Fast Food Indonesia: Rising Earnings on KFC Outlet Expansion

Most of Fast Food Indonesia's KFC outlets can be found on the bigger cities of Java, Bali, Sumatra and Sulawesi. However, the company is now also eager to open branches in the more remote areas such as Bengkulu and Papua. Besides the medium and big-sized KFC stores, the company also targets to add 20 KFC boxes, for example at train stations. The KFC box is a very small outlet with only a few available seats as well as a limited menu.

Justinus Dalimin Juwono, Director of Fast Food Indonesia, explained that revenue and profit growth come on the back of an expanding outlet network. When we take a look at the table below (at the bottom of this page) we see that in every location the company's earnings rose in Q1-2017. Apart from the rising number of outlets, we assume Fast Food Indonesia's revenue growth is also supported by the nation's improving consumer purchasing power (in line with the continuation of accelerated economic growth in the first quarter of 2017). Generally, the company feels the positive impact of a favorable demographic composition (a young and big population that is characterized by a rapidly expanding middle class and rapid urbanization).

Based on the experience of the company, each new KFC outlet immediately (from the start of operations) results in profit. This applies not only to new outlets in the big cities but also to those outlets in the smaller cities.

But the company also targets to boost revenue growth by adding new items on the menu. According to Fast Food Indonesia, new food and drink items can boost sales at an outlet by 20-30 percent. This also requires promotion to raise customers awareness of the items. Juwono said the company spent IDR 60.98 billion in the first quarter to promote its brand, up from a figure of IDR 50.52 billion in the same period one year earlier.

In the first quarter of 2017 Fast Food Indonesia's revenue rose 9.3 percent (y/y) to IDR 1.1 trillion, while net profit rose 348.9 percent to IDR 37.2 billion.

So far this year, shares of Fast Food Indonesia, listed on the Indonesia Stock Exchange have risen 1.33 percent to IDR 1,515 a piece.

Fast Food Indonesia Revenue Distribution:

City/Area	Q1-2017 (in IDR bln)	Q1-2016 (in IDR bln)
Jakarta	451.5	438.8
Medan	77.8	69.1
Makassar	133.9	123.8
Palembang	84.4	67.1
Bandung	91.4	81.1
Other	365.9	322.5
Total	1,204	1,102

^{Source: Kontan}

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