Burger boss has eye on Middle East

Josef Roberts was hunting for a New Zealand-owned brand that could be exported overseas. Photo / Doug Sherring

Josef Roberts has a "no regrets" policy in life. Therefore he does not regret the decision he and his fellow BurgerFuel shareholders took in September 2007 to list the gourmet hamburger chain on the stock exchange.

Were they bonkers? Possibly, he says. Certainly, the company's share price has gone nowhere but south since its debut at $1.

But he and founder Chris Mason weren't to know that the tidal wave that would become the global financial crisis was already gaining momentum.

And after four years on the NZAX, the homegrown burger franchise has just reported its first modest profit. It's holding its line, Roberts says. "Generally, we're on the right track."

The former property developer knows a thing or two about sticking with growth businesses. To borrow a phrase, he is the man who gave Red Bull its wings.

After losing his shirt when the 1980s property bubble burst, he went looking for a new enterprise. The story goes - and he swears it's true - that his eureka moment came in 1995, late at night in a Slovenian jazz bar.

Worse for wear and in no need of more alcohol, he spotted three cans of Red Bull on display. The energy drink was illegal at that stage and the barman refused to sell him any.

That did it. He offered $150 for it, and the New Zealand energy-drink market was born.

With no marketing or beverages industry experience, Roberts had to persuade the Austrian and Thai companies behind Red Bull to deal with him. They wouldn't answer his calls, so the Kiwi got on a plane to Austria and sat in reception until he got a meeting.

Energy drinks were not available in New Zealand at the time. Years of battles with health and customs officials, unconventional guerilla-marketing campaigns and deliveries to bars in the wee hours were to follow.

He persevered because he believed in the potential of the category. "I just felt that intrinsically there must be a legitimate way to sell this product in New Zealand and Australia, so how do I go about achieving it?"

His doggedness paid off. He sold the Australasian company back to Red Bull in 2002 in a multimillion-dollar deal.

He first invested in BurgerFuel in 2004, when the company comprised just a handful of stores run by Mason.

Roberts liked the brand. "I was looking for something to build that was ... New Zealand-owned and something that we could export."

The company and its capital requirements grew and he found himself getting more involved. He said it wasn't his plan to be working there every day, but "this is one of the things about going public, I realised that I needed to get involved in the detail".

Between them, Roberts and Mason own just more than 80 per cent of the company so the stock is not particularly liquid.

Add that to the general lack of liquidity on the New Zealand bourse and small transactions of BurgerFuel Worldwide shares can have a big effect.

"We're either the biggest loser or the biggest gainer every now and then, and that can be on the movement of $100," Roberts says.

Another downside to being publicly listed is that as a growth company it ends up making every decision under the microscope of the NZX's disclosure rules. But there are advantages - the company now has great governance practices, good levels of accountability and credibility when taking the brand to the world, he says.

Which is where BurgerFuel is focusing, specifically in the Middle East. It has just opened its first store in Iraq.

This came about following its move into Dubai in the last financial year. The idea was that tourists and business people would see the outlet and cotton on to the concept. "Iraq was a direct result of the businessman from that country having a burger in Dubai."

The world economy collapsed just as BurgerFuel started in Dubai, and the business went backwards rapidly. The global financial crisis has probably cost it two years in terms of its ability to expand, Roberts says.

In November last year, the company announced it would close a company-owned store in Sydney and focus on the Middle East.

BurgerFuel now has seven more stores under construction there. Roberts says the region has a large and affluent population with a desire for quality brands. Unrest is an issue, but people still need to eat.

BurgerFuel has made a concerted effort to move away from company-owned stores, particularly in other markets, Roberts says. Its Ponsonby store remains the only one.

"Right now our resource is best put into supporting the brand, as opposed to operating stores. This is a lot more than a marketing company. We are a manufacturer, we're a retailer, we manufacture on demand and we change the product to suit. So there's not much we don't do."

That means investing in people, systems and brands, he says. "You have to invest to build a global brand, and it does take time. It's a huge job, I don't mind telling you that."

But after years of being in investment mode, the company has just reported its first net profit - $33,500 for the year to March, compared with a $552,900 loss last year and a $710,000 loss in 2009.

"I was determined to see if we could more or less break even on the income and revenues that we have now, because that to me gave me an indication of what future growth could add to the business if we could keep costs in line."

Stuart Deeks is a cheerleader for BurgerFuel's focus on the Middle East. He is director of Kiwi-owned coffee franchise Esquires, which is also expanding in the region. Esquires has three outlets in Saudi Arabia, two in the United Arab Emirates and one in Bahrain.

New Zealand businesses' lack of focus on the Middle East is "a wasted opportunity", Deeks says.

"I reckon we should just be pouring huge amounts of time, money and effort into getting people to know about New Zealand and what we do."

He says Middle East populations have money and love Western concepts, but don't like Americans and aren't too keen on the English or Australians either which makes New Zealand the good guys.

"We don't interfere in other people's politics; you're welcome to come and visit us any time. We're the friendlies in the Western world, and there's not many of them."

NZ Herald columnist Brian Gaynor has said recently that the NZX has a shortage of growth companies but there is a clutch worth watching, including BurgerFuel.

The company is making steady progress but it is still a long way away from achieving the growth outlined in the prospectus, Gaynor wrote.

BurgerFuel's strength is that it owns its brand, which it can licence to others, Roberts says.

It employs 600 people locally and also exports New Zealand beef. "There's not much more we could be doing for New Zealand in terms of the model."

It is also looking at expanding at home and has had a lot of interest from potential franchisees, he says.

"The targets, really, are about just wanting to build a successful New Zealand business over time."

BurgerFuel around the world
* Listed on the NZAX
* Share price: 36c (Friday)
* 30 outlets: 27 in New Zealand; 1 in Australia; 1 in Dubai; 1 in Iraq
* 7 more Middle East stores under construction