Burger Fuel Worldwide: Inside Info?

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

Burger Fuel IPO: Dont buy...yet.

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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c Share Investor 2007

Restaurant Brands FY 2007 Analysis

A $3.6 M loss and a cut in the dividend of 2.5c No surprises there.

Accentuating the less negative and burying all the really negative stuff: big losses, increased running costs, a $70m increase in borrowing and continued capex on KFC.

The biggest worry that RBD have is with KFC. They are struggling with sales, dollar wise and quantity of chicken product sold while at the same time the "transformation" that management keep talking about is going to cost around 60M, with only 25% of refurbishments done and 15M already spent. The big problem with this is that they seem destined to repeat the same updates to stores in 7 or so years time, as they have done 7 years previously.

The rest of today's announcement is really a case of the same old crap but a different reporting day and isn't worth commenting on save the same old mantra that I keep repeating that it is service and I would have to say now(didn't used to be)food quality at KFC and PH that is hurting RBDs sales and bottom line. That is once again missing from management's spin.

We have also heard today a comment about "...whether we will sell the company..." will be announced to the market in about a week. That position has changed somewhat over the last couple of weeks when management announced "...we are talking to several interested parties..."

Today's language seems a spin spun because any "interested parties" have probably lost interest and the comment looks better for management as it perhaps shows that they had some control over any sale when the facts show that the company just ain't a buy.

Sell on the next profit rise.


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c Share Investor 2007

Restaurant Brands 2007 Sales Analysis

The latest sales release from RBD can be described best as, same crap different year.

Lets have a closer look:

KFC

KFC ended the financial year with the highest total sales ever at $182.7m, an increase of 6.3 per cent over the prior year. Same store sales increased 7.1 per cent for the full year, the highest annual same store sales growth.

In pure dollar terms yes KFC is 5m ahead of sales figures of 2002 , less than a 3% increase but when you factor in inflation, at a generous figure to RBD of 3%, that increase in sales is more than wiped out in one year. Extrapolate that 3% out over 5 years and you can see KFC is still hurting badly. I'm being generous to KFC and disregarding increased wages, utilities, raw product costs.

"The transformation of KFC is clearly gaining momentum as we combine store revamps with some innovative new products and a successful promotional calendar," she said today.

Now where did I hear that word "transformation" before. Yes! it was on the cover of the 2000 annual report, That was the buzz word for the year-looks like it was Vicki's' idea because she has wheeled it out again this year.

Transformation, specifically related to KFC in the 2000 report:

"..transformation of KFC with the introduction of innovative burger and snack products and store upgrades..."

AND

"...the KFC brand has been re-inventing itself...the continued store upgrade...provide(s) customers with the excitement of a vibrant,fast moving brand..."

All sounds eerily familiar to today's statement.

Vicki has a focus on marketing even in her press releases, I cant wait for this years report for some new buzz words.

Watch KFC in the face of competition from other chicken chains, notably Red Rooster. KFC is now offering whole roast chickens, as RR has always done. I put the idea of providing roast chickens to the head of KFC 7 years ago but he told me it wasn't viable because of the costs involved-oh how times change.


Pizza Hut

Not much to be said really, the figures speak for themselves:

For the full year, total Pizza Hut New Zealand sales were down 10.5 per cent to $79.7m, with same store sales declining 11.8 per cent.

In the face of competition from Domino's, complacent RBD management have let this brand suffer so much the amount of dough in their pizzas can now be seen from space. I remember Vicki saying something like "...we are not worried about the competition..." when Domino's first came on the scene. Look at Domino's now, we have never been back to PH since Domino's opened and sales figures suggest alot of others have done the same.


Starbucks

Ironically this brand used to be the straggler, now sales are increasing and all looks good. Except it still operates at a loss because operating costs are too high. Rent of some of those CBD outlets of theirs is killing the very reason for them being in business.


Summary

The focus by Vicki and her troupe on style over substance-brand image is just that if there is trouble in the kitchen: high management cost, poor service. There was no mention, and there should be, of service levels and what they are doing to make them acceptable, so we can only assume by the service in front of house that they are doing a big fat nothing.

In the face of competition RBD is an immovable feast: complacent at best and slow to react . Witness the demolition of Pizza Hut by Domino's and then wonder what might happen to KFC in the face of a bigger Red Rooster or Church's Chicken of America(cover your eyes it ain't going to be pretty)

Looking through nearly ten years of RBD reports, one must come to the conclusion that RBD, while going up and down in fortune, as QSRs do, it keeps going further down when it is down and never quite reaching the previous peak when its fortunes are up.

The future does not look good and recent talk of takeover activity(doubtful according to todays spin) may only happen when the next valley RBD gets into is unable to be got out of by spending more shareholders money on a new marketing plan, when it is the S in QSR that is sadly missing from RBD management's secret recipe.


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c Share Investor 2007