Fatburger Opens First Restaurant in New York City

NEW YORK ( TheStreet) -- Fatburger, the iconic Los Angeles burger chain, has opened its first of 10 restaurants in New York City.

Fatburger, started nearly 60 years ago and known as a celebrity hangout, has 150 restaurants and additional 300 stores either under construction or in development across the U.S. and internationally. Last year the company's system-wide sales totaled $100 million, up 22% from 2011.

It clearly intends to repeat their success on the West Coast and elsewhere in New York City through its partnership with the Riese Organization, a large restaurant management company in New York that has approximately 50 restaurants in its portfolio including such brands as T.G.I. Friday's, Tim Horton's ( THI), Yum! Brands ( YUM) Pizza Hut and KFC. The Riese Organization has also developed its own proprietary concepts including Tad's Steaks and Tequilaville, according to its Web site.

video platformvideo managementvideo solutionsvideo player

The first Fatburger restaurant, located in Manhattan's Murray Hill area, will also feature a full-service bar and is open to 1am.

At the same time as the store's opening, Fatburger also recently began selling its signature frozen beef patties in 3,100 Wal-Mart Stores ( WMT) across the U.S.

Also see: Fatburger CEO: We'll Survive The Better Burger Shakeout

TheStreet had a chance to talk with Fatburger CEO Andy Wiederhorn at the restaurant's newest location. An edited transcript follows.

Does Fatburger have appeal outside of the West Coast?

Wiederhorn: The brand has been in the East Coast before. We're in Atlantic City, Washington, D.C. and Florida. This is really the burger that everyone likes. It's Hollywood's favorite burger. Bringing it to the East Coast is exciting. We have no concerns about whether the product will be well received here.

Is it difficult to franchise in New York? There's some unique challenges associated with New York City, such as high rent?

Wiederhorn: Finding the right franchise partner in New York City is very difficult. We worked really hard and took a long time to find the right partner in the Riese Organization. They operate 110 New York City restaurants and that really gave us the comfort that they have the ability to navigate ... businesses in New York. You have to find the right access to real estate, employee and distribution to make it work. And that's what'll make Fatburger successful here.

Rent is always an issue in New York and the restaurant has to stand on its own two feet. Fatburger is not in a tourist location. We're actually in a residential area, in Murray Hill. And that really is going to show that the community wants this as their local burger joint, that's why they're here, and that's why I'm not worried about the rent cost. New York generally has higher average sales volumes and I'm sure that it'll be adequate to cover the rent cost.

So will you have to raise prices?

Wiederhorn: The prices are the same, roughly as they are in Los Angeles or Las Vegas.

Do you think the market has hamburger fatigue yet?

Wiederhorn: I don't really think that the market has hamburger fatigue because in the fast-casual space ... while there are all these new entrants to the category, there's so many customers that are an opportunity for us as a space to draw upon. It's really getting the (quick-service restaurant) customer to spend a dollar or two more and trade up to a freshly prepared burger customized the way they want it or the casual-dining customer to trade down from that $14 or $15 average check to $10 or $11.

So there's really a huge opportunity. It's not about too much fast-casual burger competition. It's really about too much opportunity for us to pull from both sectors.

So besides opening in New York City, you guys have another big announcement. You are now selling burgers, frozen burgers in Wal-Mart. What was the strategic decision behind that?

Wiederhorn: We made a decision to distribute Fatburger across the country with Wal-Mart as a partner because Wal-Mart is in so many venues that we're not. We don't have locations all over America, but Wal-Mart does. So to offer frozen Fatburger patties in the meat section at Wal-Mart and let a customer take it home and barbecue it and add the toppings to it and it'll taste just like a Fatburger they'd make in a restaurant.

Was that an exclusive agreement or will we see Fatburgers sold in more stores?

Wiederhorn: We have an exclusive relationship with Wal-Mart. And, you know, it really doesn't compete against the customer walking into a restaurant to get a hamburger because at home you're making it yourself and that's a whole different exercise if you want to cook at home. Going into a restaurant, you want someone to prepare it for you.

Is it two different customers who are buying the burgers at Wal-Mart and coming into a Fatburger restaurant? Or is it the same?

Wiederhorn: In many markets it's going to be two different customers that are coming into a Wal-Mart to buy the burger because we don't even have a Fatburger in that market. But in some markets like in California and Nevada where we have lots of Fatburgers and there's lots of Wal-Marts, then it's the same customer making the decision. Do they want to cook at home tonight or do they want to go to the restaurant and have it cooked for them? It's not going to change the product. It's really about who's going to cook tonight.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

>To submit a news tip, email: tips@thestreet.com.

Follow TheStreet on Twitter and become a fan on Facebook.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.