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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STUFF: Fairfax poll & Political Animal commentary

The latest fairfax political poll continues the trend from last year where National started to show a wide gap. This gap has not only continued but has got wider as time goes on.

It is clear to voters, Labour or National, that voters want their money back, in the form of personal tax cuts. Not State sanctioned welfare like working for families or one off dollops from those that earn the money to those that haven't. They simply want their own cash back in the hand on a weekly basis, without state apron strings involved or mixed up in loony taxpayer subsidised "savings" schemes like Kiwi saver.

The billion dollar plus price tag for a train set and not dividends in their pockets, seems to be yet another motivator for long suffering middleclass taxpayers to get on track to get back what they deserve.

Their own moola!


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Michael Cullen speaks with forked tongue
Pointing fingers in the playground
At least Robin Hood was honest
The black economy makes sense
Labour's State Control out of control




Stuff poll and commentary

National is on track for a landslide election win with a 27-point poll lead over Labour.

On today's Fairfax Media poll, Labour faces an election night rout that would oust 14 sitting MPs and deliver National a 13-seat majority.

Finance Minister Michael Cullen is now under huge pressure to deliver an election-winning Budget next week or face the backlash from voters seeking relief from rising pressure on household budgets.

But on today's result, voters have already written Labour off and it may take more than the modest tax cuts signaled by Dr Cullen to turn that around.

The Nielsen poll for Fairfax newspapers suggests that not just the size but the timing of any tax cuts could be critical, with voters saying they want relief now, even if that puts pressure on interest rates.

Just over half of those questioned - 51 per cent - don't want to wait for tax cuts, even if that means interest and mortgage rates stay higher for longer.

It suggests that Dr Cullen's argument that early and sizeable tax cuts will only push up interest rates and delay relief for heavily mortgaged households does not wash with voters.

Kiwibank cut its two-year fixed-term home loan rate to 8.99 per cent yesterday and other banks are expected to follow in anticipation of a cut in interest rates by the Reserve Bank.

Today's poll will send panic through Labour ranks. National's lead is a turnaround from polls which had Labour closing the gap - the previous Fairfax poll had National and Labour 18 points apart.

National Party leader John Key said yesterday that voters were sick of Labour.

"They're tired of the fact that they're so out of touch with issues that concern them in their daily life."

National would fight the election on tax cuts, which would be a defining difference between the two parties.

"All the messages that Labour has given off in the last two months is that tax cuts will be relatively small."

Prime Minister Helen Clark, who is in South Korea, could not be contacted for comment.

The poll put the Greens on 6 per cent - safely above the 5 per cent threshold, where they were joined by NZ First on 5 per cent.

That could put NZ First leader Winston Peters back at centre-stage in any post-election deals, though on current numbers National could easily govern alone.

The poll questioned 1091 voters between Wednesday May 7 and Tuesday this week and has a margin of error of 3 per cent.


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Something in the State of New Zealand is rotten

Just when you thought things couldn't get worse for the New Zealand Labour Party, along comes the scandal to beat all scandals, one of Helen Clark's ex employees, Maryanne Thompson, is tarred with the corruption brush and Ministers knowing this chose not to disclose and are now not talking to the media.

Lets go back a bit though.

In the last few weeks we have had a major u turn on the nonsense "climate change" policy, Michael Cullen's failed 9 year fiscal policy continuing to have a dire economic fallout, Phillip Field's corruption trial finally given the go ahead after a prior 2005 election cover up by the Labour Party, the massive hypocrisy of Auckland Airport being bared from a sale but Vector assets sold to our new friends in China, revelations that Alexandra school children were being taught in shipping containers, Michael Cullen caught out lying about the cost of "kiwi rail", the worst economic figures in generations; 29000 less people working and fatal retail sales and a list as long as your arm of ministerial gaffs and malfeasant behavior.

The latest scandal is fraught with much speculation but this is clear. Ministers from the Labour cabinet are involved and knew what was going on with Maryanne Thompson.

Thompson fudged her credentials, gave relatives quick shift through our immigration department to illegally obtain New Zealand residence and favoured friends and family in rewarding large contracts, as the taxpayer money slipped through her fingers like so much confetti .

Trevor Mallard was the Minister responsible at the time and there are rumours that he was aware of the shady business of Thompson and her co-workers. He was aware of Phillip Field and his pre 2005 Election corruption and kept it mum, so why would this case be any different.

Labour voters really cant have alot of confidence in their political masters, the Labour Party.

Their modus operandi is secretive and corrupt. A party that has had secret donations made from Owen Glen, a wealthy billionaire, has stolen taxpayer money to buy the 2005 election, has done their best to stop opposition to the 2008 election by passing the fascist Electoral Finance Act and has had their leader, Helen Clark been caught out lying several times and simply cannot be trusted.

The latest polls reflect that Labour is set for one of the biggest losses in their party history but is only going to be tempered by the large amount of working New Zealander's taxes that are going to be handed out to buy the votes of those too selfish to think of others or simply ignorant of the real state of the nation and how much Helen Clark and her merry bunch of socialist misfits have contributed to it.

We the voter shouldn't forget the Watergate scandal from the 1970s, that brought down the Nixon Government. It was predicated by a break in and a cover up of that break in. Much worse has happened during the 9 years of labour.

Where are our Woodward and Bernstein when we need them?

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New Zealand Budget

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Stick to what you know

One thing alot of people do in life,especially when they get bored, are particularly ambitious(or turn 40!) is to go outside one's comfort zone to challenge their personal or professional skills, this can be quite rewarding in many ways, a sense of achievement comes from trying new things and the risk of failure can often be forgotten in the heat of excitement.

While this approach to life in general is much to be admired, this sort of approach to investing is probably one of the easiest ways to lose your hard earned bucks.

When deciding to buy a business or part of a business, as stocks are, one of the most important aspects you must consider is if you understand what it is the company does and how it does it.

Look for either a good business that you yourself may have industry experience in or is simple enough to understand with a minimum of interpretation of company reports.

Food companies, retailing, steel making and strong brands like, Coca Cola and McDonald's are easily understood even by the most green of investors.

This basic investment tenant can also be applied to the management of any business or enterprise. Watch closely at management of any company who also want to go out of their comfort zone or level of experience and therefore competence.

A successful toilet paper company that suddenly decides to use their excellent profits to expand into the new car business is one that you don't want to invest in and if you are already invested you should roll yourself right out of there.

Coca Cola tried to mess with the formula to their main product in 1985, they didn't need to, they were still number one, but the CEO decided to go outside his level of expertise and change their simple successful 100 year old product. It would have meant the end of the company had the decision to recall the old formula not been made.

The formula of sticking to what you know clearly goes across all asset classes as well.

Be it bonds, of either the Sub-prime or "prime" variety, stocks, real estate, gold, oil, pork bellies or carbon trading, you must stick to what you know first. If you want to get into something you don't know, either you don't, or you do your homework and become as competent as you can.

It is very easy to look at glowing company reports, prospectus' or advisor recommendations of companies but when those businesses are more complex than a real estate agent's patter on explaining why the view in the advertising looks nothing like the view from the house itself, don't go along with the hype.

K.I.S.S. keep it simple stupid!

Who in their right mind would get into a company like Blue Chip New Zealand, their company was structured like a pyramid within a maze, but people looked past the complexity and "invested" anyway.

While of course good management, good company history and growing revenue and profit are also essential ingredients in the investing cake, removing complexity from the mix is going to make one's decision a more profitable one in the long run.

Understanding a business or investment is a really good start along the road of success and the new challenges will lie in continuing to keep the business/investment simple. Keep the challenges for the weekend and bungee jumping in Queenstown.


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