This article first appeared in The Edge Malaysia Weekly on May 6, 2024 - May 12, 2024

On the face of it, QSR Brands (M) Holdings Bhd is suffering because of the boycott of US-based food franchises, resulting in its suspending operations of more than 100 KFC restaurants.

But the reality could be far from that.

QSR had been trying to list the quick-service restaurant chain since 2019 but it had not been successful. Then came the pandemic and all listing plans went quiet.

Last year, CVC Capital Partners Ltd, which is a shareholder of QSR, was reported to be looking to exit the franchise. But that did not materialise either.

The fast-food chain operator could be using the current opportunity, where it is the subject of a boycott, to consolidate its operations. After all, the best time to shut down operations and lay off staff is when there is trouble within the business.

Nobody can fault Johor Corp for shutting down the stores even though 85% of the employees are Muslims. Johor Corp, the Johor state government-backed investment fund, took the fast-food operator private in 2013 for RM5.2 billion. Its partners in the privatisation exercise were the Employees Provident Fund (EPF) and CVC Capital Partners.

The plan then was to re-list KFC and Pizza Hut as one entity a few years later, paving the way for EPF and CVC to reduce their interest in the chain.

In the last few years, however, competition in the fast-food segment has increased significantly and margins have fallen. No one single operator dominates the business.

In relation to the suspension of the 100-odd stores, QSR Brands stated that the reasons were to manage the increasing business costs and to focus on high engagement areas. In essence, the company is closing down restaurants where the returns are poor.

Will a listing be next?

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