HUFFINGTON POST
03/13/2013 09:58 am ET Updated Mar 28, 2013

Fatburger Comeback Fed By Asian, Middle Eastern Appetite For Burgers

NEW YORK -- Hollywood hamburger chain Fatburger has a devoted following for its made-to-order American fare, like hand-battered onion rings and sandwiches that can be stacked with three cheesy patties to create the 2,050-calorie "XXXL burger."

But it's not American appetites or its celebrity ties that helped turn the company into a comeback story. It's the burger-crazed locals in places like Pakistan and China that pushed the once-struggling Los Angeles-based chain to cross the $100 million mark in sales last year.

Next month, Fatburger will open its second Pakistani location in Lahore, and a third in Islamabad is planned to open later this year, CEO Andy Wiederhorn told The Huffington Post. The burger chain also has new restaurants planned for Jordan, Egypt, Libya and Morocco. “We have had tremendous international expansion and that really saved our brand,” Wiederhorn said.

But this is no effort at hamburger diplomacy, a quaint idea pioneered decades ago to use fast food to promote international relations. This is a hunt for survival, boosted by the booming middle class in Asia and the Middle East.

Since 2006, Fatburger has doubled the number of its franchised locations from 75 to 150 total, with nearly all the new stores opening in foreign countries. Wiederhorn said there are 300 more in development, and the company is set to open its first New York City franchise this spring.

That's a big change from 10 years ago, when Fatburger was barely known by diners outside southern California and Nevada. After 50 years in business, the company was on the brink of financial death, despite its ties to high-profile celebrities over the years. (Hall of Fame basketball legend Earvin "Magic" Johnson owned the company between 2001 and 2002.)

In 2003, Wiederhorn stepped in with his investment group, Fog Cutter Capital, to buy Fatburger for just $7 million.

After a few years, Wiederhorn said he grew "disillusioned by [the] progress" of the management team to grow profits. He fired the president in a messy lawsuit and took the helm himself in 2006. Wiederhorn changed Fatburger's business model to be driven almost entirely by franchise owners, who pay a fee and royalties to the brand. The chain then went where the money was: to Asia and to the Middle East.

Fatburger hasn't been the only fast-food chain to look offshore for profits. Other American companies that have expanded to the Middle East and Asia in recent years include Shake Shack, Magnolia Bakery and Smashburger.

Analysts say several factors have pushed the burger boom abroad, including more access to capital to get the franchises started and a ready-made business plan that makes it easy to get a restaurant up and running quickly.

Fatburger's turnaround has included some controversy. The company filed for bankruptcy for two of its subsidiaries in California and Nevada in 2009. A committee of creditors later sued Fatburger, claiming the company had used money owed them to pay for other Fatburger entities, including compensation for Wiederhorn, The Oregonian reported.

And even as the embattled brand has resurrected itself, American fast food purveyors now face new criticism from international development experts who say the growing taste for American-style food in Asia and the Middle East is ushering in a new era of health-related problems for consumers there.

Then there's the issue of politics. As an increasing number of American-owned chains open in political hot spots, the chance for unrest is ever-present.

Wiederhorn said that so far none of the international Fatburgers has yet to be the target of a political demonstration. But it may be only a matter of time. Last fall, KFC closed its stores in Karachi, Pakistan, after they were attacked at least five times in anti-American protests in the 15 years since they opened, Bloomberg reported.

Wiederhorn appears unconcerned. "[Customers] are there because they enjoy the the local burger experience," he said. "Food transcends politics."

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