Monday, March 19, 2007

RBD: The Secret Recipe is out

I was completely unaware of this:

It bought bankrupt Pizza Hut restaurants in Victoria and a new Australian competitor, Eagle Boys, in New Zealand.

The first buy - encouraged by Yum! and sweetened with A$3 million ($3.41 million) in marketing spending - has been a millstone for years and is only now being disposed of after months of wrangling with Yum!

It makes the purchase of Pizza Hut VIC an even worse folly than it turned out to be-although I was ever hopeful that RBD would get it right.

I just have to ask myself why didn't the market know about this "incentive" before or did i just miss this info when it came out?

Wouldn't one have to ask oneself, if one was a RBD board member: " the chain is bankrupt AND they are giving us a monetary incentive to buy it, shouldn't we question seriously why YUM would be this accommodating?"

Was it stupidity, naivety or just plain lack of business acumen that would led RBD along this path and to their close demise as a whole?

I would pick lack of business acumen. Knowing the figures, margins,royalties to YUM and other costs they should have known whether it was a goer right from the onset AND secondly the point where they should have known to let go, sooner as it turns out.

Just an important point about the margins, perhaps Diabs experience should have been viewed with more scrutiny:

Even a Restaurant Brands board member, Australian entrepreneur Danny Diab, says he's had no problems running his privately owned Pizza Hutt franchises across the Tasman.

The differences between profit and loss for the business is that Diabs' PH don't have the extra layer of costs that RBD management bring to the table. Because margins are as thin as a Pizza Hut topping there is no room for fat at any level .

Of course Diabs hands-on running of his outlets, like Dominos' store owners, makes the difference in service and quality, although I would argue that DOM does it much better.

Cut management numbers and boost service levels, t he first things I would do if I
was CEO.

c Share Investor 2007

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