Shakedown for fast food sector

Restaurant Brands is selling some Pizza Hut stores to franchise holders. Photo / Supplied

The fast food industry is driving though changes including a shakedown in franchising deals.

More outlets are up for grabs with publicly-listed Restaurant Brands detailing plans to pull back from its Pizza Hut franchise.

It is starting with 10 stores being sold to independent franchisees and more will follow but Restaurant Brands insists there are no plans to cut away from the pizza chain completely.

McDonald's - which is the biggest chain and 80 per cent owned by franchisees - is still pushing ahead with plans to expand in the recession.

McDonald's has 143 New Zealand restaurants and plans for an extra 30 franchised stores.

Meanwhile, the Tasman Pacific Foods chain is understood to be facing a deadline while negotiating to sell its Burger King master franchise and 42 outlets.

More than one party is believed to have taken due diligence on Tasman Pacific Foods.

Last month TPF sold Hell Pizza back to its original owners after just 20 months.

It is is understood that the most advanced interest in Burger King - from the movie chain Reading Cinemas - is close to a deadline that would close the deal.

Tasman Pacific Foods could not be reached for comment.

But the master franchising business model underlining Burger King appears to have some basic similarities with the master franchise arrangements Restaurant Brands had with Pizza Hut, and more successfully with KFC.

Restaurant Brands - which also owns Starbucks Coffee - yesterday laid out its plans to cut away a piece of Pizza Hut.

The company, whose profits have been undermined by its troubled pizza operation, signed a deal for an initial 10-year period, with a further 10-year right of renewal.

It entails a progressive sell-down of stores to individual owner operators.

Some stores were better suited to hands-on owner management and it was envisaged that up to 10 of the 92 stores could be sold to independent franchisees in the first year, said chief executive Russel Creedy.

The company would definitely not be dropping out of Pizza Hut altogether. Asked about buyers, Creedy said planning was not complete but several had already approached Restaurant Brands, and the stores sold would likely be in geographically isolated positions.

Interested buyers were mostly NZ-based, but also included fast food operators from Australia, including parties who owned Pizza Hut franchises there or worked with other fast food chains.

Creedy said that as part of the re-alignment of the business, Restaurant Brands would work more closely with Yum Australia, leveraging marketing resources and advertising materials for the Pizza Hut brand.

Creedy said there had been no change to the existing arrangements with Yum under which eight dine-in restaurants were to be progressively closed by 2010.

McDonald's New Zealand managing director Mark Hawthorne said the fast food market was marked by the permanent inclusion of low cost products.

He said that McDonald's performance was similar to what it enjoyed before the recession.