The divestment would appease Yum! which took Competitive Foods to the Federal Court in early 2012 over a disagreement which hinged on Yum! giving notice eight years ago that it would not agree to new 20-year franchise agreements (a standard length) for Competitive’s KFC outlets.
Yum!, which owns the KFC brand, of which Cowin has about 40 stores, gave notice such a long time ago because it considered Cowin’s involvement in Domino’s to be a competitor to Yum!’s Pizza Hut, and therefore against the terms of the KFC franchise agreements. Cowin’s Somad Holdings owns 26.5 per cent of Domino’s.
But who has emerged to buy Cowin’s 40 or so KFC restaurants? One likely suspect is Collins Foods (ASX: CKF) which operates KFC stores in Queensland. Despite lacklustre operations, the company has considered expansion.
Collins Foods has failed to impress investors following its float in 2011, with the shares down some 16% since. Over the same period, the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) has returned 20% and competitors from Domino’s (ASX: DMP) to Retail Food Group (ASX: RFG) have done even better, rising some 120% and 65% respectively.
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CKF Price at posting:
$1.75 Sentiment: Hold Disclosure: Held
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