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“Our objective is really to stay in positive territory and we did that,” Collins Foods chief executive Drew O’Malley told Inside Retail.
“We’re only 0.1 per cent same-store sales growth positive in KFC, but given that we’re rolling a 12.4 per cent [growth rate] that’s equivalent to a 6.1 per cent compounded annual growth rate over the two years. If you combine that with the pace of development – we’re going to build between nine to 12 KFC restaurants this [financial] year – that’s really a phenomenal result.”
O’Malley said KFC Australia will remain focused on adding new restaurants and improving the customer experience.
“Our strategy is about driving scale for each of our brands and making sure we do that on a foundation of operational excellence. For KFC Australia, it’s building new restaurants ahead of our development agreements, and continuing to invest in digital and delivery, as well as innovating around the customer experience to keep our same store sales growth positive and to keep our margins healthy,” he said.
Investment in Taco Bell
Mexican fast food business Taco Bell increased revenue by 33 per cent to $14.8 million. O’Malley attributed this to the introduction of new restaurants and ongoing investment in brand awareness.
“Over the past year, we’ve opened four restaurants. The same-store sales growth was actually negative for Taco Bell, but we’ve grown the top line as we’ve added new restaurants, which is all part of our strategy for that brand,” O’Malley explained.
“We need to have enough restaurants around so that it’s top of mind [for consumers]. We need to move people from thinking about a brand as a ‘treat’ occasion to a convenience occasion.”
Mexican is the fastest growing segment in QSR in Australia, and O’Malley is confident that the brand will become more popular with Australians in time.
“We know that Australians are changing. They’re more open to new flavours, they’re more open to trying new types of foods. Creating a quick service offering in this space is the right concept at the right time,” he said.
“We are conscious that we need to be patient with this brand because it’s still very, very new. It is gonna take some time to get that scale underneath it but we really believe in the future of the brand.”
KFC Europe was the standout performer in the half with revenue increasing 31.7 per cent to $84.7 million. The growth was attributed to a market rebound to above pre-pandemic levels and the company’s acquisitions which have performed ahead of expectations.
“On a two-year basis, even compared to pre Covid numbers, we see growth and that’s very encouraging,” O’Malley said, pointing to investment in marketing and operations.
“We are starting to shift our marketing more around the core of what the brand stands for, more around everyday value. We’ve been doing a lot of very disruptive and aggressive promotion to get people into the brand,” he said.
“We’ve put a lot of effort into training, into the quality of the operations there. Ultimately, for us as restaurant operators, our objective is to run better restaurants than anybody. That will always be one of the key ingredients.
Collins Foods’ recent Corporate Franchise Agreement (CFA) and acquisition of an additional nine restaurants in the Netherlands, gives it control of over half the KFC network in the region and puts it in a strong position for long-term growth, O’Malley said.
“This [CFA] gives us a much more prominent position in that market. We want to integrate the new acquisitions in the beginning of next year, and we’re going to continue to build aggressively from there,” he said.
O’Malley expects there will still be a “bumpy road” ahead due to Covid, with numbers once again surging in Europe, and due to the recent emergence of the Omicron variant.
“We don’t know yet the impact of the new variant. In the near term it’s a little hard to project, but in the long term, we are very bullish on Europe,” he said.
While the impact of the variant on society remains uncertain, O’Malley is confident that Collins Foods offering will remain in demand.
“We’ve seen the strength of quick service restaurants play out during heavy restrictions over the past year, and we think that we’re still pretty well positioned to weather some of the storms that will likely come about if there’s renewed restrictions put in place,” he said.