Softlogic Restaurants (Pvt) Ltd, a franchisee of
Burger King Worldwide, Inc.
), has recently unveiled three restaurants in Sri Lanka. The
three restaurants, located in Rajagiriya, Mount Lavinia and
Colpetty, mark the entry of the brand in the country.
BK AsiaPac Pte., a subsidiary of Burger King, had entered into a
master franchise and development agreement with its franchisee,
Softlogic Restaurants Ltd in Sep 2013 to develop, open and
operate Burger King Restaurants in Sri Lanka. BK AsiaPac Pte.
Ltd. and Softlogic Restaurants Ltd together plan to expand the
supply chain infrastructure in Sri Lanka which will pave the way
for new restaurant openings in the country.
Burger King is committed to step up international expansion in
high-growth potential 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.
Last month, the company inked a joint venture deal with
restaurant operator Groupe Olivier Bertrand in France. Per the
deal, Groupe Olivier Bertrand will act as Burger King's long-term
master franchisee and developer of 250 restaurants across France.
Prior to that, the company entered into a joint venture agreement
with Everstone Group, a private equity and real estate firm in
India. Per the alliance, Everstone will act as Burger King's
long-term master franchisee and developer of new restaurants
We believe franchising a large portion of its system will
facilitate the company's earnings and return on equity growth, as
it reduces 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. Moreover,
international expansion through franchising helps increasing
brand recognition and enhancing shareholder return.
Going forward, we expect the company to remain well positioned on
the back of new product introductions, restaurant upgrades,
proper marketing mix and improved operations. Despite the
positives, a weak consumer spending environment, uncertain
economic conditions in Europe and slowdown in a few emerging
markets remains matters of concern.
The company presently has a short-term Zacks Rank #3 (Hold). Some
better-ranked stocks in the restaurant industry include
Darden Restaurants, Inc.
Buffalo Wild Wings Inc.
Brinker International, Inc.
). While Darden Restaurants carries a Zacks Rank #1 (Strong Buy),
Buffalo Wild Wings Inc. and Brinker International have a Zacks
Rank #2 (Buy).
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