Big franchises lose their sizzle

Despite more players in the market, three prominent burger brands failed to sizzle in 2017 with sales rising at a slower pace than what Kiwis were willing to spend on food and beverage services.

Government data show New Zealanders increased the value of retail spending on food and beverage services 9.1 per cent to $11.28 billion in the year ended March 31, with the volume sold rising 6.8 per cent, indicating higher prices.

While not exactly aligned, financial statements lodged with the Companies Office show total revenue at McDonald’s Restaurants New Zealand rose a modest 0.2 per cent to $260.1 million in 2017.

About 80 per cent of the restaurants are owned and operated by local franchisees.

Revenue at rival Burger King New Zealand — owned by US private equity firm Blackstone Group via Tango Holdings NZ — slipped 2.2 per cent to $187.3m, and NZAX-listed BurgerFuel Worldwide’s New Zealand revenue, which includes franchise fees, rose 8.8 per cent to $21.1m in the year to March 31.

Carl’s Jr, owned by NZX-listed Restaurant Brands New Zealand, posted a 3.9 per cent decline to $34.9m in the year to February 26.

McDonald’s local profit rose 28 per cent to $67.7m, while Burger King posted a profit of $3.1m, a drop of 18 per cent.

BurgerFuel’s net loss was $463,999, which it said was due to initial costs and later exiting of the US. Carl’s Jr improved profitability, doubling earnings before interest, tax, depreciation and amortisation to $2m.

The local McDonald’s division again paid $30m to its US parent.