Earnings

QSRs Ramp Up Global Expansion And Supply Chain Growth

More tacos in Peru and a new distribution center in Alberta — recent comments from the executives who run Taco Bell, Tim Hortons, Domino’s and other brands signal not only upcoming international expansion for quick-service restaurants (QSRs), but more spending for supply chain endeavors.

The comments come from the conference calls with executives that followed Q2 earnings reports, and included Yum! Brands, Domino’s and Restaurant Brands International (RBI). Another recent PYMNTS look at QSRs focused on food delivery trends.

Global Openings

Yum! Brands owns Taco Bell, and that brand opened nine international locations in Q2, including one in Peru. However, that paled to the global expansion undertaken by KFC, which opened 200 net new units in the quarter, according to David W. Gibbs, president and CFO for Yum! Brands, during the post-earnings conference call with investors.

Overall, Yum reported a 1 percent Q2 year-over-year increase in same-store sales, with total revenue down 5.5 percent to $1.37 billion.

Gibbs said further international expansion will come from Yum’s new alliance with Spain-based chain Telepizza. The deal “involves Telepizza opening at least 1,300 new stores over the next 10 years and at least 2,550 stores total over 20 years,” he said. Short-term, the deal will be “EBITDA neutral,” he told investors. Long-term, “it will provide us with a foothold in key European markets, something which would have taken decades to achieve on our own, as well as consolidate a majority of our Latin American markets under one master franchisee.”

Domino’s Tech Plans

Domino’s, meanwhile, reported slower-than-expected growth during the second quarter. The chain had net income of $77.4 million or $1.78 a share in the second quarter, compared with $65.7 million or $1.32 per share in the same quarter a year ago. Revenue rose 24 percent to $779.4 million in the quarter from $628.6 million a year ago.

“On the international front, all four of our geographic regions were again positive in the quarter, with our Americas and Asia-Pacific region leading the way, and our same-store sales performance for the quarter was driven entirely by higher order counts,” said CFO Jeffrey Lawrence.

A priority in the coming months for Domino’s involves improving the technology of its international operations, said CEO Richard Allison. That includes eCommerce capabilities, but first comes rolling out “our point-of-sale [POS] system, the PULSE system” to international locations that lack it, he said.

Allison added, “We have several additional international markets that are rolling that platform out this year, because that really is the foundation upon which we layer the eCommerce platforms.”

China Role 

At Restaurant Brands International (the company that operates Burger King [BK], Tim Hortons and Popeyes), Q2 revenue increased 1 percent year over year, with sales for Burger King and Tim Hortons slower than the same period last year, and growth higher for Popeyes.

“Internationally, our comparable sales reflected continued strength in markets like Russia and Turkey, partially offset by softer comparable sales in Germany and in Australia,” said RBI CEO Daniel Schwartz.

China figures heavily in the company’s future international growth plans.

“We’ve now announced the plans to build a number of restaurants in the coming years, with a long-standing BK partner for China,” Schwartz said, “and we’re well on our way [to] building out our team, working with our supply chain [and] building out our menu, all of the natural steps in the process to successfully launch our brand there.”

Tim Hortons has expanded into Mexico, the U.K. and the Philippines. Popeyes, meanwhile, is coming to Brazil, and RBI aims to expand both of those QSRs further into non-U.S. and Canadian markets.

“We’re working hard to sign several other agreements, and I hope the next time we’re all together here in the Q3 or Q4, I’ll be able to report on more progress there,” Schwarz said.

Supply Chain

RBI is also focusing on its supply chain and distribution efforts. For instance, the company is investing about $77 million “to strengthen our Tim Hortons supply chain network in Canada over the next two years. The investment involves building two new distribution centers in Alberta and British Columbia, and expanding our existing facility in Nova Scotia,” said Schwarz.

Domino’s, too, is investing more in its supply chain capacity, mainly for its new U.S. supply chain center. The chain is opening up the new supply chain center in Edison, NJ later this year. The chain will also begin work on two additional supply chain centers, set to be complete in the next 18 to 24 months. Gross capital spending will, therefore, increase to $115 million to $120 million, up from the previous guidance of $90 million to $100 million.

For Yum! Brands, Telepizza will help with supply chain efforts, along with delivery efforts, Gibbs said.

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