Collins Foods operates KFC and Taco Bell restaurants in Australia, and entered Europe in 2017 via the Netherlands and Germany. It is also the franchisor of Sizzler restaurants in Japan and Thailand.
Managing director and CEO Drew O’Malley described the Netherlands as the company’s “gateway to Europe”.
“We’ve always viewed the Netherlands as the market that is closer to scale, it’s had better economics from the beginning; a little of that has fallen away in recent years but we think it’s recoverable,” O’Malley told Inside Retail.
“We’ve always viewed Germany as a bit of a longer-term play given that it’s farther away from scale than the Netherlands.”
The latest deal came a week after the business signed a corporate franchise agreement with a subsidiary of Yum! Brands to develop, operate and market KFC in the country for an initial five-year term.
O’Malley likened the deal to a master franchise agreement, with a fixed service fee and incentives.
“[Yum!] will reimburse us for the extra costs of running the market. Instead of just being an operating franchisee, we will now run all the functions for the brand, marketing, supply chain etc,” he explained.
“The incentives will be heavily weighted on hitting our development targets, but they will also be for effective running of the brand in areas like operations and marketing.”
Collins Foods successfully integrated eight restaurants acquired late in the second half of FY21, and O’Malley is confident that they will have similar success with the latest bunch. Beyond these, Collins Food is aiming to open up to 130 new KFC restaurants in the Netherlands over the next 10 years.
Meeting demand for speed and convenience
A universal trend in fast food, and in the retail sector in general, is the heightened need for speed and convenience, O’Malley said, which has been accelerated further throughout the pandemic.
“Contactless channels like drive-through and delivery have really accelerated during Covid, and we think that KFC is perfectly positioned to take advantage of that,” he said.
Earlier this year KFC launched an in-app food delivery service in Australia with delivery fulfilled by Doordash to meet this demand. O’Malley said the service has “performed above expectations” and makes ordering and delivery “an easier experience” for customers.
“From a marketing perspective, it allows us to communicate the brand; it’s a cleaner marketing message,” he said. “Additionally, the benefit of consumer data is in our hands and that allows us to better understand our customer, and be able to provide them with offers that are more customised to their desires for how they want to interact with the brand.”
O’Malley said there are plans to upgrade the app itself, which he says is routinely in the top two performing apps in Apple’s App Store each month. He believes it can be “even better”.
“We want to make it easier, more customisable for customers,” he said.
The brand’s investment in technology will also see the addition of more kiosks in restaurants, and more software introduced to support team members with production planning and rostering.
Plant-based food is also a hot topic in the fast food industry and something that Collins Food is exploring. It launched a plant-based product for a limited time in the Netherlands for KFC but it was it
“We are very open to plant-based [food]. We think, ultimately, it has a role to play in our menu. The line in the sand that we have set for ourselves is that it simply has to meet the taste criteria of the brand,” O’Malley said.
“We don’t want to latch on to a plant-based product in our market, simply to have one. We want to make sure that it’s one that our customers love, and that’s sustainable on the menu, and that means it has to taste great.”
Like many fast food and retail businesses, Collins Foods is making a big sustainability push to reduce its carbon footprint, with plans to introduce solar in over half of its drive-through stores this year with the rest to follow early next year.
Smaller formats on the cards
Collins Foods will continue to explore different formats and asset types for KFC that help get food to customers faster, while ensuring product quality is up to standard.
“I think it’s likely that dining rooms will get smaller as channels like drive-though and delivery become more popular. You’ve got to make it easier for people to get to your store very quickly and get in and get out. We’ve got our eyes open on that,” O’Malley said.
“I think from an asset valuation standpoint, we’re also intrigued by what we call a small-box store … [Perhaps] get into some of these CBDs that we haven’t been into before because of delivery, or [open] a 150-square metre restaurant – or even smaller – that is delivery-centric, that allows [us] to be more convenient to customers in assets that previously you couldn’t make an economic model work for.”
The fast food operator also has big plans to ramp up Mexican restaurant Taco Bell in Australia.
“It’s still a small brand for us but when we’re very excited about it. Mexican is the fastest growing segment in QSR in Australia; it has grown at an average annualised rate of 35 per cent over the last 10 years versus 3 per cent in QSR overall.”