Leading New Zealand fast food operator Restaurant Brands, which owns the Pizza Hut, KFC and Starbucks franchises across the Tasman, will be exiting the Australian market after the failure of its 50 Victorian Pizza Hut stores to generate “sufficient sales” during the past four years.
Restaurant Brands owns nearly 300 fast food outlets in NZ including the Pizza Hut, KFC and Starbucks franchises.
It entered the Australian market in 2002, but after four loss-making years, the company has now decided to sell its 50 Pizza Hit Australian outlets to focus on the NZ operations.
For the year ended 28 February 2006, sales for the Victorian business fell 6.5% to NZ$27.6m, with the 50 stores making a NZ$3.1m loss, similar to the previous corresponding year.
Despite the company’s recent reinvestments in the Australian stores, Restaurant Brands has put the losses down to “an intensely competitive [Australian] market place” and the “rapid expansion of other branded pizza outlets”.
The Victorian stores will be sold to independent franchisees, resulting in a pre-tax write-down of NZ$7m.
Restaurant Brands said it was already in discussion with several interested parties and is hoping to complete the exit within the next 12 months.
Chief executive Vicki Salmon said the sale would “allow Restaurant Brands to focus on the New Zealand operations where we can generate superior returns”.
“The original intention in 2002 was to leverage the experience gained from the company’s success in the New Zealand Pizza market,” the company said.
“Despite investment into the existing store base in Victoria the business has been unable to justify the expansion of new stores required for critical mass in this market.
“This is due to an intensely competitive market place with Pizza Hut competing with low cost independent pizza operators and more recently a rapid expansion of other branded pizza outlets. A relatively flat marketing calendar also contributed to the lack of sales traction.”
In February, bandt.com.au reported that the world’s third largest pizza chain Papa John’s was set to trigger an Australian pizza war with plans to open 270 outlets in Australia, focussing on the premium end of the market. See www.bandt.com.au/articles/C6/0C03CCC6.asp.
