RBD - Restaurant Brands

[Snoopy]

quote:Originally posted by Halebop


71.7m debt / 8.5m NPAT would take maybe 7 years to repay assuming no dividend was paid. It doesn't get repaid at all at current dividend levels.

Yes that is right. The debt doesn't need to be repaid as long as RBD can afford the interest bill. Of course I would hope that at some time in the next ten years RBD will hit a 'sweet spot' and be able to repay some debt. That way, they will be able to afford the next round of franchise fees in 2017.

But even then, there are other ways of raising cash. They could sell off Starbucks, for example, back to the US parent. I think Starbucks acquired their franchised Australian operations in such a deal.

quote:
Debt repayment needs to be calculated from available cashflows, or as "long term" holders discover, a nasty outcome can be in the offing. Because the franchise arrangement needs to be refinanced in pertpertuity (or you can't assess the income as perpetual) the future cost of refinancing them needs to be factored. This means lower dividends or yet higher debt levels.

You are right Halebop. See my solutions above.

quote:
Comparing the 8.5 years figure with utility companies is a strange mechanism. Utilities negotiate multi decade supply and offtake agreements on multi hundred million dollar projects with finite capacity - the debt is supportable because everything is defined. RBD operate in the restaurant and take out segment of FMCG. They operate hand to mouth from week to week. A high debt level is not supportable.

KFC have been operating hand to mouth (good double entendre metaphor there) for around 50 years. They have a 'brand'. Granted it isn't a brand for everyone, but it is one of the world's most recognised. The KFC business model is durable and it works. KFC is also in a market area -food- which is essential to life. IMO KFC/PH has many aspects in common with the more traditional utility. And they certainly can support a high level of debt. You should have seen the leverage in YUM brands when it was floated off from Pepsi!

quote:
Strange that now you call their forecast debt high and about a year ago I said debt levels were too high, they had no flexability and you poo-poo'd the concept...

Quite so.

A lot of water flows under the bridge between FY2006 and FY2010 Halebop.

SNOOPY

[winner69]

quote:Originally posted by Snoopy



KFC have been operating hand to mouth (good double entendre metaphor there) for around 50 years. They have a 'brand'. Granted it isn't a brand for everyone, but it is one of the world's most recognised. The KFC business model is durable and it works. KFC is also in a market area -food- which is essential to life. IMO KFC/PH has many aspects in common with the more traditional utility. And they certainly can support a high level of debt. You should have seen the leverage in YUM brands when it was floated off from Pepsi!

SNOOPY

KFC for all it's sins is a great business in its own right .... its got great margins .... its a cash cow .... and it deserves ongoing investment

Pity all the profits go to keep Pizza Hut and Starbucks afloat

Ever wondered by RBD never disclose PH and SB profitability ... they would be embarassed

[duncan macgregor]

I take it that most of you think its not an issue to lease buildings then spend millions doing them up. I think that the company if it eventually goes under it will have very little to sell. It was stupidity at its peak when they sold the buildings. I remember SNOOPY and i having words on that at the time. I said it is better to own a building as it saves paying rent in the bad times. He said better to use the money to expand the business. Where are you now snoopy its the bad times, they are doing up the landlords buildings plus paying rent. macdunk

[Snoopy]

quote:Originally posted by duncan macgregor

I take it that most of you think its not an issue to lease buildings then spend millions doing them up. I think that the company if it eventually goes under it will have very little to sell. It was stupidity at its peak when they sold the buildings.

Whatever the end game turns out to be Macdunk, you can only sell your buildings once. What is your alternative? Lower wages, cut staff training, lower the quality of ingredients and cut promotional activity, but keep the buildings in case your other cutbacks strangle the business?

Actually I think you are underplaying the property situation. KFC haven't just done up the buldings. They have flattened them and built new ones. One advantage of doing it this way is that KFC have new buildings to work from, for which they are being charged 'old rents'. But all of this is just standard commercial practice isn't it? Commercial tenants always pay for building upgrades.

Now Macdunk, you are in the building industry. You must have driven past one of these new KFCs, redeveloped for $830,000 each (complete with all the landscaping) - even if only with disgust. Could you build KFC a restaurant for that price?

quote:
I remember SNOOPY and i having words on that at the time. I said it is better to own a building as it saves paying rent in the bad times. He said better to use the money to expanad the business. Where are you now snoopy its the bad times, they are doing up the landlords buildings plus paying rent.

As opposed to doing up their own buildings, and being locked into unprofitable locations you mean?

SNOOPY

[duncan macgregor]

SNOOPY, I feel quite sick that i didnt buy one of their buildings for them to flatten and give me a new one. SILLY SILLY ME macdunk

[Tyke]

I notice that Ted van Arkel has replaced Bill Falconer as Chairman. I worked with Ted for a few years and he is a retailer through and through having been with Woolworths PlaceMakers and latterly as CEO of Progressive Enterprises. If he is going to be a hands on type of Chairman there is a glimmer of hope as he certainly won't tolerate the lack of standards as described by Stranger Danger and others.

[Steve]

I hope that they don't stop the annual shareholder freebie![]

[duncan macgregor]

quote:Originally posted by Snoopy
Whatever the end game turns out to be Macdunk, you can only sell your buildings once. What is your alternative? Lower wages, cut staff training, lower the quality of ingredients and cut promotional activity, but keep the buildings in case your other cutbacks strangle the business?

Actually I think you are underplaying the property situation. KFC haven't just done up the buldings. They have flattened them and built new ones. One advantage of doing it this way is that KFC have new buildings to work from, for which they are being charged 'old rents'. But all of this is just standard commercial practice isn't it? Commercial tenants always pay for building upgrades.

Now Macdunk, you are in the building industry. You must have driven past one of these new KFCs, redeveloped for $830,000 each (complete with all the landscaping) - even if only with disgust. Could you build KFC a restaurant for that price.

SNOOPY, I thought and told you at the time how stupid they were selling the kennel to start up in AUSTRALIA. I am now telling you that their stupidity has reached the limits beyond my comprehension to spend $830000 doing up the landlords property. I wonder how much the landlord paid for the property in the first place. Some people are getting rich out of their stupidity. The long term investors are getting poor out of theirs, is my opinion. macdunk

[Snoopy]

quote:Originally posted by Stranger_Danger


Before buying this stock, do three things and ponder one other.

To do :

(a) Call a Pizza Hutt "helpdesk", far removed from the store that makes and delivers your pizza. Note disinterested tone.

Disinterested tone I can cope with. I don't want some super sales spiel when I ring up. I just want to order a Pizza!

quote:
Wait till pizza and the bill arrives - in an attempt to fight Hell Pizza, note they've half achieved this. Rather than being the "cheap family" option, Pizza Hutt have moved half way away from this - they are now not as cheap as Dominos, and not as good as Hell. Quality has improved. Prices have gone up a little. Where are they now? Slap bang in the middle. Who wants to be there?

The Japanese have positioned themselves above the other Asian competition but below the prestiege makers of Europe in the car market. 'In the middle' is a good place to be. In the middle is where Pizza Hut are *trying* to position themselves.

quote:
(b) Call into your local Starbucks. Note that coffee takes a while to make. Snack food is crappy, ambience is minimal - it is all about the coffee. Coffee selection is vast and personalised - they can't prepare 25 cups in advance. Result? Slow. Limited space for staff to move around, limit to how many you could have. Labour intensive. Note what happens during peak time - sometimes a queue stretching outside. That sounds good - the reality is, this business can't "ramp up" or go much faster than it does. There is a reason most coffee shops are owned by owner operators who just own one. Henry Ford would struggle to "production line" this business any more than it currently is, and currently, its slow.

So what is the solution? Prefabricated coffee and polystyrene cups?
People seem prepared to stand in line at places like Starbucks to avoid that. How would having owner operators control the coffee shops improve the situation in the industry?

quote:
(c) Go into your local KFC. My god. Talk about little shop of horrors. How can this place be their jewel? 9/10 times staff of a certain ethnic group are having a great time talking to their friends. Have twice seen a ball game being enjoyed by staff and "customers" (their mates who don't buy stuff). Have observed product being handed out more than once. Have seen customers ignored for friends many times. No signs of management supervision. Food totally inconsistent. Have been into two revamped stores - all the bright, fresh backdrop did for me is highlight how bored, uncaring and unsupervised the staff were, and how drab the food is.

Definitely sounds like a management issue there!

quote:
To ponder :

There are three things you need to sell chicken, coffee and pizza. Buildings, a business model, and management/staff.

As I understand it, they lease their buildings. They pay YUM a fee for the intellectual property, brand and business model.

Yes

[quote]quote:<hr height="1" noshade

[Pennywise]

Snoop...maybe dismissable as hype.

from the top, chairmans address less than 3 months ago included...


"Overall therefore, we believe that the market will quickly come to recognise
that Restaurant Brands' earnings are sustainable into the future, and when
this occurs it will be reflected in the company's share price."

their valuation $1.65-75.

market valuation ...nearly half

Disc: getting interested