Russel Creedy has been chief executive of Restaurant Brands for 13 years. Photo / Dean Purcell
Restaurant Brands boss Russel Creedy says the fast food company is on a trajectory to almost treble its size.
The owner of KFC, Pizza Hut, Carl's Jr and Taco Bell in New Zealand and some international markets is in a strong financial position, he says, and hopes to grow from today's 350 stores to about 1000 within 10 years.
Seventy-five per cent owned by Mexico's Finaccess Capital, Restaurant Brands has shown its resilience. From about $14 at the end of last year, the share price plunged to a low of $6.60 in March, but rapidly bounced back and is now about $11.90. At that price, Creedy says it is "undervalued" compared to its peers.
The fast food market appears to have a stomach of steel, remaining buoyant despite uncertainty.
Unlike most industries, Creedy says recessions and periods of uncertainty work in Restaurant Brands' favour. "We're a business that can really weather storms and tough situations. We've proven that with Covid, proven that with the GFC - two very different global scenarios that certainly had their major challenges, and in both cases, our business model survived and actually thrived as a result.
"We're well-positioned to be a stock that can deliver in tough times and when times are good, we do well also."
If you can get your hands on any Restaurant Brands shares you're in luck, because there aren't many available. But Creedy says there are no plans for Finaccess to increase its stake in the company, nor for the business to de-list from the stock exchange.
"Comparing Restaurant Brands stock to others, it is certainly not overpriced, and compared to its peer group of overseas stock it's probably undervalued."
Despite its resilience, Restaurant Brands posted a 42.9 per cent drop in profit in the first half of 2020 as a result of disruption from Covid-19 and the lockdown periods.
But Creedy, who has been chief executive of Restaurant Brands for almost 14 years and was employed by the company for six years before that, says this wasn't a bad result considering the five weeks of lockdown and weekly $500,000 shortfall in wage costs even after taking the wage subsidy.
The company received $22.1 million in wage subsidies and retained all of its 3700 staff on full pay during the lockdown period.
Creedy says not even a surge in sales in the weeks that followed under level 3 could regain the $40m or so of lost revenue.
On top of the complete shutdown in New Zealand, Restaurant Brands also faced a loss of sales as a result of partial shutdowns in Australia and Hawaii.
"Everybody has suffered with the shutdown and I think we came off reasonably lightly," he says. "At least we've got a business up and running again; sadly, some people haven't," he tells the Herald, adding that he believes the result was good considering the disruption it faced.
All things considered, Creedy says he is pleased with how the company handled the lockdown and uncertainty.
Restaurant Brands has laid off no staff since the onset of the pandemic and has recruited an additional 100 following the easing of restrictions.
Creedy says the company will finish the year in a stronger position than it did last year. "Covid was unfortunately an absolute speed bump in what started off as a good trading year for us," he says. "We've regained that momentum and we're back to trading positively on prior year results.
"The second half is going to be a strong half for the year, consumers are certainly coming back to the brands in their droves and confidently." Reduced store sales had been compensated for by more online click-and-collect and delivery sales.
Restaurant Brands is in growth mode. It wants to triple the number of stores in its stable within 10 years.
Building outlets is a major focus for the company, particularly drive-through locations. The business is preparing to open two new Taco Bell stores in Auckland by Christmas, as part of its plan to be operating at least 25 in the New Zealand market, and the same number in Australia, by 2025.
It will invest more than $65m to roll out the brand in both markets.
Creedy does not see opening more stores as a risky move in a recessionary environment. He says the company's brands are well-established and the focus on drive-through locations allows contactless operations. "Our brands and the format of the stores are quite robust and resilient to trade interruption with a pandemic.
"If we only relied on dine-in, we'd certainly have a problem. It's been a difficult, trying period for everybody but I think the strength of the Restaurant Brands portfolio has really come to the fore."
As well as opening at least four new Taco Bell locations next year, Restaurant Brands plans to open three new KFC branches a year in New Zealand and the same number in Australia. Restaurant Brands recently acquired 58 KFC stores and 11 multibrand KFC and Taco Bell stores, together with a head office, in Southern California for $US80.7 million and expects to grow the business in that market.
KFC has been in New Zealand since 1971 and has been the company's breadwinner brand for years.
Despite the fanfare and roaring popularity of Taco Bell, Creedy does not expect sales by the Mexican-inspired brand to overtake mammoth fried chicken sales - at least not within the next decade.
Creedy says there's no doubt that Restaurant Brands will reach $1 billion in sales this year - compared with $383m in its latest half-year - following the acquisition of the California business, which itself has annual turnover of US$95 million a year. He is also confident that the company's plan to triple its store count is achievable.
"To get up to 1000 stores is quite conceivable over the next, let's say, conservatively, 10 years."
Creedy, formerly an industrial chemist when he was living in South Africa, says New Zealand sales have bounced back the fastest of all of its markets. The company had expected Hawaii to recover fastest, but the US state suffered a severe resurgence of cases and was forced into a second hard shutdown.
Despite this, sales in Hawaii and all markets had bounced back.
The head honcho typically visits the mainland United States four or five times a year, Hawaii another three to five times, and the same for Australia. In normal times, he's away at least once a month.
But like the rest of us, he has been grounded in Auckland and has been attending meetings virtually.
He expects travel restrictions and the closed border to become more of an issue in the months ahead. "It is manageable through video conference meetings, but after a couple of months of those it does get a bit thin and you do need to get on the ground and move around the restaurants and meet people," he says.
"This is a day-to-day business and it does require a lot of hands-on involvement from myself and management."
Creedy doesn't particularly enjoy the frequent travel, but he says it is very important to have "feet on the ground" in the markets where it operates.
Asked if he is satisfied with the way the Government has responded to the pandemic, Creedy says the management of the virus after the first lockdown should have been done better.
"The more disappointing thing is once we'd gone into level 1, we found out that the borders were leaking, Covid had arrived again and finding out that people weren't being checked like they should have been. That's a real kick in the guts for everybody, and a kick in the guts for business certainly - it has taken us back a long way again," he says.
"It wasn't managed well. Once we'd all done the hard yards to just go back to square one.
"Overall, the retention of jobs has been a positive, the support for business has been a little light and possibly there have been some other ways of other supporting business to be able to survive."
Creedy was impressed with the management of the first lockdown, but says now is when the real challenge starts. "Now, there's opportunity to really fine tune and look at what the cost on the economy is and on business overall.
"The first shutdown, we did an excellent job of getting everybody on board and aligning 5 million people, all doing the same thing, and clearly that worked very well. In hindsight, Hawaii did just as well as New Zealand, initially, but they just changed one thing and it all fell apart."
February will mark Creedy's 20-year anniversary at Restaurant Brands.
He started out working in the supply chain and ran IT for a while before moving into store development. He has moved around and worked in various roles within the company.
On his almost 14-year tenure as CEO, Creedy says the company today is "a completely different business" compared to when he joined.
He has seen the launch of Carl's Jr in the market, and the move into three new geographical markets, along with a return to financial stability, a strong balance sheet and cash flows.
Creedy, who in his early sixties, says the only plan he has for when he does leave Restaurant Brands is to play more golf. But he says he has no plans to hang up his apron just yet and that "there's still a number of years still to go" until he is satisfied.
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