Collins Foods Ltd (ASX: CKF) is an Australian listed public company which operates food service retail outlets.
Collins Food has three main working segments with operations globally. KFC is the largest segment with over 226 outlets across Australia. Its second-largest segment is its international expansion into Germany (17 outlets) and Netherlands (18 outlets), this falls under the company banner of ‘KFC Europe’. Its Sizzler and Taco Bell Restaurants round out its current go to market strategy.
My reason for buying Collins Foods’ shares is mainly around its rock-solid management team.
Non-Executive Director Kevin Perkins vacated the CEO chair in 2014, this was after an impressive 28 years at the helm. More importantly, this experience is not lost to the company with Kevin still actively involved in the corporate strategy and future direction of the business. He also owns an imposing stake which is aligned to everyday shareholders.
Their current management team is just as impressive. CEO Graham Maxwell has extensive retail experience including SPC Ardmona, YUM! Brands and KFC Southern Africa. While their current CFO, Nigel Williams, joined in 2015 and has extensive international retail experience including time spent with Starbucks UK and Pret A Manager (international food and drink retailer).
International Expansion – Too Big Too Soon?
Like any international expansion, there is risk associated with making the move into greenfield territory. Collins Food also operates in an incredibly expensive industry. Large amounts of capital are required in opening new outlets and if sales or growth targets are not met it could have a negative impact on profitability.
One major headwind facing Collins Food is the pivot away from food classified as ‘junk’ to a more healthy and sustainable diet. This is not just a fad and is starting to gain traction among young adults globally. These external pressures could potentially put further pressure on the uptake of outlets, especially in developing countries.
What attracted me to Collins Foods was its brand awareness (who hasn’t heard of KFC) and a rock-solid management team which is aligned to my interests as an everyday shareholder. Even with the industry headwinds and tentative steps into Europe, I have faith that Collins Foods will be a staple in my portfolio for years to come.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing, Anthony owns shares of Collins Food Ltd.