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Chicken to your door the next front in fast food fight

Patrick Hatch
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KFC Australia will trial home delivery next month, as the chicken frying giant tries to keep pace with the rapidly changing fast food market.

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Direct competitor Red Rooster has been offering home delivery for 2½ years and says the move is behind much of the growth that has its parent company set for a $250 million stockmarket float.  

And online food delivery aggregators such as MenuLog and UberEATS – which provide a shared order platform and their own drivers – have made it cheaper and easier for smaller restaurants to deliver their food to customers. 

KFC Australia's managing director Nikki Lawson said a home delivery trial would start out of eight of the chain's outlets within the next three weeks.  

Foodora – an aggregator which runs a delivery network using bicycles, motorbikes and cars – will deliver the orders. 

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"We'll be going fairly carefully," Mrs Lawson said. "What you don't want to do is have a fabulous delivery experience and end up with a really awful consumer experience for everyone else."

Customer demand, the effect on service for in-store customers, and being able to deliver a quality product would determine whether home delivery would be rolled out Australia-wide, Mrs Lawson said. 

"It's the next logical step on convenience," she said.

"As soon as we see a viable business case we'll roll it out a little more aggressively." 

She said KFC's own "click and collect" online order system could be adapted to home deliveries, but there were no plans to use its own drivers.

Red Rooster delivers

Red Rooster, meanwhile, says its foray into home delivery has made it possible to move out of its suburban stronghold and penetrate inner-city Sydney and Melbourne locations for the first time. 

We'll be going fairly carefully.

KFC Australia's Nikki Lawson

"It's very difficult to get drive-through locations in urban or inner-city areas," said Chris Green, chief executive of the 354-store chain. 

"So having that delivery platform actually makes us more like a Domino's, where it opens up a lot more shop-front locations. They're cheaper rent and they're less money to fit out as a franchisee."  

Mr Green said he planned to open 40 to 50 of these urban stores across Sydney and Melbourne over the next five to six years. 

Like KFC, Red Rooster used a third party platform – MenuLog, which processed $600 million in past year – when it launched its delivery service but now has its own online ordering platform and delivery drivers. 

Delivery orders made up more than 10 per cent of all sales at the 249 participating Red Rooster stores, Mr Green said. That could reach 40 to 50 per cent of all sales, matching Domino's share from deliveries, he said. 

"It's done a very good job in bringing new people into the brand as well as giving existing customers another occasion to use us," Mr Green said. 

Float looms

Red Rooster's parent company Craveable Brands is on a roadshow through Sydney and Melbourne this week trying to drum up interest from investors for a float on the ASX. 

The company, which also owns chicken chains Oporto and Chicken Treat and is owned by private equity firm Archer Capital, is due to lodge its prospectus at the end of June with shares to start trading in mid-July.  

Craveable say it will float at between 11.5 times and 12.5 times of its FY2018 net profit after tax and amortisation, per share with a dividend yield of between 8.6 per cent and 9.3 per cent. 

The total offer size will be around $250 million, with Archer retaining at least 30 per cent of shares after the float. 

Red Rooster is on track for revenue of $500 million in FY2018. Same-store sales would grow about 4 per cent this year, Mr Green said. 

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