Collins Foods' Australian Delivery Channel Underpins Sales Growth but Dilutes Profit Margins

We think the success of the Australian KFC network will prove crucial for Collins Foods. Despite KFC expansion into Europe, Collins' Australian KFC network should drive the vast majority of operating earnings over the next decade. Collins is the largest KFC franchisee in Australia with around 295 restaurants of a total of around 800 stores in the country. Its long-term earnings growth is mainly dependent on increasing sales, by increasing same store sales and adding to its store network. Collins grows its network through both new builds and acquisitions of existing restaurants from other franchisees. Similar drivers underpin growth of the smaller European business, although we forecast new builds to play a more important role.