Hamburgini plans 20% share sale in Nomu, says CEO

Food Basics Co. is planning to float a 20% of Hamburgini’s capital in Nomu Parallel Market in the near term, CEO Nawaf Al Fouzan said in an exclusive interview with Argaam.

Hamburgini launched operations in 2013 and is co-owned by Nawaf Al Fouzan, Adnan Al Fouzan and Abdullah Al-Eisa.

The burger chain, which has 39 branches across the Kingdom, aims to open 20 new branches this year.

Al Fouzan added that Hamburgini’s unaudited sales exceeded almost SAR 130 million in 2019, compared to SAR 90 million a year earlier. Hamburgini posts modest growth rates of nearly 45% in average annually.

Here’s the full interview with Nawaf Al Fouzan:

Q: What is the brand story of Hamburgini?

A: We were keen to create an easy-to-pronounce brand for all people, especially children. Hamburgini combines magnificence and quickness. We mainly focus on providing high-quality, fresh and fast meals.

Q: What is Hamburgini’s restaurant classification in the Kingdom?

A: The classification ranges between service, fine dining, daily casual dining and fast food restaurants.

Q: Can you provide some insight into Food Basics Co.’s incorporation, capital and core operations?

A: Food Basics owns the Hamburgini and maDeli brands. It launched official operations in 2013, but emerged in 2008, when the company started to study the market, brands and products.

Hamburgini has become one of most popular burger places in Riyadh. Since our launch in 2013, our focus is to provide highest quality burgers at the most affordable prices.

In 2013, Food Basics started as a sole proprietorship ahead of converting into a limited liability company. It is owned by Nawaf Al Fouzan, Adnan Al Fouzan and Abdullah Al-Eisa.

It had a seed capital of almost SAR 2 million. The capital has more than doubled now and we will disclose the audited figures in the initial public offering (IPO) prospectus.

The company did not depend on bank loans, as expansions were pursued through profit.

Q: How many branches does Hamburgini own? Are there any plans for expansion this year?

A: Hamburgini owns 39 branches and 1 branch for maDeli. Our second brand of healthy fast-food maDeli will commence operations soon.

Hamburgini, was launched in Riyadh, where 29 branches are located. The company extended its foothold to the Eastern Province, Qassim, Jeddah and Hail. It will pursue expansions in Jeddah, Makkah, Taif, Hafr Al-Batin and other highly-populated areas.

The company eyes 20 new branches this year, bringing up its total network to 60 branches.

Q: How many employees does Hamburgini have? And what about the Saudization rate in the company?

A: Saudization hit 27% in the company, which is classified in the platinum range. We have almost 600 employees and aim to have nearly 1,000 by the end of this year as part of the expansion plan.

Q: Does the company have meat and bakery production lines? If so, what is the production capacity?

A: We own 4 production lines in Riyadh, Jeddah, Qassim and the Eastern Province, which produce meat, bakeries, and sauce. They provide our restaurants with 30-50,000 burger pieces daily. The current production capacity could be boosted later on.

Q: Do you have any plans to sell the meat and bakery lines, eye the retail sector?
 

A: We received many orders from clients to buy Hamburgini’s meat, bakery and sauce products, but selling these products is not of our priorities at present.

Q: Does the company own its branches or agricultural land?
 

A: We do not own these assets and we are not planning to buy them. Asset returns are less than those generated from restaurants. We have no plans to engage in real estate investment. The bakery, meat, sauce and vegetable centers, as well as the logistics networks are all owned by Food Basics Co.

Though we do not currently own agricultural land, we are targeting asset diversification without any negative impact on the core business. We might invest in agricultural firms or buy land, but this remains unlikely in the near term.

Q: What about franchising Hamburgini to expand its presence?

A: Plans are on the table, but franchises will be offered to our partners outside the Kingdom. Some markets require certain experience, therefore, we are planning new partnerships in the restaurant operation field. Locally, the market is relatively large and it is possible to expand in the Kingdom. Driven by our extensive experience in the field, the franchise will weigh on the company.

Franchise is undoubtedly an important option if we decide to cut investments.

Q: Have you started any talks to grant franchise outside the Kingdom?

A: We’re studying to expand overseas. We received franchise requests from Spain, the UK, the US, Philippines and India, but we preferred to enhance presence in Saudi Arabia first.

Q: What is the first market you expect to penetrate?

A: We plan to penetrate Egypt, the UAE and Kuwait. I believe Egypt may be our first destination in 2021.

Q: What is your outlook for the Saudi restaurant sector?

A: The local restaurant sector is witnessing fast growth, where more brands can enter the market and expand presence.

We aim to maintain business growth at 50%, but this could be unsustainable. 

Q: What about the company’s sales for the period from 2017-2019?

A: In 2019, Hamburgini’s unaudited sales exceeded almost SAR 130 million, compared to nearly SAR 90 million a year earlier. In 2017, our sales stood at SAR 70 million. The company posts modest growth rates of nearly 45% in average annually.

Revenues highly depend on consumer behavior. Our main challenge is to control costs and maintain profit margins.

Q: What was the company’s profit in 2019?

A: I prefer to wait until audited figures are disclosed in the planned IPO prospectus. However, the fast-food sector’s profitability rates hover between 10% and 20%. Listed companies generate profit between 14% and 15%, while peers record earnings of less than 10%. For the previous years, comparison will be inaccurate especially after implementing IFRS.

Q: What is the company’s market share in the restaurant sector?

A: It is negligible, nearly at 0.25%. The Saudi restaurant sector’s size is SAR 60 billion. Herfy’s market share, for instance, stands at just 2%.

Q: Which item most affects the company’s expenditure?

A: The cost of basic materials, which account for almost 36% of revenue. Some materials are locally supplies, but others are imported. We have achieved a high ratio of local content in some activities, such as lettuce cultivation and fodder.

Q: What about the company’s total debt by the end of 2019?

A: We have a marginal debt, resulting from supplier deals and normal operations. We will have a zero debt ahead of the planned share sale.

Q: When will you list Hamburgini’s shares? And in which market?

A: We expect to submit the official listing request after finalizing the 2019 audited financials. We hope to take action by next March. We’re planning to float 20% of Hamburgini’s capital in Nomu Parallel Market.

Q: Does Hamburgini have any acquisition plans?

A: Acquisitions are likely. Converting Hamburgini into a public company aims to enhance the company’s ability to make acquisitions.