Shocking Prediction: Is This Iconic American Brand The Next Starbucks?

posted on 06-07-2019

Some of the most successful companies have taken iconic American brands and rolled them out internationally to generate incredible growth.

Take Starbucks (Nasdaq: SBUX) for example. Starbucks first built its powerful brand in the United States, then famously rolled it out everywhere in the world. The chart below depicts Starbucks' share price performance since 1992.

Investors who jumped on the Starbucks wagon in 1992 and held on for the long-term have made 70 times their original investment.

When Starbucks went public in June of 1992 the company had 140 outlets and revenue of $73 million. All of those 140 locations were in North America.

The first Starbucks location outside of North America didn't even open until 1996 with a Tokyo, Japan outlet. That was followed in 1998 with expansion in the UK and 2002 with a Mexico City store. 

Today Starbucks covers much of the globe, operating in 63 countries with over 5,500 international stores. Since going international in 1996, shares of Starbucks have returned more than 2,500%. And even with 5,500 international locations Starbucks still has significant long term expansion plans.

There is clearly huge potential for companies that own highly recognizable American brands to compound their profits by going international. 

And I've found a company that I think is just about to start what could be a similarly long and lucrative growth trajectory. Right now, the company has a significant base in the U.S., but it could soon expand operations -- in much the same way as Starbucks. 

The firm is called Chanticleer Holdings (Nasdaq: HOTR) and it's about to roll out a very popular American brand to international markets.

Chanticleer's brand of choice is Hooters.

Chanticleer's involvement in Hooters began in 2005, when Chanticleer loaned then owner Robert Brooks $5 million to start Hooters Air (which eventually went bankrupt). As part of that loan Chanticleer received the right of first refusal should Hooters of America ever be sold.

As fate would have it, the very next year Brooks passed away. And obtaining that right of first refusal proved to be a stroke of genius for Chanticleer. 

In short, Brooks' surviving family members could not agree on what to do with the 425 Hooters locations Brooks had built in the U.S. And in 2010, the company was put up for sale.

With its right of first refusal, Chanticleer arranged for a group of noteworthy private equity investor to join in and purchase Hooters of America.

Subsequently, Chanticleer walked away with an ownership interest in Hooters of America (now 3%), a seat on the board of directors, and international expansion rights for a number of countries.

The whole process was a giant win for Chanticleer which was also repaid in full for its original $5 million loan.
Here's where things get interesting.

Chanticleer owns the rights to the Hooters franchise in South Africa, 5 states of Brazil, Hungary, England and has a joint venture with an existing franchise owner in Australia.

Today Chanticleer has 7 international locations, and the company has already identified 75 more locations where it plans to open restaurants.
 
Going from 7 to 75 locations is the kind of exponential growth that can compound wealth in a hurry. And the game plan that Chanticleer has established for expanding is both simple and intelligent.

In each international restaurant opening, Chanticleer partners with only highly experienced and well capitalized local operators. These local operators know their markets, and joining with them greatly increases the odds of each new location being successful.

What I think sets this aggressive growth plan apart is that Chanticleer isn't rolling out a new restaurant concept every time it opens a location. It is opening restaurants with an iconic American brand name that I think international consumers are going to be very interested in.

In addition to the long growth window Chanticleer has with Hooters internationally, the company has been building a portfolio of other restaurant concepts. In addition to Hooters, Chanticleer has interests in American Roadside Burgers, Just Fresh and Beacher's Madhouse.

But make no mistake, it is Hooters that is going to drive the growth for Chanticleer. To appreciate how much potential Chanticleer has with Hooters internationally, consider the opportunity in England.
  
England is a country that has 1.5 times the gross domestic product of the state of Texas but only one Hooters. Texas meanwhile, has 41. England alone could get Chanticleer close to 75 locations over time.

As I said, this company has a huge window of growth potential ahead. I believe the time to jump on it is now, while the company is still small and off most investors' radar.

Risks to Consider: The restaurant business is a very difficult one with narrow profit margins.  Having a top brand like Hooters is a great advantage, but success is certainly not guaranteed.

Action to Take --> Buy shares in Chanticleer Holdings for the opportunity to share in the huge growth potential of taking this iconic American brand international.

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