QSR’s Breakout Brand of 2020: BurgerFi Skyrockets to Wall Street

In a nearly 10-year span, BurgerFi went from a single-unit brand in a renovated Fort Lauderdale, Florida, Burger King to ringing the Nasdaq bell in New York City as a newly minted public company.

President Charlie Guzzetta, who joined the now 130-unit chain as a marketing manager in 2013, says the experience “feels like it was the longest time and the shortest time, all rolled up into one.”

Like any journey, BurgerFi started with a quest, and that was redefining how the world eats burgers. As Guzzetta explains, BurgerFi—QSR’s Breakout Brand of the Year for 2020—stands for Burgerfication of the Nation. That means taking the classic American meal of burgers, fries, and drink and serving it in a sustainable, organic, and fresh manner. The chain uses 100 percent natural Angus beef with no steroids, antibiotics, growth hormones, chemicals, or additives.

It was one of only two restaurant brands to receive an “A” rating in a report called "Chain Reaction IV: Burger Edition," which was produced by the Center for Food Safety, Consumer Reports, Food Animal Concerns Trust, U.S. PIRG Education Fund, Friends of the Earth, and Natural Resources Defense Council.

That report was published in 2018, the same year BurgerFi decided it wanted to take another step. The company met with private equity firms and investors, seeking a couple of different routes for expansion. But in the back of their minds, the leadership team always hoped BurgerFi could one day go public. That dream sped its way to the front upon a reconnection with Ophir Sternberg, founder and CEO of Lionheart Capital.

“The connection was just such perfect timing and a great energy,” Guzzetta says. “They’re commercial real estate developers, and you pair that with a high-growth expansion opportunity like BurgerFi, and it's just a perfect pair and a perfect marriage. So we really were able to hit it off.”

LISTEN: Stream the conversation with Guzzetta on the Fast Forward podcast below.

As the relationship blossomed, OPES Acquisition Corp., a special purpose acquisition company, took BurgerFi public. The two sides reached a $100 million agreement to merge in June, with an anticipated initial enterprise value of approximately $143 million, or 2.4x BurgerFi’s estimated 2021 net company revenues and 13.6x BurgerFi’s estimated 2021 adjusted EBITDA of $10.5 million.

On December 17, BurgerFi began trading on the Nasdaq Capital Market under the ticker symbol “BFI.” As part of the transition, Sternberg will serve as executive chairman, and BurgerFi will work with an independent board of directors. The restaurant also hired fast-casual and quick-service industry veteran Julio Ramirez as its CEO. There will be additional regulations and compliance guardrails set forth by the SEC that BurgerFi must adhere to, but Guzzetta says the brand will maintain its long-term vision. The DNA hasn’t changed.

“Our goal is well beyond [130 units] in the near future,” Guzzetta says. “And the more restaurants we can open up, the more guests we can serve and the more we can spread the word of BurgerFi burgers.”

At the start of 2020, BurgerFi’s goal was to open 20 stores. The chain was well on its way to reaching that mark with three openings between January and February and significant increases in same-store sales. Then the COVID-19 pandemic struck, forcing the burger brand to trudge through a treacherous March and April. But the chain since rebounded to marginally positive comps. Some stores are even up double-digits, like a franchised location in Brooklyn, New York, which is growing 20 percent year-over-year.

BurgerFi managed to open 15 of those projected 20 units, with the rest pushed to next year when the company expects to debut 32 stores—17 corporate and 15 franchises. Currently, more than 80 percent of units are franchised, but Guzzetta says the brand wants to change that mix to a 70/30 franchise-corporate split.

"Now being a publicly traded company with the capital infusion that we have coming into the business, we plan to ramp up aggressively on our corporate store development,” Guzzetta says. “Previously we were pushing hard, obviously, on the franchise side—nontraditional, some institutional partners like HSMHost, Aramark, and others. But now, with the capital infusion in the business, we're able to grow the corporate side of our base, as well.”

In hindsight, BurgerFi’s rise during the pandemic was inevitable because of its digital infrastructure. The chain signed with Uber Eats in 2017 and expanded it to the entire system a year later. By the end of 2019, BurgerFi was partnered with all the major providers—DoorDash, Grubhub, Uber Eats, and Postmates—and even some smaller regional players. In April, the brand added curbside pickup, which has spread to 50 percent of the system. Many of the restaurants in development will include built-in curbside pickup spaces.

In Q3, BurgerFi saw an 80 percent increase in delivery sales, including 76 percent in July, 154 percent in August, and 91 percent in September. It also saw a 55 percent rise in order volume. The fast casual earned $11.5 million from delivery based off of more than 476,000 orders. That exceeded the pace of Q1 and Q2 combined when BurgerFi served 428,000 delivery orders and generated $10.9 million in sales.

BurgerFi

Menu innovation, like adding chicken, will remain a staple of BurgerFi's DNA.

Olo has powered BurgerFi’s online ordering system and entire technology suite since 2014, including automatic integration of third-party couriers into the POS system.

“Now they're the largest and most-recognized online ordering provider in the industry,” Guzzetta says. “But in 2014, they were still fairly new, and we were new, and signing on with them early on, I think gave us a very competitive advantage over a lot of the other burger players and fast-casual players out there. Launching our mobile application online ordering rewards programs and third-party delivery while still keeping that millennial-facing type of a brand today on our social has been big for the company.”

In 2019, roughly 35 percent of business was off-premises while 65 percent came from indoor dining. This year, that mix completely flipped. Sales outside the four walls continue to rise as more states shut down indoor dining.

“I think there's a lot of brands that weren't in that position and had to scramble at the last minute in March and April to add third-party delivery to their businesses,” Guzzetta says. “And they found some difficult headaches from that. Not only the commission fees, but how that changes the operations, labor model, packaging, and paper goods. Fortunately, we had that in place.”

Guzzetta says major third-party delivery providers are massive companies with customer bases larger than any one single brand could ever achieve. BurgerFi views this as a positive because the pandemic shifted many to third parties, which allowed the burger chain to place its offerings in front of new customers. Assuming they love the product, the brand can drive those customers into restaurants to get the full BurgerFi experience once restrictions lift.

The restaurant’s loyalty rewards program has nearly 300,000 members, a number that grew considerably during the pandemic. The goal is to increase membership to one million users. In 2021, BurgerFi plans to leverage its mobile app and website to push special promotions, marketing offers, limited-time items, and sneak preview items only available to loyalty members.

“I think ultimately it's something that a lot of brands are going to have to study post-pandemic,” Guzzetta says. “They may be relying on third-party delivery orders right now, but if you're unable to then turn those third-party delivery orders into full-time orders in the long run, then it's going to be a loss. We know that third-party deliveries take an enormous commission. We know that paper goods have gone up considerably this year, and that's OK in the short-term if you can turn those guests into full-time brand loyal guests in the long run. These are tactics that we’re working on on a daily base.”

BurgerFi bolstered its off-premises program even further when it signed a license agreement to open ghost kitchens through REEF Technologies. The two companies are basically neighbors—BurgerFi is headquartered in Palm Beach, Florida, while REEF resides in Miami. Since the deal, the burger brand opened 10 ghost kitchens in markets like Miami, Chicago, Portland, and Austin. By the end of 2021, BurgerFi plans to have 25 open across the country.

Guzzetta views it as a way to enter a difficult market where BurgerFi doesn’t have any brick-and-mortar units. He adds that because a city like Portland is so far away from Palm Beach, it would be risky to place a regular location there without proof of concept. However, ghost kitchens allow BurgerFi to bypass barriers to entry such as high taxes and occupancy and labor costs. It also helps the chain tap into additional share in existing markets, like Miami-Dade County.

BurgerFi

Guzzetta believes BurgerFi can become an 800-unit chain.

BurgerFi hasn’t dived into the virtual brand pool yet, but Guzzetta describes it as an interesting trend. The brand is taking more of a wait-and-see approach because when everything shakes out, he says there won’t be enough room for every single virtual brand.

“We would have a million brands on Uber when you type in burgers,” Guzzetta says. “Ultimately, that’s not going to work.”

He thinks it’s a great short-term strategy for casual-dining brands that need supplemental revenue, and for some, it may even transform into a traditional concept. BurgerFi’s No. 1 priority is focusing on unit growth and learning the ins and outs of being a publicly traded entity.

With that said, BurgerFi does have some ideas ready to go if the timing is right.

“The schematics are in place, the brandings are in place, the recipes and builds are in place, and you might hear about doing a couple in 2021,” Guzzetta says. “But it will be a secondary effort. Primarily, we are focused on building and growing the BurgerFi brand.”

Guzzetta says it’s been “pedal to the metal” since June. BurgerFi already signed 30 leases. Forty-eight stores are in the pipeline, with several under construction.

He believes BurgerFi can become an 800-unit chain—500 domestically and 300 internationally. That’s the “pot of gold at the end of the rainbow.” In the short-term, the company is focused on the Southeast. Fifty units are in Florida, but Guzzetta says BurgerFi could open 30 or 40 more in the Sunshine State. The chain plans to work its way up the East Coast in cities like Atlanta, Richmond, Nashville, Charlotte, Maryland, Virginia, and Washington, D.C. Then it’ll turn its attention toward the Northeast and over to the West Coast.

BurgerFi’s time isn’t coming. It’s now.

“We have a list of our target cities, and we're not waiting. We're not waiting for the pandemic to end. We’re striking now,” Guzzetta says. “A year ago, rent prices were on the rise and available inventory, especially available inventory for burger restaurants, which often have a lot of exclusivity clauses, was on the decline. Now we're seeing a shift of that. We're seeing rent prices reduced, and we're seeing inventory rise, and we're striking on that now. We don't want to wait for the pandemic to be over and the rest of the competitors in the fast-casual burger space to begin to look for sites at that point and then be competing for the best sites in the trade areas. We'd rather strike now so that we have a competitive edge going into the first part of 21 and beyond."