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Why is Chanticleer Holdings buying up burger concepts?

This post is part of the Reporter's Notebook blog.

Chanticleer Holdings Inc. collects burger concepts like some of us collect stamps or porcelain figurines. Or at least it seems that way.

Over the past year, the Charlotte, N.C.-based company, previously known as an operator of Hooters restaurants, has acquired no fewer than four different burger concepts, and in less than two years has accumulated five of them: American Roadside Burgers, now known as American Burger Company; The Burger Company; BGR: The Burger Joint; BT’s Burger Joint; and, most recently, Little Big Burger out of Oregon.

The series of acquisitions conjures images of Chanticleer building a national chain of burger restaurants, one acquisition at a time. But that’s not quite what the company is doing.

For one thing, it’s unlikely that any of these concepts will be rebranded. Instead, they’ll keep their name and, hopefully for Chanticleer, their customer loyalty.

“We like the fact that regional brands have a loyal, cult-like following,” Chanticleer CEO Mike Pruitt said. “We can pick some of those up that didn’t have the capital or ability to grow beyond a successful local or regional business.”

Instead, it appears, Chanticleer is building something of a network of local and regional burger chains that operate under the umbrella of American Burger Company, led by Richard Adams, its president and chief operating officer.

Indeed, Pruitt lured Adams two years ago from Bojangles’ Restaurants Inc. with the specific intent of building a better burger business.

“He didn’t leave Bojangles’ … to come here and run five burger stores,” Pruitt said. “We made it clear we were looking to acquire other brands in the space.”

Chanticleer was approached two years ago with the opportunity to purchase American Roadside Burgers, which had established itself in Charlotte. The company raised money from existing shareholders and made the deal. Last year it bought the single unit The Burger Company also out of Charlotte.

In February, it bought the 20-unit BGR out of Virginia, giving Chanticleer a franchisor — 11 of those units are franchisees. The next month it reached a deal to buy another, Charlotte chain, four-unit BT’s, before recently agreeing to buy Little Big Burger, or LBB, late last month.

Chanticleer is buying brands in which management agrees to stay in place. The brands have to be well regarded, and there must be opportunities within the market to develop the brand.

It may seem odd to operate burger concepts around the country without the benefit of a single brand.

But it’s arguable that the better burger sector is as much a local phenomenon as anything. Numerous local and regional concepts have performed strongly in terms of reputation and unit volumes. And some national or super-regional burger concepts have struggled in the face of that competition.

Both Pruitt and Adams say they’re being careful not to mess with the established identities of the brands they’re acquiring.

Adams said that the company would look at best practices with each of the concepts to see what works best and work to integrate those practices at the others.

“What we don’t want to do is jeopardize the loyal following that eats at the restaurants we acquire,” Pruitt said, noting that those followings have often taken years to build.

He also referred to his two daughters, who are both in their 20s. “They steer away from chains,” Pruitt said. “They like the feel of the local player. That’s been factored in.”

And Adams said that multiple brands of similar concepts under a single umbrella have worked. Adams used to work with CKE Restaurants, which operates the Hardee’s and Carl’s Jr. chains.

“Early in my day, I worked with Carl’s, and they acquired Hardee’s,” Adams said. “Hardee’s is still Hardee’s, and Carl’s is still Carl’s, and they share the best practices for both brands.”

Adams and Pruitt suggest they will continue to be on the lookout for other concepts. But often, these opportunities present themselves.

“I don’t think we wake up every day thinking about what we’re going to buy next,” Pruitt said. “It’s really opportunistic.”

Indeed, the opportunity to buy Little Big Burger came after the BGR acquisition, when a banker approached Chanticleer about the opportunity.

“As opportunities present themselves, we’ll take advantage,” Pruitt said. “We’re seeing more opportunities than we ever have. But there are still very few that would fit in the box we’re looking to grow.”

Said Adams: “When you think about it, less than two years ago we had five. Now we’ve got 40. We definitely need to make sure we don’t get beyond ourselves. We want to do everything right, and stay true to who we are.”

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