👉 Background: Collins Foods is the ASX-listed restauranteur that operates KFC and Taco Bell restaurants across Germany, the Netherlands, and Australia. In fact, they operate nearly 40% of all KFC stores in Australia.

👉 What happened: Now, Collins Foods has warned that its net profit has tumbled by 52% from the last six months to just $24.1 million after it struggled to grow its sales and manage its costs.

👉 What else: While its sales in Australia dropped ever-so-slightly, they copped a whack in Europe where same-store sales were down 3.8% across KFC and Taco Bell stores. And, with rising wages and energy costs, KFC can’t really afford for sales to slide.

What's the key learning?

💡As cost of living pressure builds, fast-food outlets face a very tricky balance.

• On one hand, fast-food outlets want to keep their prices low
• On the other hand, they need to keep up with their own rising costs like more expensive wages, energy and raw materials.

💡Traditionally Collins Foods strategy has been to increase menu prices by less than the inflation rate. But last year, it increased the price of some of its meals by more than 20%.

💡But even with that price increase, they’re seeing profit drop. And that’s part of the reason its share price has fallen more than 30% this year - it can’t quite strike the balance between price and margin.