Kentucky Fried Chicken (KFC), a brand of Prestige Holdings Ltd’s slew of fast food restaurants in the country, last year did quite well in the first quarter, but struggled to maintain its momentum throughout the rest of last year.
The cause of this was mainly due to “rising costs and the overall market’s resistance to price adjustments to offset these costs.” This simply means price increases in its products served to its customers. This was recently disclosed by Prestige Holdings chairman Christian Mouttet.
He said the company experienced a number of difficulties last year, some were blamed on the slow economy together with foreign exchange shortages and the resultant high conversion rates, some, because of market forces and some self-inflicted.
The chairman said, “Mostly, however, we recognise that there were areas in our business that are within our ability to control and affect, even in this difficult economy and work is ongoing by your Board and management to bring about improved shareholder returns.”
So, the fact that Prestige Holdings suffered a decrease in its profits of 20 per cent for 2018 – dropping from $33.2 million in 2017 to $26.4 million for the same period in 2018 – has not been blamed on any one franchise. As a result, earnings per share last year dipped from 54.5 cents in 2017 to 43.2 cents last year. The company is the franchise holder for the chain of fast food restaurants of Starbucks, TGI Fridays, Pizza Hut, Subway and KFC.
Mouttet said his company was facing “significant challenges with availability of foreign exchange to fund our operations and the onerous costs associated with having to purchase alternative currencies to US dollars to meet some of our obligations. That cost in 2018 alone was approximately $6 million and cannot be passed on to customers.”
Continuing he said, “Additionally, consumers have become more discerning with their choices and certainly less forgiving when it comes to price and value. We are working harder in all areas and investing in innovation and convenience in order to continue to earn our customers’ trust and loyalty."
“We believe,” Mouttet added, “that there are areas for improvement in our business, which we are diligently working to address as well as opportunities for growth with our strong stable of brands. Although our performance in 2018 was disappointing, we expect the initiatives outlined above to take hold as we progress and become apparent in the latter part of 2019.”
As far as KFC is concerned, the company has put in place several initiatives to drive transactions and sales including new value offerings catering to individuals and families, faster service time at the drive through locations, acquisition of new motorbikes to improve and expand delivery and improved product availability at the restaurants.
Regarding the Subway franchise which really made strides in the second half of 2018, Mouttet said, “Under new and stronger management of the brand, we have experienced positive trends in most key areas.” He praised the new management team and associates in the restaurants and the support centre who played a significant role in bringing about these improvements.
Touching on TGI Fridays, which the chairman termed “an important and profitable brand in our portfolio,” he also revealed the opening of the company’s first new restaurant in 13 years at the Trincity Plaza. This is expected later this month.
“Our Pizza Hut brand experienced some growth but performed below expectations,” said Mouttet. “Pizza Hut is a significant growth brand for our company and a new restaurant was opened in October, one month before the end of the financial year and two new restaurants are already under construction for 2019,” he added.
The Starbucks brand, the newest of the company’s franchises, “continues to perform well and two new restaurants were opened during the year.” Two new restaurants are expected to open this year as the brand keeps its promise to bring the Starbucks experience to customers throughout the country.
Under the leadership of Simon Hardy, newly appointed chief executive officer (CEO), great things are expected. Hardy has approached his position with vigour and a clear sense of purpose and Mouttet said, “with the board’s support, is bringing about changes in management and execution that are encouraging and should serve our company well into the future.”