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Speaker 1: Welcome to Fear and Greed, summer investing series brought to

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Speaker 1: you by vanta specialist in compliance lead growth. I'm Sean Aylmer.

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Speaker 1: Mexican themed restaurant chain Guzman. He Gomes arrived with a

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Speaker 1: bang on the ASEX last year, exceeding all expectations, but

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Speaker 1: at the same time some other restaurants in the same

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Speaker 1: area didn't do so well. Domino Is one of the

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Speaker 1: sector store warts is under all kinds of pressure both

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Speaker 1: here and overseas, throwing to the mixed. Colin's Foods the

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Speaker 1: company behind two hundred and seventy odd KFC restaurants in

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Speaker 1: Australia and it's a fascinating sector for investors. As always,

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Speaker 1: this is general information only and you should seek independent

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Speaker 1: advice before making investment decisions. Ben Gilbert is the head

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Speaker 1: of Australian research at Jarden. Ben, welcome back to Fear

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Speaker 1: and Greed.

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Speaker 2: Thanks for right Sean.

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Speaker 1: Great to be here, Ben. How do you look at

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Speaker 1: the QSR sector quick service restaurant sector when you have

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Speaker 1: high flyers like Guzman, but then other Domino's and Colins

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Speaker 1: who really have struggled over the past twelve months.

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Speaker 2: It's a very good question. Sean, and I think it's

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Speaker 2: one that a lot of investors and myself are sort

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Speaker 2: of still sort of grappling and thinking about as we're

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Speaker 2: looking forward from here. Look, I think in some industries

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Speaker 2: it's good to be a challenger, some it's not. There

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Speaker 2: comes a point of scale when concepts start to be

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Speaker 2: proven up and people get excited, and look, I think

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Speaker 2: we've seen a bit of a case of that in Australia.

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Speaker 2: Goozman has obviously been a phenomenal success from a share

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Speaker 2: price perspective since it's come on. Similarly, it's comp trends

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Speaker 2: in terms of luck for like sales, but it's generating

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Speaker 2: out of the same store year and year have been

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Speaker 2: super strong and outperformed the peer set. The share price

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Speaker 2: has reflected that you flicked at the other end of

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Speaker 2: the spectrum and you've got Domino's. It's been under enormous pressure,

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Speaker 2: a function of the fact probably that it's over complicated

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Speaker 2: it's business a little bit in recent years. It's in Japan,

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Speaker 2: it's probably pushed out too many stores, issues around the

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Speaker 2: minimum wage and the Netherlands, et cetera. And then you've

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Speaker 2: got a management change to boot. More recently, look, I

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Speaker 2: think Collins has just probably been subject to just some

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Speaker 2: challengers in terms of the pace at which it wants

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Speaker 2: to grow, and a backdrop where some of the incumbents

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Speaker 2: have probably got their pricing positions wrong. Albeit that is

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Speaker 2: now starting to change. The question is moving forward. I

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Speaker 2: think can sort of Dominoes and Colin sort of get

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Speaker 2: some of that mojo back and close the gap to

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Speaker 2: Guzman And that'll be the key question I think as

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Speaker 2: we look forward from here.

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Speaker 1: Okay, so Domino's has always been one of my favorite

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Speaker 1: stocks because it did so well. It had a very

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Speaker 1: high profile CEO, who, as you just mentioned, is stepping

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Speaker 1: down don May. What's it? I mean, what's the way

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Speaker 1: forward for Dominoes at this point? Because it's got new management,

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Speaker 1: it's got a chair which has a huge shareholding in

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Speaker 1: the company, and he is certainly a very highly regarded businessman.

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Speaker 1: But what do they do when they've got all these

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Speaker 1: problems in Europe and Japan?

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Speaker 2: Yeah, Look, I think I think it's just a bit

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Speaker 2: of a back to basics approach. I think you sit

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Speaker 2: there and say, Okay, where are good stores? What's doing well?

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Speaker 2: What do the customers love about us? Let's put that

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Speaker 2: in front of them, do it consistently. Let some of

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Speaker 2: these stores that maybe weren't trading as strongly as they

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Speaker 2: should because we've rolled out too many start training up,

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Speaker 2: get to a point where maybe not over trading, you

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Speaker 2: create some pent up demand in the system. You start

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Speaker 2: seeing profitability from franchise ees lift, and then ultimately that

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Speaker 2: builds confidence which then starts getting the whole store network

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Speaker 2: and innovation pipeline moving again. Now that takes time. We've

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Speaker 2: been through a multitude of changes and announcements in terms

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Speaker 2: of this strategy reset over the last eighteen months, from

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Speaker 2: store closures to cost out to management change to changes

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Speaker 2: in pricing strategy, all this sorts of stuff. Ideally, I

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Speaker 2: think from a market perspective, we'd like to rip the

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Speaker 2: band aid and see that happen all at once, But

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Speaker 2: it hasn't. And look, I think that's obviously been to

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Speaker 2: the detriment of the share price. In theory. Now we've

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Speaker 2: potentially got one more event we've got to wait for.

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Speaker 2: We've got to see once the new CEO SHO fully

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Speaker 2: gets his feet under the desk, or but it has

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Speaker 2: been consulting for twelve months, is there going to be

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Speaker 2: a strategy reset. I don't think that there will, owing

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Speaker 2: to the fact that he has been consulting, but I

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Speaker 2: do think there's probably going to be more concerned approach

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Speaker 2: and costs and maternal capital and look being CRESR operator

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Speaker 2: that are capital light businesses. If we can get confidence

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Speaker 2: around that, there's a material opportunity for this company to

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Speaker 2: rerate and perform well over the next twelve plus months.

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Speaker 1: What about Colin's Foods then Taco Bells as well as

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Speaker 1: KFC in this country, what's the outlook for them?

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Speaker 2: Yeah, so Collins is a little bit different from Domino's.

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Speaker 2: Collins is a store operator and dealing with Young in

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Speaker 2: Australia who is sort of the master franchise. Similarly, they've

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Speaker 2: got a new master franchise in Germany that they're engaging with,

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Speaker 2: so they're a little bit more beholden to others from

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Speaker 2: a strategic and a marketing lens. Now that's not to

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Speaker 2: say that it's still not a phenomenal business and has

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Speaker 2: a massive opportunity and opportunity to generate significant returns, because

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Speaker 2: it does. But I think what we've seen is is

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Speaker 2: that some of the competitive or pricing architecture that's been

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Speaker 2: put into these categories and look, McDonald's has been in

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Speaker 2: the same boat. I think well publicized has made some

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Speaker 2: challenges around breakfast and some of these other menus. Is

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Speaker 2: getting their pricing, their marketing strategy right, and I think

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Speaker 2: what we've started to seen more recently is that is

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Speaker 2: coming through and you saw that in the comp trends

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Speaker 2: from their result towards the end of last year, whereby

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Speaker 2: you start to see SAMs or sales in Australia improved.

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Speaker 2: So that's a tick, but it needs to keep going

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Speaker 2: and if that does accelerate to three four five percent,

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Speaker 2: the leverage I either generating revenue over a cost base

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Speaker 2: means that profit should grow much more quickly. Is enormous. Germany,

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Speaker 2: in terms of what's happening over there is more about

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Speaker 2: I think getting there than you must franchise, engage or

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Speaker 2: not engaged. The wrong word is getting that plan around roll

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Speaker 2: out moving forward, and again that provides a big opportunity. Netherlands,

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Speaker 2: I think is improvement. That's some big minimal age increases.

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Speaker 2: So I think again lots of opportunities there, potentially more

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Speaker 2: for Dominoes given where it's come from, but I do

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Speaker 2: think similar opportunities for Commons as well.

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Speaker 1: Ben, thanks for joining me. Fear and Greed Summer Investing Series.

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Speaker 2: Thank you very much.

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Speaker 1: That has been Gilbert, head of Australian research at Jarden.

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Speaker 1: Remember to get your own independent advice before making any

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Speaker 1: investment decisions. This is Fear and Greece Summer invest Series,

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Speaker 1: Enjoy your day,