As ever, we appreciate your feedback. In response to the Famous Brands piece from yesterday in which Byron did a fabulous write up, in case you missed it, here it is: Famous Brands results are great. Sorry, that lame heading was mine, not enough coffee! Well, here is a great piece sent to us from a friend of Vestact!
"Interesting. After all costs and taxes Famous Brands seems to earn nett R150,000 per store; Wendy's $9,600; Burger King $18,000; Yum Brands (KFC, Pizza Hut & Taco Bell) $43,000; Tim Horton's $94,500; and McDonald's $158,000.
So McDonald's ultra efficient, Tim Horton's is probably the stock with the best growth potential on the TSX, YUM is big in China where it is not all plain sailing, and Burger King and Wendy's probably both have good recovery potential, both having emerged recently from major surgery and reconfigurations.
But profitability all over the place - quite an unusual scenario for an industry.
Subway with its 35,000+ outlets is still private (Fred de Luca and his medical doctor partner - so holding company Doctor's Associates) so no figures available. Let me guess $25,000 per outlet to give annual profits of $875m.; Wendy's $63m; Burger King $235m; Tim Horton's $403m; Yum $1,54bn and McDonald's $5.5bn.
And Famous Brands R332m from R11m just 11 years ago. Compound nett profit growth per annum of 36% compared to McDonald's 13% and Spur also 13%. Quite an achievement."
Byron answered the piece almost straight away, with a great set of observations about the market in general:
"I have 2 interesting observations here.
The first one is first world, my friend went to Paris in December. He said that the entire front end of the McDonalds was mechanised. You basically placed your order and paid at what looked like a big ATM machine. I think this is a thing for the future, not good for employment however.
The second is third world. I heard the MD of Yum! Brands Africa on the radio the other day. He said that the KFC in Lagos had already hosted a few weddings! It is such an aspirational privilege to eat out and there is a huge lack of choice in many developing countries. What we consider a normal way of life is another man's aspiration."
Thanks everybody. Comments like these make it easier to understand the businesses that we are buying, what is fast food and convenience for one person is luxury for another, I think that we can be in agreement on that!