The parent company of Red Rooster and Chicken Treat has its sights set on becoming one of the state’s largest franchise operations after consolidated annual losses doubled this financial year to $14 million.
The parent company of Red Rooster and Chicken Treat has its sights set on becoming one of the state’s largest franchise operations after consolidated annual losses doubled this financial year to $14 million.
Balcatta-based Quick Service Restaurant Holdings Group, formerly Australian Fast Foods, is confident plans to open new franchise outlets and convert existing stores to franchises will deliver positive results.
Currently about 62 per cent of the stores are franchises with the remaining 38 per cent operating as corporate outlets.
QSRH Group chief executive Mark Lindsay said the target is to reduce the level of corporate stores to 20 per cent within one year.
“Internally we are moving from a corporate focused operation to a predominantly franchise focused operation, but maintaining a key strength in corporate stores in all states,” he told WA Business News.
“QSRH Group currently has 545 stores across 3 brands; Red Rooster, Chicken Treat & Oporto.
“We opened 18 stores and closed 20 (in the last year), and converted 45 to franchise.”
At least 440 QSRH Group stores nationwide will be franchise operations this time next year if all goes as planned.
“Red Rooster has about 340 stores, so it’s the biggest followed by Oporto then Chicken Treat,” Mr Lindsay said.
In July 2007, QSRH acquired Bondi-based chicken restaurant Oporto's 106 stores along the eastern seaboard and New Zealand in a deal worth $60 million.
This took place just three months after Quadrant Private Equity, in conjunction with former QSRH Group managing director Frank Romano (now QSRH Group chairman), bought out major shareholder Nick Tana in a $180 million deal, which gave majority ownership control to the private equity firm.
Mr Lindsay, who is also a shareholder, said despite sales remaining relatively neutral in most markets, significant restructuring and consolidation plus capital costs resulted in consolidated losses more than doubling from $6.1 million in 2008 to $14.6 million in fiscal 2009.
However, after adjusting for ‘significant items’ and tax, the group recorded a profit of $3.8 million.
Mr Lindsay said the focus was on growth.
“We have structured the business to have three brand CEOs responsible for the operational execution of the brand plans,” he said.
“The focus is to increase store numbers by up to 50 a year within the next 18 months and we want to exceed 700 stores within the next four years.”
Mr Lindsay predicts business will pick up next year.
“Because we’ve been going through a fair bit of restructuring internally, some of our flatness is most probably self inflicted,” he said.
“And the focus we had the last 18 months on back-of-house investment, such as training and IT, is paying dividends as we’re more efficient in the core areas or costs of the business: sales growth, inventory control and labour management.”
With executed development agreements covering China and USA, Oporto will open its first store in Shanghai’s Fujian province in February.
Mr Lindsay suggested the QSRH Group may be floated on the stock exchange in the next few years as well.
