BurgerFuel shares continue to climb

BurgerFuel chief executive Josef Roberts. Photo / Richard Robinson

BurgerFuel's shares have climbed another 11 per cent in early trading, on the back of an 80 per cent jump yesterday when it announced it had signed a deal with the founders of the Subway restaurant chain.

The deal gives the New Zealand company the option to expand into whatever country it chooses, says the fast-food firm's chief executive.

BurgerFuel Worldwide yesterday announced an agreement with Franchise Brands which, subject to shareholder approval, would see the US company buy a 10 per cent stake of the NZAX-listed firm.

BurgerFuel's share price rocketed 80 per cent yesterday following the news, closing at $2.70. In early morning trading today, its share price climbed another 11 per cent to $3.00.

Investment firm Franchise Brands was set up by Subway founders Fred DeLuca and Peter Buck and under the terms of yesterday's deal it has the option to increase its stake in BurgerFuel to 50 per cent over the next eight years.

The agreement would also see Franchise Brands support BurgerFuel's expansion and help its push into the United States, where the company hopes to have a presence this year.

The deal was "definitely" the biggest BurgerFuel had landed since it listed, said chief executive Josef Roberts.

"Franchise Brands is the company that allows the introductions and collaboration into Subway networks. So we have the opportunity to really go into any country we feel is the right move for us but right now the focus will be on the US," Roberts said.

Subway has more than 40,000 franchised stores in more than 100 countries.

With Franchise Brands, BurgerFuel had found a "strategic investor" that offered "way more than just cash", Roberts said.

"They see the gourmet burger market as a category with significant potential and see BurgerFuel as top of the field so we're delighted to have formed the association," Roberts said.

The deal would give BurgerFuel, which has no debt, cash reserves of $9 million to $10 million.

Burgerfuel has 55 stores in New Zealand, Australia and the Middle East, 54 of which are operated by franchisees.

Roberts said he could not predict what the store number would grow to this year.

"We want to open BurgerFuels at a way faster pace than we have been and this gives us the opportunity to potentially open the order book to be able to do that," Roberts said.

Franchise Brands' 10 per cent stake, at a price of $1.35 a share, is made by way of a new share placement of $5.9 million BurgerFuel shares and the purchase of $2.16 million shares from the company's majority shareholder, Mason Roberts Holdings.

BurgerFuel in December reported a 35.4 per cent increase in total system sales, which includes sales by franchise stores, to $30 million for the six months to the end of September - a record for the half-year period. Net profit fell to $95,691 from $308,372 in the same period in 2012, with the operating revenue of the listed firm up 25.5 per cent to $6.73 million.