Burger Ranch CEO Yossi Lubaton will buy 40 percent of the fast food chain according to a market value of NIS 25 million. Businessman Zadik Bino, meanwhile, will continue to hold the chain's remaining 60 percent through the Paz fuel company. The purchase contract is expected to be finalized in the next few days.
The price may seem very low for the 86 branches of the nationwide chain, particularly in light of the recent battle over troubled Burger King Israel. In that contest, Burger Ranch, one of several suitors against the debt-laden rival, had offered NIS 30 million for Burger King's 56 branches.
Industry sources said yesterday that Bino had decided to accept Lubaton's offer to buy into the chain in order to keep the CEO at his post. Had a deal not been reached, Lubaton's departure would have sent further shocks in the firm after having failed to win the bid for the Burger King franchise.
Bino bought Burger Ranch in September 1997 at a company value of around $10 million. The chain moved into profit in 2001, but registered losses of NIS 8 million in 2002. The company recently dismissed a number of senior staffers in an effort to curb costs. Lubaton is also considering closing additional loss-making branches beyond the six branches already closed this year.
Burger Ranch recently has cut its advertising budget significantly. According to industry data, Burger Ranch spent $3.54 million on advertising in 2001. This slipped to $3.16 million in 2002, and the chain has allocated only $873,000 so far this year.
Advertising and brand identification is particularly important in oligopolistic markets such as fast food.
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