BFood expects Kenny Rogers Roasters chain in Malaysia to be profitable in FY18

KUALA LUMPUR: Berjaya Food Bhd (BFood) expects its wholly owned subsidiary Berjaya Roasters (M) Sdn Bhd (BRoasters), the master franchisee of Kenny Rogers Roasters’ (KRR) chain of restaurants in Malaysia, to be profitable in the financial year ending April 30, 2018 (FY18) with the execution of its turnaround plan.

BRoasters registered a loss before tax of RM4.2 million in FY17 compared with a profit before tax of RM2.5 million in FY16, mainly due to the impairment of fixed assets from the closure of non-performing restaurants, higher equipment maintenance and repair costs, and higher other operating costs.

BFood CEO Sydney Quays said BRoasters hit a bad patch over the last year, but stressed that it has big potential to move its numbers higher. BRoasters currently contributes some 15% to BFood’s revenue.

“What we’re working on currently... it gives us a good opportunity for the brand (KRR) to grow. We still have regular customers and we’re still strong in consumers’ mind. We can do better,” he told SunBiz in an interview recently.

Quays said their strategy includes introducing a new simplified menu, which kicked off earlier this week, with new pricing. Customers can now have lunch or dinner from RM13.90.

There are currently 82 KRR outlets in Malaysia. Moving forward, Quays said it plans to open five outlets in FY18 at a capital expenditure of RM700,000 to RM900,000 per outlet, with more vibrant design, which incorporates a walk-through service concept. It does not anticipate anymore outlet closures. In FY17, it closed five KRR outlets in the country.

Quays said the KRR team is committed to the company’s restructuring, banking on new pricing and menu, the way it serves customers, and its new star product, the OMG Unfried Fried Chicken, to transform the eating habits in KRR and cater to the different tastes of customers.

“The end goal is to create more interest in the brand and I’m positive that we will be able to achieve that.”

Quays expects BFood to achieve a better performance in FY18, driven mainly by Berjaya Starbucks Coffee Company Sdn Bhd (BStarbucks) and the turnaround in BRoasters as well as other rationalisation efforts.

“There are things that my team in Starbucks can learn from KRR and vice versa. Starbucks has always been known for its service standards and that’s something we hope to adopt in KRR. In the F&B business, it’s a lot to do with service and we definitely have to work on making service better in our companies within the group.”

BStarbucks remains the cash cow for BFood, contributing 77%-78% of the group’s revenue. There are 245 Starbucks outlets in Malaysia, and it has opened an average of 25-30 outlets a year for the last five years.

“BStarbucks’ growth strategy for FY18 will be focused on opening new stores, strengthening our current processes and getting more people to come to the brand. We also hope to penetrate more small towns than what we already have,” said Quays.

He said BStarbucks is pushing for more drive-through outlets, with untapped potential along highways, and smaller stores in MRT and LRT stations, which offer good prospects with the large number of commuters.
“The drive-through model is currently a big thing for BStarbucks. Out of 25 stores that we will open, 10 will be drive-throughs at least,” Quays said, adding that there are 34 drive-throughs now.

On its overseas food businesses, he said BFood is in talks to dispose of 51%-owned PT Boga Lestari Sentosa, the operator of KRR in Indonesia, and wholly owned subsidiary Jollibean Foods Pte Ltd that operates the Jollibean, Sushi Deli and Kopi Alley brands in Singapore.

“Our overseas businesses (KRR Indonesia and Jollibean) have been a challenge for us. We hope to be able to rationalise those businesses. We hope to be able to sell KRR Indonesia and that’s what we’re working towards. We’re close to doing that now and we hope for something to materialise soon.

“The goal is to be more lean. The company (as a small capitalisation company) has to be lean and nimble for us to move forward its strength. It needs to have profitable brands,” said Quays.