Forum Archive Index - March 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi winner69,

I appreciate your, as usual, well thought out comments

>
>IMHO all RBD's profit comes from KFC with Pizza Hut and
>Starbucks contributing nothing (at best).
> 
>RBD report the EBITDA figures 
>
>other costs (admin, general, interest, depreciation,
>amortisation and tax) RBD incurred were 11.0% of sales
> 
>Only RBD really know how these costs would be apportioned across the
>concepts (did ask RBD once but they would not provide the
>information) but if we apportion them by sales it means the profit
>margins for the last half year were - KFC 6.0% Pizza Hut 1.9%
>Starbucks breakeven and Victoria down the gurgler -15,2%
> 
>

Yes, I think on reflection your answer is probably closer to the 
truth Winner.  However, I'm not sure it is realistic to look at a 
breakdown in profitability in this way.   For a start, RBD doesn't 
have the choice of getting rid of an underperforming Pizza Hut as it 
is coupled to KFC by the agreement they have with the master 
franchise company YUM foods.  In other words, drive the 
troublesome Pizza Hut out of the farm gate and you lose the cash cow 
KFC as well.

I am fairly sure there is an agreement with YUM to open a certain 
number of YUM franchise restaurants every year.  Anyone out there got 
the original RBD prospectus to confirm this?  By taking over Eagle 
Boys, I am sure that RBD fulfilled their obligations in this regard 
for a few years.

Fulfilling the 'YUM' obligations allowed RBD to step outside the 
square and take on the Starbucks franchise.  

I don't know how many staff there are up at RBD HQ but I imagine it 
is no more than 50.  And if they jettisoned Starbucks tomorrow that 
number would probably drop to 48.  In other words, not a lot of 
difference.  But the more outlets RBD has around the country, the 
lower the overheads for all three brands.

What I am saying here is that the reason RBD profitability is quoted 
in EBITA per store is because it doesn't really make sense to split 
the head office overheads between the three chains because, in 
practice, they couldn't ever be split up that way.

SNOOPY


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