KFC, Taco Bell fans rejoice: Dozens of new stores to open, delivery to expand

The company behind American fast food giants KFC and Taco Bell in Australia has aggressive plans to open many more restaurants, saying the fried chicken icon continues to be its big earner.

At a time when convenience is king, Collins Foods has accelerated its restaurant rollout, opening 11 new KFCs during the year to May 2, by which time the group had racked up an 18.2 per cent surge in total underlying net profit and substantially trimmed its debt.

It also did 17 major KFC remodels, 25 minor upgrades and added external digital menu boards, which are now at a third of drive-through KFCs.

At the same time, even though it was in the early stages of building the Taco Bell brand in Australia, revenue growth for the chain leapt 57 per cent as consumers embraced Mexican food.

“Consumer adoption of the Mexican category continues to increase,” Collins Foods chief executive Drew O’Malley said in the group’s full-year results released on Tuesday.

“After a Covid-19 related development hiatus in the first half, we opened four new stores in the second half and our focus has returned to ramping up the build rate in financial year 2022, as we continue to drive brand awareness and trial.

“Two restaurants, both former Sizzler locations, have performed below expectations and have been impaired, but they will remain open in expectation of future profitability as the brand gains scale.”

Collins Foods plans to build nine to 12 new Taco Bells this financial year, adding to the existing 16, which are mainly in Queensland, while Victoria has four.

“New restaurants will be opened in tightly concentrated clusters in Queensland and Victoria and we expect to open our first Perth restaurant in late 2021,” Mr O’Malley said.

But KFC would remain “the core engine of performance,” he said.

“We are now operating under a new development agreement to build a minimum of 66 new restaurants by 2028, and expect to build ahead of the required rate at nine to 12 new restaurants in financial year 2022,” Mr O’Malley said.

As with so many other businesses, there’s a big focus on digital improvements, including contactless ordering, click and collect, kiosks currently being trialled in an initial 13 KFC restaurants and plans to roll them out in 30 to 50 restaurants this financial year.

Also, a further 60 digital menu boards will be added to KFC drive-thrus as part of the group’s ultimate target to have them in all KFC restaurants within three years.

As consumers demand more convenience – especially when subjected to Covid lockdowns – delivery is the other big growth focus.

The number of KFCs offering delivery via three different aggregator services including MenuLog and Deliveroo has jumped to 202, from 138 the previous financial year, while an in-house delivery platform was recently trialled.

Wilsons Equity Research noted the strong result for Australian operations was partly offset by weaker earnings for Collins Foods’ European operations, which have been hit harder by lockdowns.

“The development agreement and store rollout plans for KFC Australia are an encouraging read on management’s confidence in the brand and financial performance,” analyst James Ferrier said.