QSRH – a case study in successful

franchising

Mark Lindsay

Chief Executive Officer

Presentation Contents

1. Who is QSRH Pty Ltd?

- a brief history

- positioning three distinct brands

2. Adapting to change – to achieve sustained growth

- why restructure was needed

- benefits of restructuring

3. The franchise system

- Franchisor & Franchisee obligations

- The franchise dilemma

- Overcoming the dilemma

4. Summary

Who is QSRH Pty Ltd?

• Australian owned and operated

• Three iconic brands – Red Rooster, Chicken Treat & Oporto

• 620 stores in Australia , NZ, UK, China and USA

• Employment

• 75% franchise operated

• Total brand revenues

• EBITDA Growth

QSRH a brief history

1972 - Red Rooster established Kelmscott, WA

1978 - Chicken Treat established Midland , WA

1986 - Oporto established Bondi Beach, NSW

2002 - Australian Fast Foods (AFF) acquired Red Rooster

2007 - QSRH Group acquired AFF in MBO

2007 - QSRH Group acquired Oporto

2010 - QSRH Group acquired CHOOKS fresh & Tasty

2011 – Archer Capital acquired QSRH from Quadrant PE

QSRH’s Purpose

• To create and control internationally recognised

franchise food systems using our skills and expertise to

deliver maximum ROI to stakeholders through

innovation and leverage.

QSRH’s Management Role

• Set brand performance criteria

• Continually deliver growth in equity

Our Global Locations

613 stores today across Australia, New Zealand, China, the US and the UK:

Red Rooster - operates in every mainland state and New Zealand.

- 374 stores

Oporto - operates on the Australian East Coast, NZ, UK, China and the US.

- 137 stores

Chicken Treat - (including Chooks) operates in WA, QLD and Tasmania.

- 102 stores

Business Overview ... Store growth

Red Rooster:

Future growth

prospects

Oporto:

Domestic &

international growth

Chicken Treat

Impact of merger

East coast growth

QSRH Group Stores (by Brand)

359 356 376 401 427 455 485

106 119130

149168

188209

8 1216

25

55

108

168

65 65

103

111

119

127

135

0

100

200

300

400

500

600

700

800

900

1000

2009A 2010A 2011E 2012F 2013F 2014F 2015F

Red Rooster Oporto (Aus) Oporto (Int'nl) Chicken Treat

Brand Positioning – Red Rooster

Brand Positioning - Oporto

Brand Positioning – Chicken Treat

2. Adapting to change to achieve

sustained growth

Restructuring – why it was needed

• Predominantly corporate model (75%) in 2007

• Impact on decision making

• Impact of geographical spread

• Employee engagement, service, recruitment, training and development

• ROI

Store ownership

(company vs franchisee)

306

146

225467

0

100

200

300

400

500

600

700

Acquisition Today

Franchise

Company

Restructuring - Company to Franchise model

16

42% franchisee

76% franchisee

Restructuring – the challenges

• Culture – shift from corporate to franchise

• Training

• Systems

• Surveys

• Franchise Charters

• Data & measurement

17

IT infrastructure - Key Systems

Macromatix - Retail Operating System

ParTech and STM - Store POS systems (80% of group)

Technology One - Financial Management System

Progenesis - Property Management System

World Manager - Store online training system

Neller - Payroll system

Restructuring - the benefits

• Stabilised Group revenues and earnings

• Improved LFL sales growth

• Consistent approach to investment

• Product and service delivery

• Focus on standards

The Franchise System

The Franchise System

• Is based on a human relationship

• Duty of care

• Obligations – contractual, ethical, business of all parties

• It is a risk sharing system of doing business

• NO GUARANTEES NOR A LICENSE TO MAKE MONEY

The Franchise System

The Franchisor’s obligations:

• Must maintain, develop and promote the business

• Owns the business system and Intellectual Property (IP) in

perpetuity

• Invests capital and resources for continued development and growth

The Franchise System

The Franchisee’s obligations:

• Must operate in accordance with the system protocols and

procedures

• Must invest personal energy and financial capital

• Has a “limited time” right to utilise the business systems “IP” in

exchange for a fee.

The Franchise System - The Dilemma

Franchisees focus on:

• Making as much money as possible during the period of the franchise

• Costs rather than driving top line

• Self interest often without regard for creation of business value at exit

Franchisor’s focus on:

• Driving top line

• Consistent and sustained profit growth

• Group focus (Brand equity)

The Franchise System - Overcoming the Dilemma

Franchisor focus must be on:

• Support & Service

• Communication (transparency)

• Training & development

• Investment in infrastructure (IT)

• System consistency

The Franchise System – Overcoming the Dilemma

Franchisee Focus

Must work both “ on” and “in” the business continually.

“On” the business

a) business plan (5 yrs, milestones, growth, future capital, exit

strategy)

b) marketing/sales development (local, community involvement,

sporting clubs)

c) daily, weekly, monthly KPI’s

Business decisions must be made on facts, not assumption or

emotions.

The Franchise System Overcoming the Dilemma

“In” the business

Connect to your customer base

a) run shifts

b) create rosters

c) stock ordering & regular stock takes

Build and develop your people.

Summary

Driving Franchise Profits

Must work “on & in” the business

Must continually:

- measure outputs, KPI’s, benchmark, share

- work on the relationship – communication

- train and develop your people

- seek feedback – surveys, business and compliance reviews

Franchisee’s

• Must have a business plan that includes “your retirement”

Franchisor’s

• Invest in your Franchisees, employees, systems and IP.