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How two Queensland companies are launching a junk food assault on Europe

Business

Brisbane’s fast food kings Domino’s and Collins Foods are plotting a course to thrust the American diet onto the European market.

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The two companies, which hold franchise rights for Domino’s Pizza and KFC, are expanding rapidly with DMP planning to double the number of outlets in Europe to more than 3000 over the next decade.

Collins has plans for an extra 130 KFC outlets in The Netherlands over 10 years, adding to the 44 it now has.

Domino’s chief executive Don Meij has recently conducted his own world tour to check out acquisition opportunities in what Morgans Stockbroking said was “a relentless pursuit of growth’’.

In its latest client note on the company, Morgans said Domino’s plans to double its store numbers in Europe within a decade were “more like a staging post than a point at which it expects to reach capacity limitations’’.

The reasoning behind this was that the density of stores in Europe was a fraction of that in DMP’s home market of Australia, analyst Alex Lu said.

“Mergers and acquisitions are being actively considered as a means to compound its strong organic rollout trajectory. DMP says it has the capacity, the capital and the ambition to bring new markets into its portfolio. 

“This business has a long way to run.’’

He said if Domino’s achieved its 10-year growth plans in Europe it would still have 7 per cent fewer stores than if it had the same store density as Domino’s currently has in the UK and 42 per cent fewer stores than if it had the same density as in Australia, Lu said.

The companies expansion into Europe started in 2006, and it now has 1303 stores in France, Germany, the Netherlands, Belgium, Denmark and Luxembourg. 

Lu said Domino’s was already the number one in the pizza category of each of its key European markets.

“In our opinion, DMP regards its 2033 milestone as exactly that: a marker along the road and not its ultimate target for these countries,’’ he said.

Lu said Don Meij attended the Investor Day in Europe as part of a trip around the world, which he confirmed was arranged expressly for the purpose of seeking and discussing potential M&A opportunities in Europe and elsewhere.

“DMP said it has the capacity, the capital and the ambition to execute M&A to assist in its pursuit of growth. In our opinion, we may not have to wait too long.’’

Collins Foods also recently signed an agreement with KFC Europe to be the corporate franchisee for The Netherlands which will see it run the market for KFC in the country and develop 130 new stores in the next 10 years.

Chief executive Drew O’Malley said the announcement was a true milestone in the European strategy.

He said it would allow Collins to more fully leverage its scale and experience and operational capabilities in Europe.

“We believe there is a substantial opportunity for restaurant growth in the Netherlands, given KFC’s low penetration rate relative to developed markets and other quick-service restaurant brands.

Separately bought nine existing stores and will have 44 restaurants when the deal is completed.

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