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 Diab's 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 Hut franchises across the Tasman.

The differences between profit and loss for the business is that Diab's' 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 Diab's 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, the first things I would do if I
was CEO.


Restaurant Brands @ Share Investor

Finger Lick'n Good Management
Chart of the Week: Restaurant Brands Ltd
Long Term View: Restaurant Brands Ltd
Stock of Week: Restaurant Brands Ltd
Restaurant Brands: Buy or Sell ?
Pizza Hut sell-off provide opportunities all-round
Danny Diab & Restaurant Brands
2008-2009 KFC sales figures mislead investors
KFC Finally Flying
Starbuck's New Zealand Cup doesn't runneth over
RBD gives KFC a push
McDonald's 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


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c Share Investor 2007

Restaurant Brands Saga Continues

So...Vicki Salmon has been swimming against the river of opinion for her to go and finally she has. Has it has taken her 10 years to decide that the fortunes of RBD are gradually in decline or has she milked enough moola as a director and CEO, 1.2M over the last 4 years and around the same for the previous 6 years, that she figured it was time to go.

I have been critical of her since her placement as head chef at RBD and she has more than lived up to my low expectations of her. Under her stewardship profit has declined more than under her predecessor and service levels and food quality at KFC and Pizza Hut have resembled a similar flight path much the same as the proverbial flightless bird the kiwi.

I made a comment about her flashy dress-sense at the time of her placement as CEO, calling her in effect a "Flash Harry" ; all image and little substance. Her continual emphasis on how stores looked and how marketing was done was continually being let down by the complete disregard to service and the customer experience.

Competitors in this hard fought industry have overtaken RBDs past dominance of the QSR sector and real sales and profit continue to slip.

Analysts and financial commentators continue to trumpet Vicki's' "success" in the turnaround of KFC's' fortunes. What bloody turnaround would that be? 5M dollars more sold than their best year, behind when inflation is taken into account by 25-30% and even further behind when one considers recent stats indicating very healthy increases in the fast food sector.

How bad does one have to be as a CEO to be given the rooster?

Sadly , Vicki leaving/being pushed ain't gonna cut it either. When you consider the poor calibre of management ,just below Vicki, at board level and then the detritus that makes up region, area and store managers then as a shareholder you would have to be worried that the management direction of RBD, will be, like the aforementioned Salmon, have RBDs' fortunes swimming weakly upstream.


Restaurant Brands @ Share Investor

Finger Lick'n Good Management
Chart of the Week: Restaurant Brands Ltd
Long Term View: Restaurant Brands Ltd
Stock of Week: Restaurant Brands Ltd
Restaurant Brands: Buy or Sell ?
Pizza Hut sell-off provide opportunities all-round
Danny Diab & Restaurant Brands
2008-2009 KFC sales figures mislead investors
KFC Finally Flying
Starbuck's New Zealand Cup doesn't runneth over
RBD gives KFC a push
McDonald's 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

Discuss RBD @ Share Investor Forum
Download RBD company reports


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c Share Investor 2007

Restaurant Brands 2007 Sales Analysis

The latest sales release from RBD can be described best as, same crap different year.

Lets have a closer look:

KFC

KFC ended the financial year with the highest total sales ever at $182.7m, an increase of 6.3 per cent over the prior year. Same store sales increased 7.1 per cent for the full year, the highest annual same store sales growth.

In pure dollar terms yes KFC is 5m ahead of sales figures of 2002 , less than a 3% increase but when you factor in inflation, at a generous figure to RBD of 3%, that increase in sales is more than wiped out in one year. Extrapolate that 3% out over 5 years and you can see KFC is still hurting badly. I'm being generous to KFC and disregarding increased wages, utilities, raw product costs.

"The transformation of KFC is clearly gaining momentum as we combine store revamps with some innovative new products and a successful promotional calendar," she said today.

Now where did I hear that word "transformation" before. Yes! it was on the cover of the 2000 annual report, That was the buzz word for the year-looks like it was Vicki's' idea because she has wheeled it out again this year.

Transformation, specifically related to KFC in the 2000 report:

"..transformation of KFC with the introduction of innovative burger and snack products and store upgrades..."

AND

"...the KFC brand has been re-inventing itself...the continued store upgrade...provide(s) customers with the excitement of a vibrant,fast moving brand..."

All sounds eerily familiar to today's statement.

Vicki has a focus on marketing even in her press releases, I cant wait for this years report for some new buzz words.

Watch KFC in the face of competition from other chicken chains, notably Red Rooster. KFC is now offering whole roast chickens, as RR has always done. I put the idea of providing roast chickens to the head of KFC 7 years ago but he told me it wasn't viable because of the costs involved-oh how times change.


Pizza Hut

Not much to be said really, the figures speak for themselves:

For the full year, total Pizza Hut New Zealand sales were down 10.5 per cent to $79.7m, with same store sales declining 11.8 per cent.

In the face of competition from Domino's, complacent RBD management have let this brand suffer so much the amount of dough in their pizzas can now be seen from space. I remember Vicki saying something like "...we are not worried about the competition..." when Domino's first came on the scene. Look at Domino's now, we have never been back to PH since Domino's opened and sales figures suggest alot of others have done the same.


Starbucks

Ironically this brand used to be the straggler, now sales are increasing and all looks good. Except it still operates at a loss because operating costs are too high. Rent of some of those CBD outlets of theirs is killing the very reason for them being in business.


Summary

The focus by Vicki and her troupe on style over substance-brand image is just that if there is trouble in the kitchen: high management cost, poor service. There was no mention, and there should be, of service levels and what they are doing to make them acceptable, so we can only assume by the service in front of house that they are doing a big fat nothing.

In the face of competition RBD is an immovable feast: complacent at best and slow to react . Witness the demolition of Pizza Hut by Domino's and then wonder what might happen to KFC in the face of a bigger Red Rooster or Church's Chicken of America(cover your eyes it ain't going to be pretty)

Looking through nearly ten years of RBD reports, one must come to the conclusion that RBD, while going up and down in fortune, as QSRs do, it keeps going further down when it is down and never quite reaching the previous peak when its fortunes are up.

The future does not look good and recent talk of takeover activity(doubtful according to todays spin) may only happen when the next valley RBD gets into is unable to be got out of by spending more shareholders money on a new marketing plan, when it is the S in QSR that is sadly missing from RBD management's secret recipe.


Restaurant Brands @ Share Investor

KFC finally flying
Starbuck's New Zealand Cup doesnt runneth over
RBD gives KFC a push
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





c Share Investor 2007

Long Vs Short Term Investing

An interesting debate that was carried out on my share investor forum


The 2 opposing sides of this debate are encapsulated perfectly by a third entrant:

Brut wrote

Macdunk & Snoopy

I am new on this tread but I thought I'll add my 2 cents worth... It's great to have two opposing views on investing in the share market, if everyone agreed there wouldn't be a market. By this i mean, if everyone agreed (bulls & the bears) that XYZ stock was worth $5 a share, there wouldn't be a market (nobody would be buying or selling)

I personally like to invest 90% of my portfollio in long term stocks & I have 10% in speculative stocks that I trade. I'm probably not as experience as you guys, but I've learnt that you find a system that works for you & stick to it.
Goodluck to both of you!!!


... It's great to have two opposing views on investing in the share market, if everyone agreed there wouldn't be a market...

Share Investor

Exactly, I couldn't have said it better myself. Snoopy and Macca are examples of the 2 opposite sides of your quote Brut.

Welcome to Share Investor!



The debate over the long and short-term thing rages on. I have a go at both approaches and both can be used in one's arsenal of investing tools, a Benjamin Graham and Warren Buffett approach if you like!!

Many investors say on or the other of these methods is right or wrong. Remember though, when investing do what is right for you dear reader.

Happy Investing,


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c Share Investor 2007