No rest for RBD

By Phil Boeyen, ShareChat Business News Editor

Wednesday 28th March 2001

Fast food company Restaurant Brands (NZSE: RBD) has detailed further expansion plans for its Pizza Hut and Starbucks brands and says it will use cash from KFC to fund the growth.

CEO Jim Collier told shareholders at the company's AGM today that although the company is planning to have opened 50 Starbucks coffee stores by the end of 2003, it will still only represent 6% of the café market.

"We believe there is potential to expand beyond 50 stores and 6% market share. It is probable that the company will continue to open stores after 2003 and we will evaluate the scale of the opportunity in the next 12 months."

Mr Collier says there is also scope for Pizza Hut, which currently has 82 stores, to expand.

"There are many regional towns which could support a Pizza Hut delco. Examples are Whakatane, Te Awamutu, Morrinsville, Levin and Greymouth. We intend to commence opening regional delcos in the second half of 2001."

Mr Collier also explained to shareholders that although the company lost around 15% of Eagle Boys' sales after converting the stores to Pizza Hut, the numbers have now recovered.

"As of February 2001, Pizza Hut was serving the same number of customers each week as the combined Pizza Hut and Eagle Boys served prior to the acquisition.

"16 stores were closed so Pizza Hut is serving the same number of customers out of 82 stores that the combined Eagle Boys and Pizza Hut served out of 98 stores."

Margins at Pizza Hut, which suffered due to the disruption of the integration, have also recovered to 11%, slightly higher than pre-acquisition levels.

Meanwhile Mr Collier says while sales growth at KFC stores has been disappointing, the chain is a "terrific business with high margins and relatively stable cashflows".

"KFC has expanded its margins by 4 points from 17% to 21% in the last 5 years - that's a 25% margin expansion with relatively flat sales.

"That success is continuing in 2001 with KFC holding the margin gains seen in the back half of 2000."

Mr Collier says the company will continue to invigorate KFC to ensure it delivers sustainable and robust cashflows, which will be invested in businesses that create shareholder value.

"We've already made good progress in implementing this strategy.

"KFC profits are up, Pizza Hut is set for increasing success and Starbucks is growing rapidly. Assuming economic conditions hold up in 2001, we believe our strategies will ensure an improved profit this year."

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