The private Perth company that owns the Red Rooster and Chicken Treat brands across Australia plans extensive national growth ahead of an eventual stock market float.
The private Perth company that owns the Red Rooster and Chicken Treat brands across Australia plans extensive national growth ahead of an eventual stock market float.
Australian Fast Foods managing director Frank Romano says the company aims to have 580 stores across Australia by 2007, up from about 400 presently.
The growth plans are on the back of a return to profit last financial year.
Accounts lodged with the Australian Securities and Investments Commission show that the company has also completed a major debt restructuring, involving the early repayment of loans taken out in 2002 to help fund the $70 million purchase of Red Rooster.
In the year to June 2004, Australian Fast Foods, which is chaired by Perth Glory owner Nick Tana, achieved a net profit after tax of $3.8 million compared with a $3.1 million loss in the previous year.
Mr Romano said Red Rooster was a loss-making brand for Coles Myer and this flowed through to Australian Fast Foods’ 2003 loss.
Since the acquisition, AFF has been cutting costs by reducing layers of management and taking over the “shared services” functions such as payroll and accounting, which had been provided by Coles.
“There was a fee for that and we put that in house and managed to do it a lot cheaper,” Mr Romano said.
AFF will complete the transfer of head office functions from Melbourne over the next six months, giving it about 75 staff at its new head office in Balcatta.
AFF’s annual accounts show that sales and franchise revenue increased 6.3 per cent to $316.8 million last year.
Mr Romano said the group was currently achieving ‘same store’ growth of 7.5 per cent a year, and new store openings would lift the total to more than 10 per cent.
“I’d be disappointed if we didn’t achieve double digit growth each year for the next five to six years,” he said.
Mr Romano said new store openings would seek to boost the Red Rooster brand in Sydney and Melbourne, where it has a much lower market share than in Perth.
“We need to get our brand up to the same level as McDonald’s and KFC,” he said.
As well as opening company-owned stores in the cities, AFF is selling Red Rooster franchises for regional areas.
AFF has also sold a master franchise agreement for the Red Rooster brand in New Zealand.
Looking at future ownership options, Mr Romano said the company planned to bring in new management ahead of a float in two to five years.
“It will need new blood and a new team to take it forward,” he said.
Last year’s debt restructuring involved early repayment of a $7 million vendor loan provided by Coles Myer and a $9 million convertible note provided by Kerry Packer’s CPH group.
Mr Romano said the CPH note had been transferred into the Challenger financial services business, which is backed by Mr Packer.
AFF chose to repay the note early rather than wait to see if Challenger wanted to convert the note into ordinary shares. Interestingly, AFF agreed to pay $12.5 million to redeem the notes, a price Mr Romano said reflected their increased value.
The $3.5 million “redemption excess” was written off against last year’s profit. To help fund the repayments, AFF borrowed an extra $7.4 million under a term loan, taking its total term loan debt to $39 million.
AFF Snapshot
- Returned to profit in 2004.
- Annual sales up to $316 million.
- Plans to open 180 new Red Rooster stores.
- Debt to Kerry Packer’s CPH group repaid early.
- Plans ASX float in 2-5 years.
