Leading restaurateur, Burger King Worldwide, Inc. (BKW), recently unveiled its restaurant in Brunei Darussalam in collaboration with its franchise partner Sinofood Express. This marks the first Burger King outlet in Brunei, located on the north coast of the island of Borneo, in Southeast Asia. Sinofood will work with Burger King to open more restaurants across the country over the next few years.
Located in the heart of the city, this restaurant is expected to witness a decent footfall, which will eventually drive sales. Burger King intends to capitalize on Sinfood’s extensive knowledge of the local market to expand its Whopper sandwich and other offerings in the market.
Burger King is looking to accelerate its presence in high-growth potential international markets mainly through franchising. Of late, the company has initiated ventures in key markets like Russia, China, Mexico, France, Central America, South Africa, Singapore, Malaysia, Korea and Vietnam.
We believe franchising a large chunk of its system facilitates the company’s earnings and return on equity growth by reducing capital requirements. The company’s franchised business model allows it to generate strong free cash flow, thereby helping it to maintain a healthy balance sheet. Since a major portion of its business is franchised, Burger King is likely to be less affected by inflation compared to its peers.
This Zacks Rank # 2 (Buy) company posted mixed fourth-quarter 2013 results in January with earnings beating the Zacks Consensus Estimate while revenues missing the same. However, driven by net restaurant growth and higher comps in the Europe, Middle East and Africa and Asia Pacific regions, organic revenues grew 5.2%.
Some other stocks worth considering in the restaurant industry include Famous Dave's of America Inc. (DAVE), Fiesta Restaurant Group, Inc. (FRGI), and Brinker International, Inc. (EAT). While Famous Dave's of America and Fiesta Restaurant Group sport a Zacks Rank #1 (Strong Buy), Brinker International holds a Zacks Rank #2 (Buy).
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