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SUBWAY FOUNDERS' COMPANY TAKES STAKE IN BURGERFUEL

by Simon Lord,
last updated 10/02/2014

in this article:

14 January 2014 - A massive US franchisor is to take a stake as shareholder and franchise advisor with NZ-founded BurgerFuel Worldwide

From Ponsonby to Riyadh: BurgerFuel's success in the Middle East has attracted prime investors to the business - next stop USA?BurgerFuel, the company that started with a single outlet in Auckland's Ponsonby Road, has caught the eye of the biggest restaurant franchise in the world. In a move that could see the publicly-listed BurgerFuel enter the US and other key markets, Franchise Brands LLC is to take a 10 percent stake in BurgerFuel worldwide with an option to increase to 50 percent.

Franchise Brands (FB) was created in 2005 with the support and guidance of the founders of Subway restaurants, Fred DeLuca and Dr. Peter Buck, in order to invest in and offer guidance to small and mid-market companies with experienced management that are seeking to expand their businesses. Subway restaurants is the largest single brand restaurant chain in the world with over 40,000 franchised stores in more than 100 countries.

BurgerFuel Worldwide (BFW) and FB have also entered into an agreement in which it is intended that FB will collaborate with BFW to grow the business by providing knowledge and support as well as global development opportunities, including in the United States where BurgerFuel plans to open restaurants.

FB will buy an initial 10% stake in BFW with an option to increase its holding up to 50% over 8 years. The stock is guaranteed by Mason Roberts Holdings Limited (MRH) the largest BFW shareholder with a current holding of 80%. The initial 10% stake will comprise a $5.9M placement of new BFW shares and the purchase of $2.16M of shares from MRH. The purchase price is $1.35 per share, the trading price when discussions were first initiated in April last year. BFW confirmed the deal, including due diligence, was complete and it is anticipated that shareholder approval will occur shortly.

BurgerFuel shares immediately climbed 40 percent to their highest ever price of $2.10 on the news, and have since increased further to $2.50 - find current value.

BFW went public in New Zealand following the launch of its prospectus in 2007, offering shares with their burgers to customers in a typically bold and somewhat controversial approach - read more. Although ineffective in attracting shareholders at the time, the publicity alone was worth a lot of money. The company has improved its share price in the past two years as it has become established in the Middle East, and the bold move has now paid off with the announement of FB's interest.

BFW Chairman Peter Brook said, 'This is extremely positive for the future of BurgerFuel. It’s an incredible opportunity for the company and very exciting for all our shareholders. Bringing on board a strategic investor with major distribution, experience and unsurpassed global reach will drive significant value for BFW over the coming years. We are delighted for all of our shareholders.'

BFW Group CEO Josef Roberts said that, 'This gives us the opportunity to turbocharge our business by going into the US and other countries alongside the largest franchise company in the world. BurgerFuel will retain control over its unique brand and operating style and we will remain a publicly listed New Zealand company.'

Roberts said the agreement was negotiated directly with Lisa Oak - FB Managing Director and Vice President of Franchise World Headquarters LLC. 'I met with Fred [DeLuca] and Lisa early last year, since then we’ve been working together to conclude the deal, which we are all pretty excited about. This is a major event in the history of BurgerFuel.'

BurgerFuel Founding Director Chris Mason said, 'Our vision and objective was always to develop the brand globally and build a big business. We want to make BurgerFuel a household name around the world like it is in New Zealand and like it’s becoming in the Middle East. We’re only just getting started.'

The deal will see BFW with cash reserves of around $9-10M. The company has no debt.

A date for the BFW Extraordinary General Meeting for shareholders to approve the deal will be notified shortly.

Read why this deal is a milestone for New Zealand franchising.

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