Click Here for great Idaho Potato Recipes!

Why Chanticleer is Buying Up Burger Brands

Filed under Business, Expansion, Fast Casual, Marketing

Carolina Roadside Burger at American Roadside BurgersChanticleer Holdings Inc. is buying burger concepts, although its entry into restaurants came in 2006 when it bought a minority interest in wing-concept Hooters of America Inc. (HOA), that brand’s parent company. In 2011 the Charlotte, N.C.-based firm exercised its right of first refusal to acquire HOA and it operates or franchises more than 400 Hooters in 28 countries. It shifted to burgers in 2013 with the purchase of then-five-unit American Roadside Burgers. It followed with acquisitions of The Burger Company., a Charlotte burger restaurant; the 20-location BGR: The Burger Joint chain, based in Lansdowne, Va.; and, in March, Charlotte-based BT’s Burger Joint, which has four locations. Its 2014 acquisition of fine-dining seafood restaurant Spoon Bar & Kitchen in Dallas proved to be one of its few missteps. But Chanticleer’s burger buying isn’t finished as was clear from BurgerBusiness.com’s interview with Chairman-CEO Mike Pruitt and Rich Adams, president and COO of Chanticleer’s American Burger Co. subsidiary.

Tell me why you love burger concepts so much.
Mike Pruitt:
Well, I’m an American! But Chanticleer started as an investment fund and to some degree I still consider myself an investor first. Our foray into restaurants was driven by an investment we made in Hooters back in 2006. [Acquiring Hooters parent in 2011] put us in in a big way. Once we got in, we started looking at what might be the best opportunity to take advantage of the platform that Hooters allowed us to develop, both in terms of a network of people, and also our having restaurants in five parts of the world with a very experienced team.

The idea of taking America abroad really became our focus internally. But out of the blue we had the opportunity to buy American Roadside Burger. We wouldn’t have bought it if we didn’t have the right guy to operate it, because we’re not operators. But Rich Adams, having been part of a very successful turnaround [as an executive] at Bojangles came to me and said, “If you’re interested in buying this business, I’d be interested in coming and running it for you.”

American Roadside was a fairly low-visibility brand at that point, from my vantage point at least. What did you see in the concept?
MP:
It has a really good following at its Smithtown, N.Y., location, which was the original. We’re based in Charlotte and it has a couple of locations here. They were just opening in Greenville, S.C., and Columbia, S.C., hadn’t opened long before. The product was really good. What struck us in doing the deal was that when we brought in Rich, the investors in the deal brought an additional $2.5 million up to the table to kind of get us started in the category. That was a good vote of confidence.

How does The Burger Company fit with it?
MP:
That’s a great geographical fit. It’s a great product with a slightly different opportunity in terms of how they did business. We were always looking for the opportunity to get into the franchising business whether we did it organically or through an acquisition. When we were introduced to BGR: The Burger Joint, that opportunity really quickly made sense for us to acquire it and put us where we wanted to be.BGR burger and shake

BGR has overseas potential?
MP:
Oh they’re already there. They sold a 50-store deal to a couple of parties in the Middle East. They’re in Oman and Dubai. Their first is open in Kuwait City and two more are under construction.

We feel confident that our other concepts would have worked internationally if we had gotten the franchising part off the ground. But now that we bought BGR, that will be our franchising vehicle. It doesn’t mean we won’t incorporate some of our other concepts to give a different option to franchisees over there.

From my experience with Hooters, it would difficult to do business in most of Europe without a pretty good beer or bar presence. So BGR’s current prototype—although they do sell beer and wine—doesn’t have enough of the bar presence that may be required to succeed. The guys who run our Hooters in the UK have looked at BGR and have said it would need a little more bar presence for the UK.

But you’re looking to expand in the U.S. as well?
MP:
Sure. We’re still looking and hope to acquire more regional concepts, and if we do that we would not look to open BGR location in those markets and compete against ourselves. It could be a combination of other regional concepts and maintaining their brands and their people and consolidating back office functions rather than solely expanding BGR.

Is the BT’s brand replicable?
MP:
I don’t see us necessarily running out and opening a bunch of BT’s Burger Joints. It just was a perfect add-on acquisition to our business here. It has four locations; the three in Charlotte are in different areas than we currently are. The way they’re set up and do business is very similar to ours. And it puts us in a new market—Asheville, N.C.—which we think is a very good market.

We’ll take our time in figuring out how best to integrate it. The parent company [for burger concepts] is called American Burger Co., which Rich runs. It has been the acquirer of American Roadside Burger, BGR The Burger Joint and BT’s. We’ll figure out the best way to integrate BT’s, but I’m not sure opening more stores under the BT’s brand is the right plan now.

Might you convert it another of your brands?
Rich Adams:
As Mike said, we’re looking at regional players and trying to build in markets where we have those players now, where we already have a foothold and can help them leverage it even more. BT’s is very similar to American Roadside Burgers. We’ll take it slow and look at the best parts of both brands. I can see the two blending eventually under one name and growing out the Charlotte market under that name. Just from a marketing standpoint, it gives you more buying power and leverage.
BT's Burger Joint

Are there regions that interest you most?
RA:
Well, whatever regions we are in. Whenever we do expand it will be contiguously. I’ve been with other brands where they branch out too far. Especially when you’re in the franchising business that can make it hard to give the proper support. So we’ll grow contiguously and set people up to succeed. But there aren’t any other particular areas where we’re saying, “We want to go there.”

From an international standpoint where we already have Hooters restaurants and operators under the Chanticleer umbrella. Those are markets we would look at because we already have operators there.

Mike Pruitt: One of the things that separate us from the other burger companies out there, I believe, is that we have such a strong international presence. From a franchising perspective, at least in the short term, we probably could see some more franchise agreements internationally than domestically.

But from a company-store perspective, we certainly are going to defend our market share in D.C., Northern Virginia and Maryland under the BGR umbrella and in the Carolinas under American Roadside Burger and BT’s.

The interest in Spoon Bar & Kitchen seems an outlier.
MP:
I have the luxury of having partners on the Hooters side who are arguably the best restaurant investors over the last 20 years. I have a wealth of people around me and we all talk bout what’s hot and growing and exciting and a good value. One of the areas we were really interested in was fast-casual seafood.

[Spoon Chef-owner] John Tesar is an amazing chef and Spoon won “Best New Restaurant” in all of Texas when it opened and just plain “Best” the second year. Some of the best meals I’ve ever had I had there. We bought it for stock and the thought was to open some fast-casual versions in the seafood space using John’s reputation. But he started focusing on some other things like Knife [Tesar’s steakhouse he opened last year] and saw an opportunity to put money in his pocket. We started to wonder if it made sense given that we saw immediate opportunities in the burger space. So we mutually agreed to part. We basically unwound the transaction and sold [Spoon] back to him. [It closed at the end of 2014].

You don’t buy the idea that the growth of the burger category is a bubble that’ bound to burst?
MP
: I don’t. I have three children in their 20s. They bought into burgers but into places like ours rather than McDonald’s or Burger King. They just want to know that [a restaurant has] a really quality product using really fresh ingredients and that it’s prepared by people who care. There’s a greater interest in health and we have turkey burgers and veggie burgers in some of our locations. I have male friends who get a burger with no bun.

And in international markets, if you think the lines are long at Shake Shacks in the U.S., try the UK. And Five Guys only wishes it had lines here like it does in its London location. I don’t believe burgers are ever going to go away.