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Restaurant operator Collins Foods says it is taking an $11.9 million writedown on eight underperforming Taco Bell outlets and hitting pause on building any more, beyond the five or six currently under development.
The company suffered an $800,000 operating loss on its 24 Australian Taco Bells in the six months from May 2 to October 16, and says it wants to rejig them in conjunction with US-based franchisor Yum! Brands.
"We are refining every element of the business, from marketing and media spend to portioning and product quality, to ensure we meet and exceed customer expectations," Collins Foods managing director and chief executive Drew O'Malley said on Tuesday.
The company will work with Yum! "to regain traction on sales before further recommencing the rollout and scaling the brand", Mr O'Malley said.
He said Collins Foods was confident in Taco Bell's prospects in Australia, given its value proposition, the rollout of delivery with Uber Eats and "product quality upgraded and enhanced value marketing".
In May through July, Collins opened two drive-through Taco Bells in Melbourne and two in Perth, bringing its total number of Taco Bell restaurants to 13 in Queensland, eight in Victoria and three in WA.
The company's other brands did much better in the half-year, with KFC Australia revenue up 10.6 per cent to $479.6m and underlying earnings of $95m, up 0.7 per cent from a year ago. Its EBITDA margin of 19.8 per cent was in line with expectations.
"In a challenging consumer landscape, we've seen the brand strength of KFC on full display in the first half," Mr O'Malley said.
Collins has 145 KFCs in Australia and is on track to open another nine to 12 in 2022/23.
For all of its operations, including KFCs in the Netherlands and Germany and Sizzlers in Japan and Thailand, Collins Foods revenue was up 15 per cent to $614.3m.
Collins posted a statutory net profit after tax of $11m, down from $26.4m a year ago, including the $11.9m non-cash impairment on the eight underperforming Taco Bells.
At 3.15pm AEDT, Collins Foods shares were down 18.7 per cent to $8.16.
