Restaurant Brands eyes Mexican menu

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Restaurant Brands is still some way from deciding whether to bring Taco Bell to this country, but believes the American chain which provides Mexican-style food would have "legs" here.

Chief executive Russel Creedy told its annual meeting yesterday no decision had yet been made on whether Restaurant Brands would introduce a fourth brand.

Talks had been held with Taco Bell brand owner Yum! and Restaurant Brands executives had spent some time visiting Taco Bell in the United States, evaluating its stores and products, Mr Creedy said.

"We believe that the brand does have legs in New Zealand, but there is a considerable amount of work yet to do before we can make a decision to undertake a pilot in this country."

Chairman Ted van Arkel said Restaurant Brands' three existing businesses had seen little evidence in the first quarter of the current financial year of a significant turn around from the tapering off in sales growth in the second half of the last year. But he said directors remained confident the levels of profitability seen in the past two years continued to be sustainable.

"While we continue to await meaningful signs of recovery in the general economy, we have some reason to believe that the imminent Rugby World Cup activity may be a catalyst for our business based on previous similar live and televised events.

"However, we remain somewhat cautious as to the flow through to the wider retail environment in the current financial year."

In the 2010/11 financial year, Restaurant Brands reported net profit of $25.1 million, driven by its KFC business which lifted sales 5.6 per cent from a year earlier to $235.8 million.

A process of transforming KFC stores is under way, with work on nine stores last year, although that is being scaled back to four or five stores in 2011/12 to reduce pressure on the business and match the pace of change with the economic climate. It is also intended to build one or two new stores.

Van Arkel said that with a little over half the KFC stores now transformed there was still a great deal of opportunity in that area.

With Pizza Hut, the strategy is to return profitability while progressively reducing the number of smaller regional stores through a controlled sell down process.

From current store numbers of 82, the company expected to sell 10 to 12 stores a year for the next two to three years, with a strengthened residual core remaining around the major urban centres, van Arkel said.

Starbucks Coffee was seeking to build sales while maintaining profitability. It would have new menus and possibly new sites.

KFC DOUBLE DOWN EATS INTO PIZZA HUT'S PROFIT

The successful launch of the KFC Double Down in New Zealand ate into the profits of Pizza Hut over the same time, said Restaurant Brands CEO Russel Creedy.

Creedy said KFC sold more than 60,000 of the bun-less chicken burgers.

"This represents a rate that is nearly five times the rate achieved in the United States and Canada during their successful initial Double Down launches.

"We were particularly pleased with the ... Double Down sales given this was achieved with minimal marketing expenditure but unprecedented publicity."

The success of the Double Down contributed to negative Pizza Hut same store sales figures, which were down 15.7 per cent. That was a concern and action was under way to address that slump, he said.

Craigs Investment Partners broker Chris Timms said KFC remained the key profit driver for Restaurant Brands.

"The success of the Double Down is unbelievable. It's certainly fattening the profits for the company.

"I don't know how they measure the effect on Pizza Hut, but they obviously can."

Also helping sales were people wanting an affordable treat in hard times, he said.

- NZPA