Chanticleer (HOTR) An Undervalued

Restaurateur with Strong Brand Portfolio

and Significant Growth Opportunities
Executive Summary
Chanticleer has significant upside to reach its peer group multiples with
tremendous growth opportunities from both domestic and international
expansion of all brands within its portfolio over the next few years. In
addition, the company just announced a transformative deal that will nearly
double its restaurant count.
Company Description
Chanticleer Holdings was formed in 2005 as a business development
company. In 2008, the company was transformed into an operating holding
company. The company is now an owner and operator of multiple restaurant
brands domestically and internationally.
Share Structure
Shares Outstanding: 7.24 million pre-February/March 2015 rights offering
and 15.75 million post-rights offering
Market Cap:

$15.06 million

Public Float:

5.82 million

Insider Ownership:

32.63%

Brand Portfolio
The companys brands include:
Hooters
11 international locations and 2 domestic locations
American Burger Co 6 domestic locations
Just Fresh
7 domestic locations
Hooters

Chanticleer currently owns the exclusive franchise rights to develop and

operate Hooters restaurants in South Africa, Australia, Europe, and Oregon
and Washington in the U.S.
Hooters restaurants are casual beach-themed establishments featuring
music, sports on large flat screens, and a menu that includes seafood,
sandwiches, burgers, salads, and Hooters original chicken wings. The
company originated the breastaurant category with its skimpily dressed all
female wait staff called Hooters Girls. Given Hooters created a new
restaurant category, it is an iconic brand name.
Chanticleer currently owns and operates in whole or part of 13 Hooters
restaurants in all of its territories including five in South Africa, four in
Australia, one in Hungary, one in England, and two in the U.S giving the
company an established infrastructure in South Africa, Australia, and Europe
to grow it network.
Chanticleer grew its Hooters network organically and through acquisition.
The company opened nine locations and acquired five locations. The
companys international acquisition strategy started with Hooters in
Nottingham England in November 2013. The company then purchased a
Hooters in Portland, Oregon and a Hooters in Tacoma, Washington in a
combined transaction in January 2014. In June 2014, the company acquired a
60% stake in Hooters restaurants in Parramatta and Penrith, Australia.

American Burger Co.

In September 2013, Chanticleer acquired American Roadside Company, now

American Burger Company. The company offers a Made in America menu
that includes premium beef burgers, sandwiches, salads, side items, milk
shakes, and beer and wine. Chanticleer recently acquired The Burger
Company restaurant in Charlotte, NC, which has a similar concept becoming
ABCs sixth location. American Burger Co. has six locations including one in
Smithtown, New York, three in Charlotte, North Carolina, and two in South
Carolina. This fast casual concept provides the company with an established
brand and tremendous room for growth.
Just Fresh

In September 2013, Chanticleer made its initial investment of 51%, which

has since grown to 56% ownership, in JF Restaurants, LLC and JF Franchising
Systems, LLS. The company operates a chain of seven restaurants
throughout North Carolina, under the Just Fresh name, with the first location
opened in 1994. The menu consists of fresh, health-conscious items such as
salads, wraps, sandwiches, soups, freshly baked items, and smoothies. Just
Fresh provides customers with a fresher, more nutritional diet. Just Fresh
attracts customers due to its foods positive effect on physical health and
overall wellness.
This concept is completely different from Hooters and American Burger
Company providing diversification as well as tremendous growth
opportunities.
Chanticleer also owns a 3% interest in Hooters of America. At the end of July
2013, Hooters of America owns 160 restaurants and operates or franchises
over 430.
BGR: The Burger Joint

On February 18, 2015, Chanticleer announced an agreement to acquire BGR:

The Burger Joint, with expectations for the acquisition to on or around March
15, 2015. BGR: The Burger Joint is a better burger concept with a menu
focusing primarily on its proprietary blend of Prime, dry-aged burgers grilled
over an open flame. BGRs buns are baked fresh by local bakers and they use
fresh vegetables prepared in store. BGR was voted #7 Burger Chain in USA
by The Daily Meal & MSN.com, #1 Burger Restaurant by the Washingtonian

and #1 Burger Patty by the Washington Post. BGR currently has nine
corporate owned locations, eleven franchises including one international
location in Kuwait, and over eighty franchise locations under development
agreement almost equally split between domestic and international markets.
This acquisition is transformative almost doubling Chanticleers restaurant
count while increasing the companys presence in the fast growing fast
casual segment. BGRs burgers are highly acclaimed. Its model of using
Prime, dry-aged burgers grilled over an open flame and sourcing freshly
baked buns from local bakers is transferable and can be a differentiating
factor for the company.
Growth Strategy
Chanticleer has been growing rapidly both by organic growth and
acquisitions, as illustrated below.

The closing of BGR: The Burger Joint will bring its total number of restaurants
to 48.

The company also has plans to continue to expand the Hooters brand
internationally. The company has exclusive franchise rights to develop and
operate Hooters in South Africa with Durban, South Africa being Chanticleers
first location. The company currently has five locations in South Africa with a
six location re-opening in Cape Town in mid-2015. The total market
opportunity in South Africa is fifteen locations.
In Australia, Chanticleer has a JV agreement with existing Hooters franchisee.
The company has 60% interest in four restaurants in Australia, with one more
opening in early 2015. The company believes the total market opportunity of
fifteen restaurants.
In Europe, Chanticleer currently has two locations, one in the England and
one in Hungary. In Eastern Europe, the company owns 80% of Crown
Restaurants collaborating with Crown Restaurants CEO Alex Hemingway. Mr.
Hemingway previously worked as President and CEO of CEFG, owners and
operators of Pizza Hut and KFC brands in Hungary. The company is
evaluating two more locations in England and one in Poland. The overall
market potential in Eastern Europe is eighteen restaurants.
Chanticleer has two locations in Oregon and Washington and sees a potential
to add three more locations.
Rights Offering
To fund the acquisition of BGR, continuing operations and future restaurant
openings, Chanticleer is currently undertaking a rights offering with the goal
of raising a gross amount of $17 million and a net amount of $15.64 million.
The subscription period ends on March 13, 2015. The cash will provide ample
resources for growth as the BGR acquisition will only cost $5 million.
Valuation

Chanticleer is significantly undervalued relative to peers. Assuming a median

EV/Sales of its restaurant peer group there is 55% upside. This does not
account for the significant growth the company will see over the next few
years or the value of iconic Hooters Brand.
Conclusion
Chanticleer has significant upside to reach its peer group multiples with
tremendous growth opportunities from both domestic and international
expansion of all brands within its portfolio over the next few years. In
addition, the company just announced a transformative deal that will nearly
double its restaurant count.