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Fri 14th Sep 2018 - KFC reports big profit boost in the UK after refranchising push
KFC reports big profit boost in the UK after refranchising push: KFC has reported its UK business saw pre-tax profit of £186.1m in the year to 24 December 2017 (compared to £58.9m the year before) after it refranchised 133 stores and recorded net franchising gains of £112.9m. The company’s results include its Germany business, where it sold all 29 remaining managed stores. By the year-end, franchises were running 87.1% of all KFC sites (up from 74.2% in 2016). The company stated: “Like-for-like sales growth of 3.8% (2016: 1.4%) has been a result of the roll-out of the continued development of new products to the market including ‘Double Down’ and the roll-out of delivery through third-party providers. Furthermore, strong advertising though a new marketing partner and continuing investment in enhancing our restaurant estate has supported delivery of growth. Operating margin of 42.2% has increased when compared with that of prior year (2016: 12.6%). This is due to refranchising gains of £112.9m and an increase in cost-saving initiatives implemented across the business resulting in operating profit totalling £118m compared with £60.6m in 2016. After excluding refranchising gains, operating margin increased from 12.6% in 2016 to 16.9% in the current period. The refranchising activity in the equity business resulted in a drop in total average number of employees of 13.2% in the year.” The company reports the refranchising initiative will be completed by next month, when 94% of the business will be franchised. The financial year ended before KFC encountered severe supply problems when it changed its third-party distribution. Turnover in the year was £445.7m down from £479.8m the year before as would be expected when a company refranchises and begins to collect more royalty income from more franchises instead of turnover. Company store sales were £379m (£428m the year before), while franchise royalties and fees were £66.1m (£51.6m the year before). UK sales were £423m (2016: £412.8m), while Europe sales were £22m (2016: £67m).

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