RBD - Restaurant Brands

[LAC]

Thank you. much appreciated guys.
Bought RBD when it was $2.60 and just wish I bought heaps more back then.... just waiting to see if it will drop around $3.50ish.
Snoopy -> thanks for the breakdown on how you value based on Div history....

[Regi]

https://www.anzsecurities.co.nz/Dire...spx?id=3904917

[Harvey Specter]

https://www.anzsecurities.co.nz/Dire...spx?id=3904917

Very good but I am not sure they should be referring to increase sales/profits at KFC as "healthy"!

[Snoopy]

Tough talking Chairman Ted added some local flavour to his AGM address. A new KFC will be opening in the Christchurch eastern suburbs soon. Also two ‘Carl’s Junior’ outlets will be built in Christchurch this year, the first being at the old clock tower site in Hornby. He was pleased to bring the AGM back to Christchurch because 10% of shareholders now live here. There was a great turnout at the meeting too, with hardly a seat at the Clearwater Conference room left unfilled.

A shareholder mentioned the target of 40-50 Carls Junior stores, the fact that RBD now had 18 but that only three more were planned this financial year. Was the target of 40-50 still realistic? Answer: Yes, but directors were being very disciplined in how they spent shareholder capital. The north of the North Island now has scale. But directors want to see that part of the Carl’s Junior chain in profit before fully committing to the rest of the country.

Competition for capital is there in the form of the KFC site rebuilds. There are only nine to go now before the whole network is transformed. A shareholder brought up the point of long queues at KFC particularly in the drive in lane at dinner time. Could there be an advance order system be brought in to cut customer waiting time? CEO Creedy noted that this was the reason the new position of “General Manager Information Systems” has been created. Geoff Holton who has this position is tasked with making all of the brands mobile phone friendly. Put your orders in , in advance, and skip the queues! The Pizza Hut Website is about to re-launch to better mesh with the mobile phone interface. Similar systems are planned for Carl’s Junior and KFC. Meanwhile a monitoring program was in place to measure waiting times for both drive in and counter orders.

A shareholder noted that "Texas Chicken", branded as "Church's Chicken" in the US, has opened a store in Auckland. Did RBD consider them a threat? CEO Creedy said that he had been there and didn't think much of them. Pretty tasteless compared to KFC, and really just an inferior knock off he said. Nevertheless RBD are keeping an eye on the store because they know it is well financed. They may respond at the nearby KFC store with special offers if they ae required to do so. The story of Red Rooster arriving from over the ditch, building six stores in Auckland, then folding their tents in full retreat a few years later was relayed!

The sell-off of Pizza Hut stores is expected to continue with another 4-5 set to go to independent owners this year. There is a growing trend for potential independent franchisees to want to buy more than one store. This year the RBD share of the Pizza Hut business will drop to under half the total number of stores. For the first time, RBD has disclosed total Pizza Hut sales (including franchisees). That figure for FY2015 was $82m and only $48.2m of those were RBD owned units.

Average sales of RBD owned Pizza Hut: $48.2m / 46 stores = $1.05m
Average sales of independently franchised Pizza Hut: $33.8m / 42 stores = $0.80m

Given the PH stores sold were generally in the smaller and less profitable catchments, I might have expected RBD itself to be doing better. This shows that RBDs strategy of continuing to sell down is probably the right one.

‘Starbucks’ received more than its fair share of attention from shareholders, despite the record EBITDA result. One questioned the ‘invisible advertising’. Geraldine Oldham, General Manager Sales and Marketing noted that ‘Starbucks’ stores were their own billboards. Starbucks NZ also run their own facebook and instagram pages. Further, as with much of the ‘café culture’ the most important advertising is word of mouth. Another noted the shrinkage in the number of outlets in NZs second largest city, even as other coffee chains had expanded. Director Sue Suckling carefully articulated that RBD had different expansion options available to it and it was up to directors to use the company’s capital in a way that would provide the highest return to shareholders. All sensible stuff, except that if you really believe that Starbucks can’t compete for the use of RBD’s capital, why own Starbucks at all? RBD have been ruthless at selling off underperforming Pizza Hut stores, so why are they not selling underperforming Starbucks stores? My conclusion: the whole of Starbucks is being 'polished up' ready for a trade sale in one block. Remember you read that on Sharetrader first!

Warehousing and food distribution were brought back in house during the year. Bringing warehousing and food distribution in house has changed the ‘normal’ accounting base. CFO Grant Ellis noted that the large increase in inventories on the balance sheet, matched by an equally large increase in trade creditors will be representative of the ‘new look’ balance sheet because of this change. I am really surprised that such a large part of the company's business could be shunted off balance sheet in the past. But there you go!

Tough talking Ted has been on the RBD board since 2004, but said he was more excited than ever about RBDs business prospects and was just rearing to be re-elected. He was re-elected.

"With its three established brands all performing at a very high level and Carl’s Jr now beginning to gain some traction, we are now starting to get to a position where we can begin to evaluate another brand opportunity." Ted said.

"Whilst it would be premature to start speculating now, we have been scanning the marketplace in a number of sectors including Mexican, Asian, mid-scale casual dining and lunch day-part opportunities."

What about Taco Bell a shareholder interjected? "You must have read my mind" Ted said. So perhaps 2016 will be the year that the Taco Bell (finally) tolls? Not sure if that will be a good thing in a country without much Central American culture.

Another shareholder asked about the fall in the NZD:USD exchange rate. Will profitability going forwards be affected?

"The only major US sourced product is Starbucks coffee, amounting to some $5m of ingredients per year." "Carl's Junior did have a lost of US content, but the beef for that is now sourced locally." "So going forwards the weaker NZD/USD exchange rate is not a big issue." said Ted

Now shareholders will be watching carefully to see if Ted van Arkel's new found enthusiasm continues to come through in the company results.

SNOOPY

[percy]

A very good account of the meeting.
I was most impressed by the board's openness,skills and experience.
It is a very well directed and managed business.They know where they are,where they want to be ,and how they are going to get there.
The Beagle gave himself away by asking a question about page 52 in the annual report.!!! lol

[Regi]

Not Taco Bell!! Place is trash. I say bring Chipotle!

[Xerof]

Chipotle - my favorite when I lived in Virginia a few years ago, along with '5 guys and fries'

Used to be under McDonalds' influence, although divorced in 2006.

wonderfully simple mex meals, cheap as, and great with an in-house marguerita

[Rep]

The sell-off of Pizza Hut stores is expected to continue with another 4-5 set to go to independent owners this year. There is a growing trend for potential independent franchisees to want to buy more than one store. This year the RBD share of the Pizza Hut business will drop to under half the total number of stores. For the first time, RBD has disclosed total Pizza Hut sales (including franchisees). That figure for FY2015 was $82m and only $48.2m of those were RBD owned units.

Average sales of RBD owned Pizza Hut: $48.2m / 46 stores = $1.05m
Average sales of independently franchised Pizza Hut: $33.8m / 42 stores = $0.80m

SNOOPY

System Sales
Actually, RBD have disclosed the PH system sales previously. In 2012/13 they disclosed that they were $62.2m for the year. They quietly dropped disclosure of the system sales thereafter.
The major increase by a third to $80m since then is consistent with the significant same store increases since then...
http://www.restaurantbrands.co.nz/fi...t_2012-13.pdf/

Starbucks
The sale of the Pizza Hut stores to independent franchisees is a helluva lot easier than looking to do the same for Starbucks. PH around the world is based on a franchise model - apart from New Zealand, I'm not aware of many countries where Starbucks has provided an independent franchisee. RBD Shareholders are probably not aware of the hideous open cast money pit that Starbucks International managed to create in Australia (it dwarves RBD's disasterous foray into Pizza Hut Victoria by probably a factor of 3) when they built over 60 stores before closing over half of them almost overnight and having less than a third still operating. Any trade sale would have to either to SBI or to a franchisee that SBI approve.

As a shareholder, I'd rather that any RBD investment is into something that produces the best return and it isn't Starbucks. But there isn't any point doing a firesale as it producing a return.

[Snoopy]

Starbucks
The sale of the Pizza Hut stores to independent franchisees is a helluva lot easier than looking to do the same for Starbucks. PH around the world is based on a franchise model - apart from New Zealand, I'm not aware of many countries where Starbucks has provided an independent franchisee. RBD Shareholders are probably not aware of the hideous open cast money pit that Starbucks International managed to create in Australia (it dwarves RBD's disasterous foray into Pizza Hut Victoria by probably a factor of 3) when they built over 60 stores before closing over half of them almost overnight and having less than a third still operating. Any trade sale would have to either to SBI or to a franchisee that SBI approve.

As a shareholder, I'd rather that any RBD investment is into something that produces the best return and it isn't Starbucks. But there isn't any point doing a firesale as it producing a return.

Actually the topic of the sale of Starbucks NZ has come up before. This from Tuesday July 2, 2013:

http://www.nbr.co.nz/article/restaur...decision-bd-14

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The fast-food operator closed six Starbucks stores last financial year and may shutter a further five outlets as leases come up for renewal, leaving 22 profitable cafes in the group, chairman Ted van Arkel said in an interview.

"We are tidying up, we are working at reducing the number of stores and when we are ready we will put it on the market," he says. "In the meantime, we are getting some inquiries but there is nothing firm on the table."

-------

So much for my 'scoop'! They currently have 26 cafes left, so maybe another four to close up?

I had a short chat with one of the Starbucks minions after the AGM, as I figured anyone in a green apron probably wasn't being paid enough to lie. The sole remaining store in Christchurch is apparently doing rather nicely as they have benefitted from the loyal clientele of the closed city branches coming in for their Starbucks fix. The main attraction is of course those heavily creamed tall drinks which true coffee conniseurs (of which I am not one!) might well regard as vile. Nevertheless there is a market for these type of drinks. And if Starbucks can get people coming citywide to get them, well good on them!

SNOOPY

[Snoopy]

The sell-off of Pizza Hut stores is expected to continue with another 4-5 set to go to independent owners this year. There is a growing trend for potential independent franchisees to want to buy more than one store. This year the RBD share of the Pizza Hut business will drop to under half the total number of stores. For the first time, RBD has disclosed total Pizza Hut sales (including franchisees). That figure for FY2015 was $82m and only $48.2m of those were RBD owned units.

Average sales of RBD owned Pizza Hut: $48.2m / 46 stores = $1.05m
Average sales of independently franchised Pizza Hut: $33.8m / 42 stores = $0.80m

Given the PH stores sold were generally in the smaller and less profitable catchments, I might have expected RBD itself to be doing better. This shows that RBDs strategy of continuing to sell down is probably the right one.

System Sales
Actually, RBD have disclosed the PH system sales previously. In 2012/13 they disclosed that they were $62.2m for the year. They quietly dropped disclosure of the system sales thereafter.
The major increase by a third to $80m since then is consistent with the significant same store increases since then...
http://www.restaurantbrands.co.nz/fi...t_2012-13.pdf/

Thanks for that Rep. Company Pizza sales for FY2013 were $47.9m. So with a bit of judicious subtraction, we can find out how the non-company to company sales equation looked two years ago.

Average sales of RBD owned Pizza Hut: $47.9m / 57 stores = $840k
Average sales of independently franchised Pizza Hut: $14.3m / 26 stores = $550k

Now we can look at the sales improvement over the last two years:

Sales of company owned restaurants improved by: $1.05m/$0.840m = 25%
Sales of non-company owned restaurants improved by: $0.800m/$0.550m = 45%

A clear win to the owner operators. Fortunately RBD does not become totally divorced from the owner operator stores once they are sold. The owner operators still remain under the watchful eye of the RBD Pizza Hut area manager. So hopefully RBD themselves will be able to learn from the owner operators so thet they can keep improving their own Pizza Hut store performance.

SNOOPY