KFC's WA franchisee bought out for $56m

Queensland-based food group Collins Foods will pay $55.6 million to acquire Competitive Foods’ KFC business, which is the franchisee of 44 KFC restaurants in Western Australia and the Northern Territory.

Collins said the acquisition reflected its strategy to grow its KFC network, giving it a foothold in two new markets.

Competitive Foods’ management team will remain in place, Collins said.

Prior to the acquisition, Collins was the franchisee for 125 KFC stores in Queensland and New South Wales.

The sale was brokered by UBS and will be entirely debt-funded.

Competitive Foods, which is owned by Hungry Jack’s magnate Jack Cowin, had been embroiled in a long-running dispute with KFC's international franchisor, Yum! International.

The dispute was centred on Mr Cowin's involvement with the Dominos Pizza chain, which is a direct competitor of Yum!'s Pizza Hut brand.

Mr Cowin's company will retain ownership of the Hungry Jack’s and Domino’s brands in WA following the transaction.

Collins is expecting Competitive Foods' KFC stores to add $110 million to its revenue in financial year 2014, while it said it would spend $25 million upgrading WA stores over the next four years, as well as opening 10 new outlets.

Collins Foods managing director Kevin Perkins said the KFC network in WA and NT was a natural fit for the company.

“We are acquiring an existing franchisee of a business we know well,” he said.

“Importantly, we will have meaningful new store rollout opportunities in Western Australia and the Northern Territory to drive organic growth over the coming years.

“These markets represent fast growing geographical regions for KFC.

“In particular, Collins Foods will now have a substantial presence in Western Australia, a large market that has historically been under-penetrated by KFC.”