Burger Fuel Worldwide Annual Meeting Scripted addresses

11th Annual Meeting of Burger Fuel Worldwide Ltd, Thursday 30th August 2018 at 2.00 pm Chairman's Address, On behalf of the board, I would like to welcome you all to the 11th annual BurgerFuel Worldwide AGM and thank you all for your support as shareholders. For those of you who haven't visited here before, we would also like to welcome you to BurgerFuel HQ. This building is the heart of the deeply unique BurgerFuel brand and it is our pleasure to be able to host you here today. I would now like to review the main events of the past financial year for the BurgerFuel Group of companies. A net loss after tax for the period of $463,062 was reported. Group Operating Revenue increased by 10.9% to $24.8M. This was largely comprised of sales revenue & long-term recurring royalties from existing and newly opened BurgerFuel restaurants. BurgerFuel Total (unaudited) System Sales are up 5% to $105M for the 12-month period. The total number of BurgerFuel restaurants operating globally as at 31 March 2018 was 80. FY18 was a pivotal year for BFW, and saw the Company undertake many major strategic changes in order to refocus the business on growth here in New Zealand, where we see great potential for further profitable development as a Group. Despite withdrawing from the collaboration agreement with Franchise Brands, we decided to establish an exploratory store in America as much of the preparatory work had been done. We opened the first USA-based company owned and operated store in Broad Ripple, Indianapolis in May 2017. The store opened strongly but has experienced mixed results over the first 12 months of operation. At the end of FY18, the Board decided that without a US partner, the financial undertaking required to further establish and expand the brand in this market was too high for a potentially unknown return and that resource was better dedicated toward development here in New Zealand. Thus, the Master Licence Agreement for BurgerFuel USA was sold to BurgerFuel founder, Chris Mason, who still sees potential for both development and the possibility of a USA partner for that market. BFW has returned to its primary function as a Master Franchisor. The agreement included the purchase of the single company-owned store in Indianapolis. As part of the agreement, Chris Mason resigned from the BFW Board of Directors in order to ensure that independent governance at board level was maintained and to allow Chris's focus to remain firmly on the development of the USA only. Some additional costs were incurred as part of this process, and these are shown in the accounts. This move will allow BFW to re-focus resource and capital on both the development of the BurgerFuel brand, supporting the existing BurgerFuel markets and the exploration of new opportunities here in New Zealand. BFW independent director John Pfannenbecker also stepped down from his position on the board of directors in November 2017. John was appointed when the Franchise Brands collaboration agreement was in force but following the passing of Fred De Luca and the end of the Franchise Brands partnership, the board accepted John's resignation as independent director. The board thanks John for his service to BFW and wishes him well for the future. Shareholders will be aware that we have recently negotiated to buy back the shareholding in BFW held by Franchise Brands LLB in order to formalise the end of this relationship. In July, BFW purchased 5.27% of the 10% holding in cash. Subsequently, we were able to negotiate very favourable payment terms with Franchise Brands that will enable the Company to pay for and cancel the remaining balance of 4.9% over a period of eight months. This has triggered the need for shareholders to vote, meaning that one of the resolutions at the end of the meeting today will relate to the Company's decision to complete the purchase of the balance of these shares from Franchise Brands. Across the rest of the BurgerFuel business, we have continued to focus on the growth and maximisation of our existing store network in New Zealand and in the Middle East. The board continues to see ongoing potential within the BurgerFuel brand to drive revenue via both existing and new streams and it is our objective to pursue these pathways towards increasing profits year on year. It has become clear to the board over the last two years that international exploration and development has become an expensive, time consuming and ultra-competitive proposition in today's rapidly expanding retail food category. The directors feel that the growth potential for BFW lies here in New Zealand, where we have intimate knowledge of the market and the ability to move the Group forward into profit. Our strategic direction is now to transition into a multi-brand group in New Zealand where we have in-depth knowledge of the market and can capitalise on our years of experience gained here. The Winner Winner Chicken Shop brand was acquired by BFW in December 2017. This marks a new era for BFW, as the Group looks to diversify into the development of other brands, utilising our strengths and years of experience in franchising, marketing and systemisation. In addition to the acquisition of the Winner Winner brand, we are pleased to announce that we are close to launching a new brand that has been developed here in-house at BFW. We will, of course, also continue to support and work alongside our established BurgerFuel partners in the Middle East, where there is also more room for development of the BurgerFuel brand. The board is very positive about the opportunities available to us in New Zealand and looks forward to sharing more news of other potential business activities, both inside, and outside of the BurgerFuel brand, over the coming year. The Company expects to move towards profitable growth in FY19 and based on this, it is our intention to review our dividend policy for the years following. Chief Executive's Address Good afternoon everyone and welcome once again to our 11th AGM. It's certainly been a busy year for BFW and I'm looking forward to sharing with you some more information about our new strategic direction. In FY18, alongside continuing to develop and support the BurgerFuel brand in New Zealand and the Middle East, we opened our first store in the USA, commenced development of a new food concept, purchased the Winner Winner brand, moved to exit Australia and sold the USA Master Franchise to BurgerFuel founder Chris Mason. As Peter mentioned, the resource and capital required for international development has become too much for us to keep expending. This, coupled with the increasing length of time required to establish concepts in new, ultra-competitive markets, has all pointed to the need to change direction. These factors have forced us to review in detail, our strategy for growth, so that as Peter stated, we can focus on moving the Company into profit. Firstly, I would like to talk about BurgerFuel USA. A lot of capital - both time and money - went into our USA venture. Securing the Subway, Franchise Brands partnership was, for me, a massive business achievement. I had developed a personal relationship with Fred Deluca the Founder of Subway and his passing and the subsequent loss of the Subway and Franchise Brands partnership can only be described as devastating to our aspirations to become a global burger brand. We had that huge opportunity in the palm of our hands and were well underway with the rather enormous task of stitching ourselves into the Subway network. I know that all shareholders have been extremely disappointed at the loss of this partnership - none more so than myself. Many of us have lost personal wealth with the erosion in our share price that followed the end of that partnership. However - we must all accept that this is business, and this is the risk we take in making investments where the outcome is sometimes simply out of our control. Last year became all about picking ourselves up, shaking off the dust and looking for how we recover and move forward. We are still a great New Zealand company with many options and that is what I, as CEO, am focused on. Later in the meeting Peter will discuss the resolution to purchase back the remaining Franchise Brands shares at a significant discount to the current market price. I simply wish to thank Franchise Brands for their gracious exit and the very generous offer afforded to us, to allow us as a Company to purchase back and then to cancel, their 10% shareholding over a comfortable period of time. This will end this chapter in the history books of BFW and will of course increase the ownership percentages of all shareholders. Following the opening the first USA based store, we reviewed the ongoing expenditure and resource that would be required to support and further develop the brand in this market. We had to ask ourselves if this this was a good use of our resources to continue development as a small NZ company relative to a massive USA market. The answer was no - we cannot undertake this ourselves - we must have a large, local USA partner for BFW to continue supporting the requirement for big amounts of cash and time needed to penetrate that market. Chris Mason who is based in the USA remains enthusiastic and excited about the prospect of making BurgerFuel a success in the USA. Following negotiations, we were able to formulate a deal with Chris which allowed us some of our capital back, and, more importantly, the chance of a modest slice of any prospects in the USA. We feel the brand is in good hands with Chris, who is currently operating the Broad Ripple store under licence and who we understand has plans to expand from that base. Alongside the decision for BFW to exit the USA, the big question we asked ourselves is simply: Where are our strengths? What are we good at? Where can we best succeed? BFW is a company that excels in franchising, systemisation and marketing - and we have extensive knowledge, connections, experience and networks right here in New Zealand. It has become clear to us that this is where the opportunity lies, and with BurgerFuel reaching maturity in store numbers, our focus is now on establishing and growing a successful multi-brand group utilising the strong stable of assets we have at hand. As mentioned in the Annual Report, it is likely that BurgerFuel Worldwide will undergo a name change in the near future as it diminishes its international exploration efforts and focusses on the development of a premium multi-brand business in New Zealand. The acquisition of the Winner Winner brand was the first step forward in this direction. Winner Winner is a great brand with a strong food offering and a well-established reputation in the Waikato region. I highly recommend you stop by to eat there next time you are in Hamilton. We see a lot of potential to grow the footprint of Winner Winner in the surrounding regions, and eventually, right across the country. We are currently focused on systemising the business, as well as securing franchisees for growth and will update the market with information as the Winner Winner business develops. We are now very close to launching a fast, new, modern, innovative food concept to market here in New Zealand that we believe will provide a high-quality food solution to hungry consumers. This concept - soon to be announced, will take us into a different market segment to BurgerFuel and ultimately, we think will be highly complementary. The next step is to get the first store open and to obtain proof of concept. Should this store be successful, we will look to franchise this concept within the New Zealand market. More information will be provided to the market on our new brand in the coming weeks. As stated our focus is now set firmly on supporting and growing the existing BurgerFuel business in New Zealand and supporting the Middle East, as well as building our two new New Zealand-based brands to create positive revenue streams. Additionally, we are always looking at further opportunities to expand our footprint here in New Zealand. I wish to thank you all for your continued support of us as a listed company. The journey to success is full of ups and downs and learnings. Whilst the last year or two have not been easy, we have emerged as a company with a tighter focus on strong local ambitions. We remain committed to achievement and expansion. Chief Operating Officer's Address Thanks Josef. I'd also like to welcome our shareholders to BurgerFuel HQ today and thank you all for your ongoing support. In FY18, our years of experience in systemisation, operational excellence, training and scaling have continued to prove their value as we have worked to not only advance and maximise the BurgerFuel business, but to build a solid foundation for the two new brands in the Group. This has included the refinement and adaption of our key systems, processes, procurement and supply chain for all brands - our goals is to achieve scalability, and economic and operational efficiency right across the business. Whilst the two new brands will sit totally separate to BurgerFuel in the consumer world and provide very different customer experiences, operationally we have been able to adopt and customise many BurgerFuel tools and systems which have created great efficiencies for these new brands. So far, we have managed to do this without adding any additional headcount, which is the product of previous projects delivering higher productivity levels. To remain ahead of competitors in this fast-changing market, grow the BurgerFuel brand, and scale a stable of new brands, we know that innovation, quality product, great customer experiences and world-class marketing are essential ingredients. Every day we drive forward to refine and maximise our current offering in our quest to deliver the ultimate brand experiences to our customers. We have talked about achieving operational excellence in the past and this is now more important than ever as we move the Company back into profit and launch new food concepts. In all markets, we have continued to improve, innovate and fine tune our gourmet food offering as well as increase the speed in which we can sell and serve great food - without compromising on quality or the customer experience. To further maximise our menu and dining experience for customers, we launched a new gourmet, all-natural dessert range in FY18 and these products are performing well to date. In the marketing department, we placed a huge focus on brand marketing in FY18 as part of our efforts to increase the knowledge our customers have of BurgerFuel, our menu, our ingredients and our culture. We have increased our digital capabilities, allowing us to reach more customers with more targeted messaging and there are many projects underway in the business at present to upgrade and refine our digital tools and improve the customer journey. People are the core of our business and we have continued to innovate our training programs to provide an immersive, engaging, comprehensive education programme for our staff that not only benefits their personal development, but improves the customer experience too. Utilising innovative technology and gamification, our word-class training materials are designed to have maximum impact with the millennials using them, and the new brands will benefit greatly from these resources too. In New Zealand we have seen another year of solid results and have continued to strengthen the penetration of the BurgerFuel brand. As previously communicated the brand is starting to mature here in New Zealand however there are still a number of areas that do not have a BurgerFuel outlet. We see potential in these areas and work is underway to franchise these remaining locations. Our company owned stores in Ponsonby, Takapuna and Henderson have continued to provide a good return on investment to BFW, as well as acting as valuable facilities for training, research, product trial, day-to-day operations and customer insights. The Company owned stores portfolio is certainly an area we will look to expand in the future, if, and when, opportunities present themselves. In Australia, as previously signalled, reasonable operating margins have continued to be difficult to achieve despite every effort to move towards profit. Therefore, in July of this year, we closed all remaining franchised stores in Australia and exited the market. These store closures are not material to the Group. In the Middle East, total revenue is down for FY18, but the region continues to be a good contributor for us and we are seeing progress in some areas in the UAE, Saudi Arabia and Iraq. Retail occupancy costs remain extremely high in most parts of the Middle East - especially in Dubai. Thus, our strategy with our Master Franchisees continues to be the relocation of high rent stores to lower rent, key residential areas to reduce overheads, while maintaining customer reach. To further assist this strategy, our partners in Dubai have been driving forward with the development of the home delivery service to offer more convenience to customers and maximise revenue. Earlier this month, we opened a new store, Motor City, in Dubai. This store will provide home delivery service to the many affluent suburbs around it. While the entire retail sector in the UAE continues to be somewhat turbulent and we face a heavy proliferation of competitor concepts, our business is operating well for the Group at this stage. We will continue to work with our partners there to explore further opportunities in the UAE. Our licensed business in Saudi Arabia has continued to see good growth in sales and this can be largely attributed to a continued increase in BurgerFuel marketing activity, as well as the on-going effects of the changing Saudi economy. Like our other Middle Eastern markets, Saudi Arabia is also facing high retail rent, increasing labour costs and also staff shortages due to work visa changes. Our partners in Saudi are also optimising locations as well as implementing store re-design strategies to maximise space, reduce overheads and increase local customer reach. Earlier this month, we opened a new outlet in the Rabwa district of Riyadh. In Iraq, sales for the store in Baghdad performed reasonably well in FY18 and the brand has continued to grow in popularity, standing out in a revitalised market that is currently free from a proliferation of American chains. Our partners in Iraq opened a second store in Baghdad on the other side of the river in early FY19. Iraq is facing some challenges however - the impending elections, utility shortages and local friction is causing some difficulties and having an impact on trade. We will monitor the situation closely and continue to support our Iraqi partners. In Egypt, the political climate and its effect on the economy proved unviable for our licence holders in this market and accordingly our partners made the move in FY18 to close their remaining stores. At this point in time there are no plans to reopen in Egypt. These closures are not material to the Group. To summarise, while revenue is down for the MENA region, the Board remains positive about parts of the region, especially if we can lessen the effects of high retail rents via strategic store relocations. As always, we do caution the market every year that our outlook in any of these countries can change quickly due to the ongoing potential for volatility in the Middle East. We will continue to support the Middle Eastern markets and see potential for further growth and development in this region. Overall, it has been a year of significant consolidation and optimisation as we work to restore the Company towards profit while also laying the foundations required to transition successfully into a multi-brand group. This is a large task and we are only at the beginning, but it is a strategy that should deliver sustainable long-term growth and recurring profits. Chairman's Closing thanks: On behalf of the Board, I wish to thank all employees, franchisees, and other business partners for their efforts. I would also like to thank my Board colleagues for their support and the work that they have performed during the year. Finally, the Directors would like to thank all shareholders for their ongoing support. We look forward to continuing our work to support management and direct the business for the year ahead so that the Company can continue to grow. I look forward to sharing our developments with you as we transition into a multi-brand group. End CA:00323102 For:BFW Type:GENERAL Time:2018-08-31 08:30:09