The acquisition of Gourmet Burger Kitchen increases the risk profile of FBR for 2 key reasons: 1) increased exposure to the GBP, and 2) corporate outlets operate very differently to franchised outlets, and FBR has limited experience in operating corporate stores.
A review of GBK’s financials show that its staff costs are relatively high, but given the high cost of operating in the UK, we are uncertain of whether FBR could cut costs and drive efficiencies in this new business.
On the upside, if FBR is able to profitably run the GBK operations and open outlets as planned, we believe this acquisition could take FBR into its next growth phase.