Fastfood giant’s sustained appetite for growth
RESTAURANT Brands boss Russel Creedy says the fastfood company is on a trajectory to almost treble its size.
The owner of KFC, Pizza Hut, Carl's Jr and Taco Bell in New Zealand and some international markets was in a strong financial position and hoped to grow from today's 350 stores to about 1000 within 10 years, Mr Creedy said.
Seventyfive percent owned by Mexico's Finaccess Capital, Restaurant Brands has shown its resilience.
From about $14 at the end of last year, the share price plunged to a low of $6.60 in March, but rapidly bounced back and is now about $11.90. At that price, Mr Creedy said it was ‘‘undervalued’’ compared to its peers.
The fast food market appears to have a stomach of steel, remaining buoyant despite uncertainty.
Unlike most industries, Mr Creedy said recessions and periods of uncertainty worked in Restaurant Brands' favour.
‘‘We're a business that can really weather storms and tough situations. We've proven that with Covid, proven that with the GFC — two very different global scenarios that certainly had their major challenges, and in both cases, our business model survived and actually thrived as a result.
‘‘We're wellpositioned to be a stock that can deliver in tough times and when times are good, we do well also.’’
If you can get your hands on any Restaurant Brands shares you are in luck, because there are not many available. But Mr Creedy said there were no plans for Finaccess to increase its stake in the company, nor for the business to delist from the stock exchange.
‘‘Comparing Restaurant Brands’ stock to others, it is certainly not overpriced, and compared to its peer group of overseas stock it's probably undervalued.’’
Despite its resilience, Restaurant Brands posted a 42.9% drop in profit in the first half of 2020 as a result of disruption from Covid19 and the lockdown periods.
But Mr Creedy, who has been chief executive of Restaurant Brands for almost 14 years and was employed by the company for six years before that, said this was not a bad result considering the five weeks of lockdown and weekly $500,000 shortfall in wage costs even after taking the wage subsidy.
The company received $22.1 million in wage subsidies and retained all of its 3700 staff on full pay during the lockdown period.
Mr Creedy said not even a surge in sales in the weeks that followed under Level 3 could regain the $40 million or so of lost revenue.
On top of the complete shutdown in New Zealand, Restaurant Brands also faced a loss of sales as a result of partial shutdowns in Australia and Hawaii.
‘‘Everybody has suffered with the shutdown and I think we came off reasonably lightly,’’ he said.
‘‘At least we've got a business up and running again. Sadly, some people haven't,’’ he said, adding that he believed the result was good considering the disruption it faced.
All things considered, Mr Creedy was pleased with how the company handled the lockdown and uncertainty.
Restaurant Brands has not laid off any staff since the onset of the pandemic and has recruited an additional 100 following the easing of restrictions.
Mr Creedy said the company would finish the year in a stronger position than it did last year.
‘‘Covid was unfortunately an absolute speed bump in what started off as a good trading year for us,’’ he said.
‘‘We've regained that momentum and we're back to trading positively on prior year results.
‘‘The second half is going to be a strong half for the year, consumers are certainly coming back to the brands in their droves and confidently.’’
Reduced store sales had been compensated for by more online clickandcollect and delivery sales.
Restaurant Brands is in growth mode. It wants to triple the number of stores in its stable within 10 years.
Building outlets is a major focus for the company, particularly drivethrough locations.
The business is preparing to open two new Taco Bell stores in Auckland by Christmas, as part of its plan to be operating at least 25 in the New Zealand market, and the same number in Australia, by 2025.
It will invest more than $65 million to roll out the brand in both markets.
Mr Creedy did not see opening more stores as a risky move in a recessionary environment.
He said the company's brands were wellestablished and the focus on drivethrough locations allowed contactless operations.
‘‘If we only relied on dinein, we'd certainly have a problem. It's been a difficult, trying period for everybody but I think the strength of the Restaurant Brands portfolio has really come to the fore.’’
As well as opening at least four new Taco Bell locations next year, Restaurant Brands plans to open three new KFC branches a year in New Zealand and the same number in Australia.
Restaurant Brands recently acquired 58 KFC stores and 11 multibrand KFC and Taco Bell stores, together with a head office, in Southern California for $US80.7 million ($NZ121.6 million) and expects to grow the business in that market.
KFC has been in New Zealand since 1971 and has been the company's breadwinner brand for years.
Despite the fanfare and roaring popularity of Taco Bell, Mr Creedy did not expect sales by the Mexicaninspired brand to overtake mammoth fried chicken sales — at least not within the next decade.
Mr Creedy said there was no doubt Restaurant Brands would reach $1 billion in sales this year — compared with $383 million in its latest halfyear — following the acquisition of the California business, which itself has annual turnover of $US95 million a year.
He was also confident the company's plan to triple its store count was achievable.
‘‘To get up to 1000 stores is quite conceivable over the next, let's say, conservatively, 10 years.’’
Mr Creedy, formerly an industrial chemist when he was living in South Africa, said New Zealand sales had bounced back the fastest of all of its markets. The company had expected Hawaii to recover fastest, but the US state suffered a severe resurgence of cases and was forced into a second hard shutdown.
Despite this, sales in Hawaii and all markets had bounced back.
The head honcho typically visits the mainland United States four or five times a year, Hawaii another three to five times, and the same for Australia. In normal times, he is away at least once a month.
But like the rest of us, he has been grounded in Auckland and has been attending meetings virtually.
He expected travel restrictions and the closed border to become more of an issue in the months ahead.
‘‘It is manageable through video conference meetings, but after a couple of months of those it does get a bit thin and you do need to get on the ground and move around the restaurants and meet people,’’ he said.
‘‘This is a daytoday business and it does require a lot of handson involvement from myself and management.’’
Mr Creedy did not particularly enjoy the frequent travel, but said it was important to have ‘‘feet on the ground’’ in the markets where Restaurant Brands operated. — The New Zealand Herald