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Collins Foods (ASX: CKF) has announced the end of an era for the Australian dining scene with plans to close its nine remaining Sizzler restaurants.
The news cements the fate of the once popular buffet-style restaurant chain which was hit hard this year by COVID-19.
"Closing restaurants is not something we do often and not a decision we take lightly, especially for a brand as beloved as Sizzler which has been such an important part of the Collins Foods' history," says Collins Foods' CEO Drew O'Malley.
The fast-food company has been struggling with the business model for years, with the Sizzler chain under review since 2015. The company has closed 19 Sizzler restaurants in that time.
The fate of the remaining nine was sealed this year as Collins Foods, which owns KFC and Taco Bell, concedes that Sizzler has been the division hit hardest by the pandemic.
Of the nine Sizzler restaurants to close, five are located in Queensland at Mermaid Beach, Loganholme, Toowoomba, Maroochydore and Caboolture. The others are in Western Australia at Innaloo, Kelmscott and Morley; and one in NSW at Campbelltown.
Collins Foods says Sizzler revenues and earnings have failed to recover from the impact of COVID-19 and have been operating at a loss since the start of the public health crisis.
Sizzler restaurants will close permanently by November 15, costing up to 600 jobs. Collins Foods says redundancies have been offered to eligible employees while the company is still hoping to deploy some of the affected staff to other business divisions.
"This has been a difficult decision for Collins Foods, especially given the impact it will have on our dedicated Sizzler employees and customers in Australia," says O'Malley.
"As a casual dining concept, Sizzler has been the brand in our portfolio most impacted by the COVID19 pandemic.
"The ongoing impact of COVID-19 on revenues has meant that unfortunately, these restaurants have not established a clear path to profitability in the foreseeable future.
"In FY20, Sizzler Australia revenues accounted for less than 3 per cent of Collins Foods' total revenue. While the Sizzler Australia closure will allow us to minimise current-year and future losses, there will be some one-off closure costs that will be reflected in the upcoming half-year results."
All the Sizzler restaurants to be closed are company-owned with leases are due for renewal over the next four months. Collins Foods says the costs associated with the breaking of leases will be minimal.
Despite the Australian closures, the Sizzler brand has not entirely been flushed from Collins Foods' system. It plans to continue licensing the brand in Asia.
Royalty revenues from Sizzler in Asia grew 1.2 per cent for Collins Foods in FY20. The company has 73 Sizzler restaurants in Thailand and Asia.
Outside of Sizzler, Collins Foods had a fairly robust FY20 considering the conditions by posting a $53.7 million profit, down 5.7 per cent. Revenue surged 8.9 per cent due to a lift in sales from existing stores and due to new stores opening.
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