Christian Mouttet is the chairman of Prestige Holdings (PHL), the restaurant management company that operates the KFC, Pizza Hut, TGI Friday’s, Subway, and most recently the Starbucks brands in T&T.
At the opening of the Starbucks store in South Park Shopping Centre in San Fernando on August 28, Mr Mouttet was asked the following question by this columnist: “This is the fifth foreign franchise that Prestige Holdings is bringing to T&T. When are you going to send a T&T franchise out to the world?
Mr Mouttet’s response, after a chuckle, was: “We don’t have any immediate plans for that. Our business model, at this time, is one in which we own and operate franchise businesses that have come from established markets and with established ways of doing business.
“For us, that has been our success and our way of growing our business, through established international brands.
“We have not, at this point, ventured into creating our own brands, either here or for markets outside of Trinidad.
“I won’t say it is something we will not do, but I would say that at this point in time, our focus remains very much on establishing the international brands that we have in our portfolio.”
Mr Mouttet, of course, is one of T&T's captains of commerce and is someone whose clarity of thought and speech, as well as his strategic business acumen, mark him as an outstanding business leader in the Caribbean.
Not only is he chairman of Prestige Holdings, which is publicly listed, but he is the CEO of Victor E Mouttet Ltd, which owns 50.3 per cent of publicly listed Agostini's Ltd. He also serves as the chairman of Smith Robertson and Superpharm, which are subsidiaries to Agostini's Limited, whose board he is a member of as a non-executive director.
So here is Christian Mouttet admitting that the Prestige Holdings business model is for it to bring foreign (exclusively US so far) franchises to T&T, lease some space in a local mall or elsewhere and hire mostly women who are paid at rates just above the minimum wage.
It is clear that the business model that he speaks of has been increasingly profitable in the period between 2006 and 2015.
In 2006, Prestige Holdings reported group sales of $478.4 million and profits attributable to shareholders from continuing operations of $17.7 million from 70 restaurants. The company’s earnings per share in 2006 was 24.3 cents.
Ten years later, in 2015, the group’s revenue totalled $963 million and its profits jumped to $59.5 million, from 112 restaurants. PHL’s earnings per share in 2015 amounted to 95.7 cents.
In 2006, sales in T&T accounted for 94.7 per cent of PHL’s total sales while in 2015, the company’s T&T sales had increased to 98.7 per cent of total sales.
What does the above information mean?
INCREASING PROFITS
It means that in the ten-year period from 2006 to 2015, Prestige was able to double its revenues and more than triple its profitability by increasing the number of its restaurants by 60 per cent.
But it also means that the company is almost totally dependent on the local economy for its sales and profitability.
It means that PHL has been able to triple its profits in ten years by operating a business model that is completely dependent on foreign brands—KFC, Pizza Hut, TGI Friday’s, Subway and Starbucks—and local employees.
If your business model resulted in a tripling of your after-tax profits in ten years, you probably would not want to change it either. But the success of Prestige Holdings proves a point that has been made in this space for years, which is that the reason T&T has become so import dependent is because it is the surest way to profits with the least amount of effort.
Why go through the hard work of standardising doubles, shark and bake or pelau and franchising those Trinidadian foods to the world when it is easier and more profitable to pay Yum Brands for KFC, Pizza Hut, TGI Friday’s and Subway?
It is quite possible that the only reason the international franchises remain the principle focus of Prestige Holdings at this point is that they are an easy source of profits, requiring little or no local innovation, continued access to foreign currency to pay the royalties and the cost of the imported steaks, fries and coffee and a population primed for Starbucks, TGI Friday’s and Subway by access to 24/7 cable television.
The success of Prestige Holdings is mostly dependent on the ability of middle-income households to continue to afford the offerings of the restaurants that are managed by the group.
In the coming months, middle-income households in T&T are likely to be forced to pay the reintroduced property tax, higher excise duties on alcohol and tobacco, a seven per cent tax on online purchases, plus increased tertiary education costs and higher water and electricity rates.
This will mean there will be less disposable income with which to purchase the skinny cafe latte from Starbucks or the over-priced entree from TGI Friday’s.
And if the TT dollar continues to depreciate, that would mean higher prices for all the foreign foods and drinks sold at the Prestige Holdings restaurants.
Also at the press conference at the launch of Starbucks, Mr Mouttet was asked this question: “Is the local market becoming less favourable to international brands, in terms of the level of income in the country and the availability of US dollars?”
His response was: “I think it is a bit too early to determine that. Certainly Starbucks coming into T&T would indicate that that is not now the case.
“I think we would have to wait over the medium term to determine whether brands coming into T&T are deterred by our slowing economy,” adding that the company continues to re-image its stores (refurbish them) and is committed to four of its brands at South Park.
