developing it more fully and profitably in Australia.

Two company owned stores in Sydney just isn't a good indicator for future success outside the Australasian market.

I have so many questions about this move I have made a request to Josef ,via email , to flesh out some of the detail of today's announcement. I'm curious as to whether the Dubai company made the first move or if it was Burger Fuel's initiative.

I know there is plenty of interest about this company because every bit of news about Burger Fuel is googled incessantly, this site got alot of BF related traffic today, including a handful from Dubai, possibly kiwi ex pats.

Save for more positive concrete numbers or an indicator that things are improving financially and that the Franchisor business model will work with this type of high end food business, I clearly remain negative on the company when it comes to its present valuation of just under NZ $30 million.

Some questions need to be answered to reassure investors that management are heading in the right direction, given today's surprise announcement.

Hopefully, even though I have been critical of his baby, Josef will return my email. He has been great so far.

Burger Fuel shares were untraded at closing today, which isn't unusual. They last traded April 29 @ 45c.


Burger Fuel Worldwide @ Share Investor


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Discuss BFW @ Share Investor Forum - Register free


c Share Investor 2008

KiwiRail will cost Mainfreight

Micheal Cullen is not Warren Buffett, another individual who has been buying large train sets, like Burlington Northern in the United States. Buffett has bought good assets at rock bottom prices and they are lean and mean operators. This is not likely to happen with the new State run rail company that will no doubt be called KiwiRail.

So ignoring that, and on behalf of the long suffering taxpayer, the Micheal Cullen and Helen Clark twins have just plunked down almost NZ$700 million taxpayer dollars to buy a new train set, with billions more to come to prop up its day to day running, on a business that has never made money.

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• Cullen Pays 6-fold more than KiwiRail worth


Apart from the stupidity of the transaction,and over inflated purchase price and the immediate increase of about 2000 in state employees in a new government department, one of Labour's main aims is to "get all those trucks off the road".

Just like Air New Zealand [AIR] before them and government departments like KiwiBank, taxpayer funds will be used to subsidise an inefficient and loss making business to compete with private enterprise, the very people who are paying the tax in the first place!

Like myself, you would have to be concerned if you were a shareholder of a company like Mainfreight[MFT] or the owner of a smaller trucking company, already struggling with high diesel prices and government imposed regulation and cost.

Long haul operators like Mainfreight are going to face intense competition from the new State run rail company. Subsidies to business who need goods hauled will give an unfair advantage to the rail operator when competing for business.

Further government "protection" of a State rail system, in the form of "climate change" regulations and/or taxes can't be discounted with the current administration, who have shown that they are prepared to retrospectively pass laws to fit their socialist agenda, regardless of sensible business practices and outcomes.

While Mainfreight have both long and short haul divisions and operate trucks from seaports, airports and rail hubs and therefore may be able to transform their long haul business and capital expenditure to focus on a possible busier short haul business-Labour have a goal of doubling current freight volumes, the cost to do this is clear. It will be large.


"In summary, we do not have a large enough or vibrant enough business sector in New Zealand. Economically, New Zealand has been on a long slow decline relative to other OECD countries for close to forty years, and this decline has accelerated in recent years. Surely with the benefit of hindsight, New Zealand governments can recognise that our productive sector is not performing to the level necessary to ensure this nation’s future health and prosperity.

Right now we need bold new initiatives and inspirational leadership. Other countries have found ways to reverse economic decline, and that has involved low company tax rates as in Singapore and Ireland and a reduction in the weight of compliance costs.

Whatever the outcome, Mainfreight has a determination to remain a New Zealand owned and operated business while continuing to pursue global aspirations".

More and more the New Zealand economy slides down the OECD economic rankings as we milk our productive sector in the hope of remaining a first world country with taxpayer funded hospitals, education and social welfare.

There needs to be a clear understanding that the productive sector is the only means by which a country can prosper – interesting, challenging enterprises earning profits are the mechanism which creates opportunities for people to do well for themselves, the enterprise, and for mankind". Bruce Plested, Executive Chairmain, Mainfreight annual report 2007

Now Bruce and his mates at Mainfreight are canny operators in logistics and business in general and will probably manage the increased government interference in their business well, but why should they have to?

The uncertainty that today's decision makes for Mainfreight and other logistics operators is only compounded by a lack of any detailed planning before the purchase of the rail assets from its former Australian owner, Toll New Zealand.

There was no business case done before the purchase by the government, as there was no detail over just how much capital expenditure was to be made to justify such a high purchase price for largely obsolete rolling stock.

Operators of long-haul trucking businesses would do well to lobby their local MPs and hassle them about the cost their decision today will impose on their businesses. Short haul logistics company's, while clearly advantaged, would do well to similarly put their MPs against the wall.

Some forget the reason this turkey was sold in the first place, it was losing $NZ1 million 1994 dollars a day and was costing its clients through slow service, strikes, theft and high prices. Toll have done much better running the business and there is no reason to feel complacent about bureaucrats running the company again.

Regardless of the political implications though, the uncertainty to the logistics industry will cost them millions.

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Related Amazon reading



End of the Line: The Failure of Amtrak Reform and the Future of America's Passenger Trains by Joseph Vranich
Buy new: $25.00 / Used from: $9.99
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c Share Investor 2008

LIVE BLOG: Warren Buffett news conference

Over at Everything Warren Buffett there is a live blog of a news conference currently being given by the Warren Buffett himself. This is the news conference where the likes of Bloomberg, Reuters and Forbes are getting information to write the current Buffett headlines.

There is nothing like straight from the horses mouth, rather than journalistic interpretation or inaccurate reporting.

This is almost required reading for all investors, especially during these turbulent times, and definitely essential reading for Warren Buffett fans like myself.

Go to Live Blog

Current Berkshire price:

Berkshire Hathaway Inc US%3bBRK.A 133600.0 -300.00 -0.22% NYSE

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Visit Everything Warren Buffett

c Share Investor 2008

New Political Animal URLs

For ease of memory, even just for me. Political Animal can now be found at the following two new urls:

http://www.darrenrickard.com/
http://www.politicalanimal.info/

c Political Animal 2008