Sunday, May 18, 2008

Restaurant Brand's gives KFC a push

It will seem strange to regular readers of this blog for me to be praising Restaurant Brand's [RBD] management but after some reasonable on site research of one of the company's brands, KFC, I do believe they might have got one aspect of the company almost right.

Restaurant Brands is the franchisee operator of KFC, Pizza Hut and Starbucks and has had a very chequered operating past since listing in 1997. Sales have been declining, levels of service poor and menu and food quality dubious at the best of times. Profit and revenue have also consistently fallen in the last decade as a result of the poor management.

There has been a 2 year focus on KFC to resurrect the company's only profit maker. Millions have been spent to remodel the 89 store chain with new menu items to give the image of KFC and the Colonel's old deep fried chicken a healthier look and judging by my own survey of a couple of Auckland's North Shore stores, Takapuna and Browns Bay, the extensive rejig of the menu seems to be keeping declining customer numbers at an even keel.

The choice of salads, burger meals, various new types of snack foods and smaller chicken pieces from the old KFC menu make for more choices for customers but management risk diversifying too much and alienating their core customer (thats me folks) who still comes for the fried chicken, if they go further.

Stick to what you know guys and don't try to reinvent too much. McDonalds have just successfully redefined their menu in a healthier way, while adding a large chicken menu to their roster and too many similarities between the 2 chains chicken products should be avoided at all costs. KFC's main point of difference, and it has been that way for nearly 40 years in New Zealand, is their 11 herbs and spices recipe. Don't kill the very chicken that lays the golden stuff !

Related Share Investor reading

McDonalds playing chicken with KFC
Restaurant Brand's Pizza Hut faces increasing competition
RBD sales analysis
RBD saga continues: CEO leaves
The secret recipe is out
2007 FY profit analysis
Delivering increased profit in October 2007
No reason for optimism in latest sales figures

Russel Creedy, who was appointed as CEO in September 2007, has made some good moves since his appointment and the continued development of KFC from previous management head Vicki Salmon has stemmed the previous hemorrhaging of the KFC unit.

What Creedy must do now though is consolidate his relative success at KFC and sell the loss making Pizza Hut New Zealand while there is someone willing to buy it.

Starbucks, while still growing revenue, mostly from inflation, is nonetheless still losing money overall and a sale back to the franchisor would be the best for all participants.

RBD management don't have the depth of expertise to manage 3 brands to the maximum benefit of their shareholders, and as proven ever so slightly so far, their concentration of efforts seems to be paying off at KFC.

Related links

RBD New Zealand
KFC NZ
Yum ! RBD's franchisor

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