Business

Saturday December 27, 2008

Fast food gains popularity

By LEE KIAN SEONG


SINCE the setting up of the first quick service restaurant (QSR) in Malaysia by A&W in 1963, this type of restaurants have been popping up, as the Chinese saying goes, like bamboo shoots after a spring rain.

With the rising affluence of Malaysians in the last 10 years, coupled with the need to dine in a more comfortable environment, QSRs have been gaining popularity.

The QSR concept has gone through an evolution in the last four decades. It is no longer confined to the dine-in experience today, as value-added services like drive-thru, 24-hour, and delivery service have been added to its business scope.

Names such as Kentucky Fried Chicken (KFC), Pizza Hut, McDonald’s and A&W have since become household brands for dining. They have become places for families, working adults and youngsters to hang out.

Having gone through two recessions in 1988 and 1997, the QSR industry is facing a challenging time again with the present global financial crisis. The slowdown in consumer spending is affecting the industry.

The market is expected to experience some slowdown after the Christmas, New Year and Chinese New Year celebrations.

Surprisingly, StarBizWeek learns that industry players are still optimistic regarding their business and some of them are even planning for aggressive expansion.

The main market players in the QSR industry are either maintaining its advertising expenditure (adex) level or are increasing it. KFC Holdings (M) Bhd and QSR Brands chairman Tan Sri Muhammad Ali Hashim says the company will continue to spend 5% of its total sales on advertising and promotion next year to make the brand visible among consumers.

“Adex has an important impact in the QSR market and we will not reduce it next year despite the global financial crisis,” he says.

Ali says the company will do more website advertising as there are more consumers surfing the Internet now, but it will still need to do conventional advertising (such as newspapers and TV).

Times may be bad, but KFC and Pizza Hut do not believe in retrenching staff, he says.

KFC plans to invest RM21mil next year to open at least 30 new outlets in Malaysia, with an average investment of RM700,000 per outlet.

“The amount doesn’t include enhancement of existing outlets,” he says.

KFC has opened 38 outlets this year, which exceeds the YUM! Restaurant International’s expansion target of 26.

Meanwhile, QSR Brands plans to invest RM16.2mil to open 18 Pizza Hut outlets in Malaysia next year. The investment will be around RM900,000 per branch, he says.

KFC Holdings is a 49%-owned associate company of QSR Brands. The latter operates Pizza Hut outlets in Malaysia.

McDonald’s Malaysia is also not cutting back advertising. Its marketing, corporate communications and consumer/business insights vice-president Stephen Chew says the company will instead increase its adex by at least 20% next year from about RM30mil this year.

He says the company has not experienced a slowdown in consumer spending as of last month and its current sales are still robust.“Malaysia is one of the top 10 countries for McDonald’s in the Asia Pacific, Middle East and Africa regions and our sales contribute about 20% of sales in the South-East Asian region,” he says.

He says consumers are more prudent in their spending generally, adding that consumers look for the best value and convenience when visiting a QSR.

However, he expects consumer spending to slow down post-Chinese New Year. Chew says the company plans to open 15 to 20 new outlets next year. It has 185 outlets currently.

“This will create a minimum of 3,000 jobs,” he says, adding that the majority of new outlets will be located in out-of-town areas.

For this year, the company targets to open 13 outlets, and as of last month, it had set up 10 outlets.

KUB Malaysia Bhd executive director and chief executive Datuk Mohd Nazar Samad says the company plans to increase the advertising spending for wholly owned subsidiary A&W Restaurants next year to 6% of its revenue from the current 4%.

He says the company will spend more in areas that could contribute to productivity and sales, particularly in these hard times, adding that the slowdown in consumer spending is expected to last for at least 1½ years.

Meanwhile, the franchise holder of Domino’s Pizza in Malaysia, Dommal Food Services Sdn Bhd plans to invest RM6mil to open 12 more outlets next year, adding on to its 37 outlets currently, says chief operating officer Ba U Shan-Ting.

He says the expansion can create an additional 300 jobs.

“We also plan to invest RM700,000 to renovate seven existing stores next year,” he adds.

For J.CO Donuts & Coffee International, the company plans to open six outlets in Malaysia next year to capture the local QSR market.

“We are currently negotiating with several shopping mall operators in Petaling Jaya, Kuala Lumpur, Malacca and Penang for our new outlets,” says its marketing communications manager Indriana Listia Rahma.

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