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Q&A: Andrew Wiederhorn, Fog Cutter Capital

Group ready to acquire second restaurant brand with Fatburger set for growth

After a few bumpy years, the quick-service Fatburger chain is growing, both in the United States and overseas, and its parent company is poised to add a new brand to its portfolio.

Andrew Wiederhorn, chief executive of Fatburger parent Fog Cutter Capital Group Inc., told Nation’s Restaurant News that his company will announce the addition of a second restaurant brand early next year.

Although not ready to disclose the investment, he said it involved a national chain that offers breakfast and all-day dining — one not in the same space as Fatburger.

Meanwhile, Wiederhorn, whose company bought a majority stake in Fatburger in 2003, said he is pleased with the burger chain’s turnaround.

Fatburger has grown to 104 units, with 20 opened during 2010. Another 30 to 40 are scheduled to open next year, about two-thirds of which will be in international markets including Dubai, Kuwait and Kurdistan, he said.

Two subsidiaries filed for Chapter 11 bankruptcy protection in 2009 after the company fell into default on loans. The bankruptcy included corporate locations in California and Nevada. Wiederhorn said the move has helped the chain renegotiate leases in those economically challenged markets.

However, he also expects the subsidiaries to emerge from bankruptcy within the first quarter next year.

Also this year, Wiederhorn moved Fog Cutter’s corporate offices from Portland, Ore., to Santa Monica, Calif., consolidating with Fatburger’s corporate headquarters there.

Fog Cutter earlier this year was delisted from the OTC Bulletin Board, although the company is listed on the Pink Sheets Electronic OTC Markets.

In an interview, Wiederhorn discussed the chain’s growth plans:

Is international growth a focus right now?

We opened about 20 restaurants this year, eight in Los Angeles and the balance internationally. We’ve had a gigantic push in the Middle East and Asia. We’re open in Dubai, with three open there and two more under construction in an eight-store deal. We opened our first in Kuwait this summer with a five-store deal there. We have 17 stores planned in Saudi Arabia with the first to open in December and two more in January. And we’re going into Qatar, Egypt and Jordan.

We’re going into Kurdistan in Northern Iraq. The first there is opening in a couple of months. The area is almost like an extension of southern Turkey. There’s no military activity there. It’s an oil province and there is a lot of tourism. We’re excited to have an American brand represented in Iraq.

We’re open in Macau and Beijing. Macau is a phenomenal success. It’s one of our top five stores [in sales] worldwide. The second in Beijing is scheduled to open in February. We had a store in Hong Kong, but it closed during the summer because we weren’t comfortable with rent levels. We have three in Jakarta, Indonesia, with two more under construction. In Singapore, we have a deal for three stores.

Canada is a very strong success story, with 16 open there, all in Western Canada. Sixteen more are planned over the next two years.

Where in the United States is the chain growing?

The eight we opened this year were all in Southern California, and it was very good for us to see the Southern California market come back so strong for our brand. We have strong brand equity here. Our sales were up over 6 percent year over year in Southern California, and they were also up in Vegas a little bit.

Has most of the growth been through franchising?

Macau is a corporate location, but the other international locations are franchised. All the new locations in the U.S. are franchised. Our goal is to be 15 to 20 percent corporate owned and the rest franchised.

How have you been marketing the brand to franchisees?

Our franchisees come to us because it’s their favorite burger. Consumers followed the value meals and realized they were sacrificing quality. To be up 6 percent or more in Southern California and to see competitors in the QSR space like Carl’s Jr. off 6 percent, there’s a huge swing there.

Fatburger seems to attract celebrities as franchisees. Can you name a few?

[Hip hop star] Kanye West has two stores in Chicago. [Actress/musician] Queen Latifa has two in Miami. Franchisees include [television personality] Montel Williams; and [professional football players] Orlando Brown and Willie Anderson.

Why the move to Santa Monica?

We consolidated the Fog Cutter and Fatburgers offices in a cost-cutting move. We consolidated everything we could and killed the commute.

Contact Lisa Jennings at [email protected].

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