Too-Fast food?

A gourmet restaurant's uphill battle in burger-loving Germany

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Seeing the wood despite the trees. Source: Stephan Rumpf / picture alliance / SZ Photo

Hans im Glück, a high-end German burger chain, has been expanding so fast, it might be running out of luck.

The upmarket franchise outlets are probably already at a high street near you. Founded in 2010, each restaurant is kitted rustically with birch tree trunks. Its backstory refers to the Grimm brothers’ fairy-tale “Hans in Luck,” a homily about the hapless, happy Hans who loses a chunk of gold and returns penniless to his mother. Unsurprisingly, the founder of the company has no such plans.

Two years ago Thomas Hirschberger told Handelsblatt he wanted to run 500 restaurants in Germany. So far, with a winning recipe of the folksy and the fancy, he has 56 franchise outlets. In comparison, McDonald’s had 1,476 restaurants in the country last year.

Hans im Glück has grown rapidly thanks to a gourmet burger boom in Germany. Its burgers start at €6.80, while adding fries and a drink cost a further €5.50. As in many European fast-food restaurants, you can order drinks from beer to wine, or even a cocktail for €7.90. A bottle of Prosecco costs €19.80.

So far, so tasty, but behind the scenes, the chain may be suffering from growing pains. Mr. Hirschberger had to take out loans; he fell out with friends whom he set up restaurants with at the outset. An adviser last year tried to persuade managers to stage a coup against him. Luckily that didn’t pan out, and Hans im Glück’s managers stuck with Mr. Hirschberger.

Expensive Singapore expansion

But as business grew, so did costs. Plus, Mr. Hirschberger wound up making avoid an expensive settlement with an investor who bought his cocktail bar chain Sausalitos in 2014 then accused him of poaching his executives.

The boss also wound up with more costs after he decided to take over Hans im Glück branches previously run in cooperation with franchise partners and friends. Some business relationships with partners ended in time-consuming acrimony. And a prestige project, namely outlets in costly Singapore, proved painfully expensive, despite the aim of proving the rustic German mood of the restaurants could also work in the rapidly-expanding Asian market.

Then, a few weeks ago, a family-owned investment company suddenly bought a 10 percent stake in the group for €9.9 million ($11.35 million). The sum would ideally accelerate Hans im Glück’s growth, though the cash might be needed just to cover Mr. Hirschberger’s liabilities.

The boss declined to comment. His company said in a statement it would seek to use investor GAB Grundstücksverwaltung’s experience to expand. However, it isn’t obvious right away how a small family office like GAB can provide Hirschberger’s company with the kind of international, strategic help it needs. There is, however, a family connection between the firms because the wealthy entrepreneur who controls GAB, Gerd A. Bühler, is the father of one of Hans im Glück’s three executive directors, Johannes Bühler.

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On the upside, the Hans im Glück restaurants earned 5 percent more, with revenues reaching €55.3 million in the first half of 2018, thanks to new outlets, according to the interim report seen by Handelsblatt. Some €23.4 million of that came from restaurants that are owned by Mr. Hirschberger and his partners, while the rest came from franchise partners.

Hans im Glück remains a work in progress. Before he left after the failure of the management coup, independent consultant Gisbert Grasses said the company ought to be reorganized. He warned in a report in December that it lacked financial transparency. “Overall the performance of the accounting system (internal and external) isn’t up to market standards and has major risks attached,” he said.

Plus, inefficiencies meant the company didn’t manage to complete its monthly accounts fast enough, he wrote in the report. Its efforts to obtain finance were too short-sighted.

Asked to comment, Hans im Glück said it was improving steadily. Plus, the report’s criticisms are commonplace in the catering industry. “We have reacted and are having the reworked processes externally audited. The initial results confirm the success of our measures,” the company said. Mr. Grasses declined to comment.

The burger chain plans to keep growing, with 10 new outlets due to open in 2018 and 20 in the following years. It denied speculation that Mr. Hirschberger is planning to sell his stake — a moot point given that right now, he would probably struggle to find a buyer.

Christoph Kapalschinski covers consumer goods, textiles and food for Handelsblatt. To contact the author:

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