Ingram’s September 2022

Q: New concepts seem to be emerg- ing all the time; what’s the key to retain ing market share in a hyper-competitive environment? A: This year is odd because it’s the first year more dollars are being spent in restaurants than grocery stores. This has been a market-share game changer out there. It’s not everyday that you see startup concepts scale because it’s very dif ficult to do. The economics of getting into real estate like the legacy brands did 40, 50, or 60 years ago, today is much more complicated economically. Chick-fil-A and Whataburger have been pretty successful, however there aren’t a ton. It’s just very, very difficult to scale when you’re building one store from the ground up every time. For businesses like ours to stay successful, they must evolve, stay relevant, and remain distinctive in a crowded marketplace. Q: Do newer entrants to the work force no longer see the same value prop osition in quick-service jobs? A: There’s no question the value proposition for employees has changed, but for context, so has ours. We have had to evolve substantially in the past three years. It started at the beginning of COVID when we had to find ways to keep people excited about working in a consumer-facing busi ness. Then with all the stimulus dollars, we had to keep employees excited about coming to work every day. A: For us, it was a combination of simple stuff like evolved benefits, the way we thought about ancillary benefits to how we were paying individuals. We talk about career growth and not thinking about those jobs as entry-level, but about what’s needed in their career and how they can find it here. Last year was our biggest growth year ever in absolute dollars as an organization, and being able to show an upward trajectory and opportunities from it is an advantage over other businesses like ours. There’s been no more complicated time in the 22 years I’ve been in this business than the last year. Q. How did you manage that in the current labor environment?

business, it is at three times higher than we have ever seen. This has caused a slowdown in acquiring and selling because earnings are in a tough spot across the industry. Q: How has scaling altered your capital-formation strategies? A: We’ve been really blessed on that front. We’ve had a fantastic partnership with a series of banks for a good long period, and they are great partners. We have a fantastic partnership with a family in Chicago, and we have about 45 sharehold- ers inside our organization with the management team with ownership stakes. That strong, long-term capital structure not only helped us get where we are today but will continue to help us grow the business. Q: Will there be a point where expan- sion into additional brands is part of the growth plan? A: Possibly, but we have a lot of runway in particular with Taco Bell and Arby’s brands. We see a lot of potential scaling in the coming years. Not that the same isn’t true with KFC, but we’re already scaled there, and once we return to normal macroeconomics, I think in the near term the growth will be in the other two businesses. Q: Whyhave so fewcompanies seized on growth opportunities in this space the way KBP has? A: The key in our mind is to stay focused on good brands, keeping the underlying business financially healthy, and retaining our great people, not just today, but with the capability to grow. The thing I consistently see in this industry is that people are ready for the now but not for tomorrow—they are not in brands strategically chosen to scale. I’ve always said, in this industry, if you’re not growing, you’re dying. In order to attract people to the business, you have to provide upward mobility in their careers. We’ve built a business foundation with all this growth, and that’s what it takes to keep people excited about coming to work.

“The key in our mind is to stay focused on good brands, keeping the underlying business financially healthy, and retaining our great people.”

— Michael Kulp, President & CEO, KBP Brands

Q: How does your growth alter the map for expansion? Are there still oppor tunities for acquisition? A: There are plenty. We’re in 31 states today; we have three brands today (KFC, Taco Bell, and Arby’s). To the extent we find ourselves in a situation where we aren’t seeing great opportunities for growth in those brands, we might consider pulling back, but I don’t see that as a near-term issue. Constant succession scenarios lead to constant M&A opportunities in quick service and in each of the brands. We see plenty of deal flow; 2022 was probably the slowest year in deal activity in the last decade. It was also a year in which we saw the most difficult operating environment in our history. Inflation is absolutely rampant; in our

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I n g r a m ’ s

Kansas City’s Business Media

September 2022