Fri | Aug 23, 2019

KFC takes a sweet turn, $2b expansion by 2021

Published:Thursday | April 18, 2019 | 12:29 AMNeville Graham - Business Reporter
KFC and Pizza Hut restaurants in Ocho Rios. Franchise operator Restuarant of Jamaica will be rolling out at least seven new restaurants for the two brands over three years.
KFC and Pizza Hut restaurants in Ocho Rios. Franchise operator Restuarant of Jamaica will be rolling out at least seven new restaurants for the two brands over three years.

Jamaica’s most populous fast food enterprise KFC is about to get bigger, and its boss, Mark Myers, is looking to add new enticements to the product line up in its stores, possibly through a new franchise arrangement.

Restaurants of Jamaica, ROJ, the franchise operator for KFC and Pizza Hut, is currently in the middle of executing its latest expansion plan, but is already looking towards growing the chains even further within the next three years.

Both expansion rounds – potentially spanning 14 outlets of KFC and Pizza Hut altogether – could potentially represent investment of $2.8 billion by 2021.

“I am so bullish now that the sky’s the limit and what will hold me back is the conservative nature of my organisation and my financial advisers saying ‘don’t get crazy’,” he said Tuesday in an interview with the Financial Gleaner.

Under the current expansion programme in which ROJ is investing $800 million, the company opened up a KFC outlet in Falmouth, Trelawny last December, another at Harbour View in Kingston at the start of this month, and is in the process of constructing a store in May Pen, Clarendon, which should be on the market by August.

ROJ is already planning the execution of another seven outlets – three for KFC, for which locations have already been identified, are scheduled to be on the market by 2020; and four new Pizza Hut stores that are due to open this year.

But ROJ Managing Director Myers is thirsting to go beyond the seven outlets.

“I think I can identify another 10 locations by now and 2021 and conservatively it will require about $2 billion in investment to get that up and running,” he said.

The $2 billion will cover 7-10 restaurants with an average spend of $200 million, depending on whether it is greenfield site or repurposed building.

The May Pen store being built at the intersection of Glenmuir and Manchester Avenues, will bring the KFC chain to 37 restaurants and Pizza Hut to 11.

Not only will the 5,000 square foot complex house two restaurants, KFC and Pizza Hut, it will be used as the testing ground for a new product line to be introduced by the fast food operator – ice-cream.

Although Myers declined to speak in detail about the initiative because ROJ is still finalising the business dealings around it, he did confirm that it would be in partnership with a Jamaican manufacturer of ice cream, and that it would potentially operate as a store front with its own sales counter.

“Half of it will be the KFC, a quarter or so will be dedicated to the Pizza Hut and the rest will go to another concept that we are working on but have not quite finalized as yet,” Myers said of the planned set up for the new May Pen store.

“We’re actually looking at partnering with a local supplier and possibly getting into the ice cream business from the perspective of supplying our customer base with product that is complementary to what we’re already offering,” he said.

However, it’s unclear whether the ice-cream arrangement will become a new ROJ franchise operation.

“We don’t have a main offering in terms of ice creams or deserts but we have all these consumers coming to our locations so where we have some additional space one thought is that we can do a partnership with an ice cream supplier,” he said.

Myers’ efforts not to get too crazy with his expansion ambitions is happening in the middle of a business boom for the KFC franchise, which is Jamaica’s most popular fast food chain.

So popular is the KFC fried chicken offerings that the stores in the network are often overfull, some with lines that spill beyond the doors of the restaurants, and extended wait times to collect food purchases, belying the ‘quick service restaurant’ tag for such businesses.

Myers said the long lines and wait times are uppermost in the minds of the management at ROJ as issues to be resolved.

“We recognise that that there can be some improvement. The biggest challenge is simply making sure that we maintain an unbroken supply chain regarding products supplied to our restaurants,” he said.

He noted that ROJ regularly does consumer surveys and that shows the need for improvement in the length of time it takes to serve customers.

“That is why part of our development plans have to do with offering additional outlets to make it more convenient and deal with our throughput of customers,” Myers said.

“We have a great product and we’re very proud of that. I want to be just as proud of our customer service and I won’t shy away from the fact that we have a little bit of work to do,” he said.

The new Harbour View store, a mid-size facility spanning 3,000 square feet that is in proximity to the Windward Road KFC restaurant, had been under consideration for at least a decade before ROJ determined the timing was finally right to take the plunge.

Myers says ROJ acquired the land on which the Harbour View store now sits about 10 years, but deposited it in its land bank, as the company had determined that a KFC outlet there would not generate sufficient customer traffic to warrant having two stores in the same vicinity that could potentially cannibalise each other’s business.

But over time, as new developments in the area extending to the western side of St Thomas, came on stream, the market dynamics changed. It meant that each store could tap into a different consumer base instead of competing for the same customers.

“When we looked at it late last year, we thought that there was now enough of two defined communities that would warrant two separate locations,” Myers said.

Additionally, the company is also taking a fresh look at St Thomas as virgin territory that it once rejected as having too dispersed a population to make a good business case for investment.

“We didn’t believe that St Thomas from an urbanization perspective, or even from the standpoint of a concentration of consumers, was at the point as yet,” Myers said.

But that’s changing, especially in light of the planned new town centre for the capital, Morant Bay.

“We believe St Thomas is coming of age and in our estimation that will create a destination that will bring the residents together and as such that will make for a viable business proposition,” Myers said.

But even if the development plans for the parish fail to get off the ground, Myers signalled that the ROJ is still willing to commit to the parish, and is investigating prospective sites in the town centre.

“But as you can imagine, with many of these towns there is a space constraint and the undeveloped spaces that are there, the owners are often not interested in doing anything with it,” Myers said.

“We’re hoping that the Goodyear project comes to fruition,” he added, referring to plans by the Jamaican government to build the new town centre for Morant Bay on the property that housed the long-shuttered tyre manufacturing facility. “But if not, we will have to go for a Plan B,” Myers said.

neville.graham@gleanerjm.com