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Restaurant Brands Renews KFC Franchise Agreements

14 August 2006

Restaurant Brands Renews KFC Franchise Agreements

Restaurant Brands New Zealand Limited is pleased to announce that it has signed a new KFC Master Franchise Agreement with Yum, the franchisor of its KFC and Pizza Hut brands.

The new agreement allows for an early franchise renewal of approximately fifty percent of the KFC store franchises due for renewal in May 2007. The agreement comes into effect tomorrow, ten months ahead of the official renewal date. The remaining KFC stores will be renewed next year in May 2007, as will the Pizza Hut store franchises expiring at that time.

In addition to the new KFC Master Franchise Agreement, Restaurant Brands has also signed an agreement with Yum which provides for a committed investment by Restaurant Brands of NZ$35 million into the KFC store transformation project over a three year period (which includes the approximately NZ$12.5 million spent to date on completing 15 stores under that project). Restaurant Brands plans to spend a further NZ$8 million on 8 stores by the end of the year.

The agreement provides that if stores are developed under the KFC store transformation project to an agreed standard, Restaurant Brands may be entitled to a new franchise agreement for an initial period of ten years with a further renewal of ten years, allowing for 20 years in total.

Restaurant Brands Chairman, Ted van Arkel, said that he was pleased with the outcome of the discussions with Yum.

“The Restaurant Brands board is delighted to be able to announce the early renewal of the KFC franchise for a further ten years. The new agreements and early franchise renewal give us increased certainty and the ability to concentrate on the next stage of the KFC store transformation project.”

Current trading conditions for the business continue to be tight, especially in the pizza category which is having a significant impact on both sales and margin. The exit from Pizza Hut Victoria is continuing, but progress is slow. The company is reviewing its forecasts for the remainder of the year and will update the market with further information shortly.


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