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, & • 620 stores in , 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 – 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 1000

QSRH Group Stores (by Brand) 135 900 Red Rooster: 800 127 . Future growth 168 119 prospects 700 108 111 55 600 103 209 25 188 65 16 500 65 168 Oporto: 8 12 149 130 . Domestic & 400 106 119

international growth 300

455 485 200 401 427 359 356 376 Chicken Treat 100 . Impact of merger 0 . East coast growth 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 Restructuring - Company to Franchise model

Store ownership (company vs franchisee)

700

600

500 76% franchisee Franchise 400 225 42% franchisee 467 Company 300

200 306 100 146 0 Acquisition Today

16 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.