By targeting the potential high growth markets of South Africa, Australia and others, Chanticleer looks to turn the already-lucrative Hooters name into dollar signs.
Earlier this year, Chanticleer Holdings (OTCBB: CCLR.OB) completed a deal that netted the company and its cadre of investors ownership of one of the most internationally-recognized American brand-named chain restaurants, Hooters.
Chanticleer, otherwise known at the time for its successful management of a value-based micro-cap fund, pulled off a coup by landing Hooters when the Brooks family estate decided to put it up for sale after nearly three decades of family ownership. Robert Brooks, who purchased Hooters as a small chain in 1986 and grew it into an international enterprise, passed away in 2006, but had a close friendship with Chanticleer CEO Mike Pruitt, who through a business arrangement with Brooks and the now-defunct Hooters Air, was able to secure a 'first right of refusal' for 'Hooters of America (HOA)' - the franchiser and operator of over 450 Hooters restaurants in 44 states and 28 foreign countries - should it ever go up for sale.
The rest is history.
Hooters of America went up for sale after after the death of patriarch Robert when a squabbling second wife and other family members couldn't agree on who gets what. When the offers started rolling in, Mr. Pruitt - who had gathered some serious investor backing - exercised that ever-so-valuable first right of refusal and then successfully warded off a legal attack by Wellspring Capital Management LLC, who challenged the first refusal right.
Pruitt now serves on the HOA Board of Directors, and through Chanticleer holdings, he looks to grow the Hooters brand internationally.
The game plan starts with targeting highly-populated and developing areas, and strategically placing Hooters in those locations. One area that fits that description is South Africa, where three Hooters locations are already operating (in Johannesburg, Durban and Cape Town), with plans in place to open a fourth.
According to an announcement last month, the Emperors Palace Casino Resort in Johannesburg has been targeted as the fourth location, which will be the first that is solely owned and operated by Chanticleer.
Limited partners came on board for the first three stores in South African, which were part of a joint venture with SG Shaw Foods. Shaw was bought-out earlier this year, however, and a majority stake is retained by CCLR and its partners.
Also a result of the Shaw buyout, Chanticleer created its own management company to run and maintain its interests in South African Hooters.
Australia is another Hooters-friendly area being targeted for expansion. A September press release announced that a second location will be opening in Sydney, in addition to the site that opened up in Penrith earlier this year. Future sites in Australia are probable, and, according to the above-linked release, the company is feeling out other potential high-growth areas around the globe into which a Hooters presence can further expand.
Although CCLR is now chest deep in the restaurant business, it should also be duly noted that those on the Chanticleer team are investors at heart, as the company was formed in 2005 on the basis of business development and then converted into an operating holding company a few years later. So, while the Hooters venture well articulates Chanticleer's strategy of targeting sound fundamentals and inherent growth potential for its investment dollars, there is a lot more to look at in the story than just Hooters.
Chanticleer also manages, through its wholly-owned subsidiary Chanticleer Advisors, a portfolio of assets that has been hugely successful since its inception; realizing returns significantly above the standards set by the S&P 500 and Russel 2000 indexes.
These gains are confirmed and outlined by documents linked to the Chanticleer Holdings website.
One hidden gem discovered by the Chanticleer investment team might be North America Energy Resources, Inc. (OTCPK:NAEY). Chanticleer owned over 2.6 million shares of the company as of Q2 2011, according to a report released last month, and the recently agreement for NAEY to purchase a significant amount of oil and gas assets may corroborate the growth story as originally outlined by CCLR at the time of the initial investment.
Aside from uncovering growth stories for its own portfolio, however, the lightly-traded Chanticleer could be positioned to land some significant growth of its own.
Revenue is already rolling in from its share of earnings for the Durban and Hannesburg stores in South Africa, and a revenue stream from the Cape Town store is expected to commence shortly, according to the latest quarterly report.
Although the world economy has been on the slide, there are still a number of countries and regions experiencing extremely high growth rates, and Chanticleer plans on targeting these locations for the expansion of its assets. That expansion into various international markets also looks to be gaining momentum, as evidenced by the grand openings of the past couple of years in South Africa and Australia.
It's a given that people will always eat - and having a high-profile restaurant name with a plan for expansion is a recipe for success.
Keep an eye on Chanticleer; still trading below the radar, this company has a very high profile asset in the Hooters name, which could lead to significant and expansive international growth.
Disclosure: Long CCLR.