CKF, owner of the KFC chicken franchises, seems to have done the old “it worked so well in one fast food line, why not try another”, as the rationale for Taco Bell. Same for the regional expansion too, into Europe.

It reminds me a little of the time when Fosters (beer company) moved into wine thinking it would be pretty similar for selling purposes, and the whole thing went pear shaped.

They’ve geared up the balance sheet to do so.

Which is always a little risky.

They’d been finding that the returns on each successive new store (store rollout) was generating lower and lower returns.

And, as is so often the case, “something”, happens. Here it is the mix of inflation, COVID, staff shortages, wages. But earnings took a hit.

The market had loved it for a time. Now maybe not so sure. There was some very sizeable multiple expansion, as total return ran well ahead of earnings growth…

…although perhaps the multiple was arguably too low, in the early days.

Not one for us, just interesting.

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